.png)
What happened last week?
Global markets
The final week of 2025 and the first session of 2026 saw global markets conclude a robust year on a more cautious note, as the widely anticipated "Santa Claus rally" failed to materialize in the United States. Global sentiment was defined by year-end rebalancing and mounting geopolitical anxiety, specifically regarding the U.S. oil blockade of Venezuela. Despite the quiet holiday liquidity, 2025 stood as a banner year for risk assets. The MSCI ACWI was down -0.2% during the week, and closed the year with a total YTD return of 22.3%, reflecting broad-based strength across both developed and emerging economies.
US
The S&P 500 ended 2025 with a return of 16.4%, marking its third consecutive year of positive gains. However, the final week was characterized by a defensive retreat, with the index sliding approximately 1% as investors locked in profits from the year's "AI supercycle." Technology and Consumer Cyclical sectors were the primary laggards - driven by individual weakness in names like Tesla and Amazon - while Energy and Utilities served as the week's top performers. Sentiment was further dampened by the release of December Fed minutes, which revealed a central bank deeply divided over the pace of 2026 rate cuts, prompting a rise in the 10-year Treasury yield to 4.19%.
Europe
European equities showcased notable year-end resilience, with the STOXX Europe 600 finishing 2025 with a gain of 16.7%. The index defied the late-December gloom in the U.S., kicking off the first session of 2026 on January 2 by scaling record highs and testing the psychologically significant 600-point threshold. This strength was largely concentrated in the Defense and Energy sectors, which rallied in response to the escalating maritime tensions in South America. While Eurozone manufacturing data continued to signal a contraction, European shares benefited from a weakening U.S. dollar and a growing investor preference for the region's more attractive valuations relative to U.S. mega-cap tech.
Rest of the world
The Rest of the World, particularly Emerging Markets (EM), provided the strongest performance of the year, with the MSCI Emerging Markets Index posting a stellar 33.6% YTD return for 2025. The final week of the year saw a continuation of this trend, fueled by a massive year-end surge in Chinese equities; Baidu, for instance, rallied over 20% in the final sessions. This "EM Resurgence" was underpinned by breakthroughs in Chinese AI Large Language Models (LLMs) and aggressive domestic stimulus. Heading into 2026, the ROW segment remains a favorite among many strategists due to the combination of dollar debasement, superior earnings growth, and significantly lower P/E multiples compared to the U.S. market.
Our view on equity
Equity asset class
POSITIVE in the current environment
We shift to a Negative stance on government bonds. Positive global growth dynamics, price pressures in the US and profligate fiscal policies reduce the attractiveness of long-term government bonds as a potential hedge for economic downturn and increase the risk of higher long-term yields. Limited prospects of further central banks’ rate cuts and unattractive yield curve slopes at the front-end also reduce the attractiveness of government bonds on short-to-medium term maturities.
Earnings
POSITIVE as breath to increase
Earnings remain a tailwind for equities, supported by a strong third-quarter earnings season and expectations that growth will accelerate and broaden in 2026. Technology stocks should continue to deliver robust performance, while the “old economy” is set to recover.
Valuation
NEUTRAL as US large caps remain expensive
US technology stocks remain expensive, although growth and profitability provide some support while international equities are more reasonably valued. Equity risk premia remains low in both the US and Europe.
Disclaimer
This marketing document has been issued by Bank Syz Ltd. It is not intended for distribution to, publication, provision or use by individuals or legal entities that are citizens of or reside in a state, country or jurisdiction in which applicable laws and regulations prohibit its distribution, publication, provision or use. It is not directed to any person or entity to whom it would be illegal to send such marketing material. This document is intended for informational purposes only and should not be construed as an offer, solicitation or recommendation for the subscription, purchase, sale or safekeeping of any security or financial instrument or for the engagement in any other transaction, as the provision of any investment advice or service, or as a contractual document. Nothing in this document constitutes an investment, legal, tax or accounting advice or a representation that any investment or strategy is suitable or appropriate for an investor's particular and individual circumstances, nor does it constitute a personalized investment advice for any investor. This document reflects the information, opinions and comments of Bank Syz Ltd. as of the date of its publication, which are subject to change without notice. The opinions and comments of the authors in this document reflect their current views and may not coincide with those of other Syz Group entities or third parties, which may have reached different conclusions. The market valuations, terms and calculations contained herein are estimates only. The information provided comes from sources deemed reliable, but Bank Syz Ltd. does not guarantee its completeness, accuracy, reliability and actuality. Past performance gives no indication of nor guarantees current or future results. Bank Syz Ltd. accepts no liability for any loss arising from the use of this document.
Related Articles
The interest rate cut by the Fed is highly anticipated but the narrative will be important for sentiment and the remaining days of trading this year.
AI-driven market nervousness is palpable, with recent news flow providing ample fodder for bears.
AI-driven market nervousness is palpable, with recent news flow providing ample fodder for bears.