United States — Leadership Narrowing

US equity markets were mixed in December 2025:

• Dow Jones Industrial Average: +0.7%
• S&P 500: flat
• Nasdaq: −0.5%

Inflation moderated, with November headline at 2.7% and core at 2.6%. September core PCE, released in December, fell to 2.8% from 2.9%. Retail sales were flat in October.

The Federal Reserve cut rates by 25 basis points in December, signalling a potential pause in further easing, dependent on incoming data. Earnings growth remains concentrated in AI and tech mega-caps, while broader market participation is uneven. Valuations remain elevated (~22x forward earnings) and passive-driven flows reinforce concentration risks.

Outlook: US remains the global growth anchor, but market leadership is narrow. Investors should balance exposure to structural growth with high-quality, resilient companies.

Europe — Stabilising but Divergent

• December performance: CAC 40 +0.3%, DAX +2.7%
• Eurozone inflation (Nov): 2.1%
• Growth: GDP ~1%, with Germany lagging structurally and Southern Europe more resilient

The ECB maintained policy rates near 2%, with monetary and fiscal policy broadly neutral. Earnings momentum is fragile, concentrated in defensive and globally exposed sectors. Europe and the UK trade at a 30–40% discount to the US and provide defensive diversification within global portfolios.

United Kingdom — Outperforming Developed Peers

• FTSE 100: +2.2% in December
• Inflation (Nov): headline 3.2%, core 3.2%
• GDP growth forecast: 1.4% (2025) → 1.1% (2026)

Fiscal consolidation and global uncertainty constrain investment, but a neutral monetary stance (~3.5%) provides some support.

Asia ex-Japan & Emerging Markets — Selective Opportunities

• December performance: Shanghai +2.1%, Hang Seng −0.9%
• China: Manufacturing PMI expanded to 50.1, non-manufacturing PMI to 50.2. GDP expected to moderate from ~5% in 2025 to ~4.5% in 2026 as temporary consumption support fades and the property sector continues adjusting.

Emerging markets remain selective. Asia ex-Japan leads on policy easing and technology demand; Latin America is mixed. EM equities are trading at a meaningful discount to developed markets, but trends remain fragile, sensitive to USD strength, rate volatility and China-related risks.

Japan — A Standout Performer

• Nikkei: +0.2% in December
• Core inflation (Nov): 2.9%, trending toward BoJ’s 2% target

Policy: Rates projected to rise gradually toward 1% by end-2026

Domestic demand is resilient, with corporate reforms, buybacks and improved governance supporting shareholder returns. After a prolonged rally, upside is now asymmetric, suggesting higher likelihood of consolidation.

South African Equities

• ALSI (Dec): +4.4%
• Sectors: Financials +7.2%, Resources +5.6%, Industrials +1.5%, Property −0.4%
• Inflation (Nov): 3.5%
• GDP forecast: 1.2% → 1.5% (2026)

Sustained fiscal discipline and structural reforms are key to growth and foreign investment. Precious metals and quality financials remain attractive, while domestic cyclicals require selective positioning.