Before the bell: smile for the camera

2025 was the third consecutive stock market year with strong returns, although on average European equities delivered higher gains than their US counterparts. Asia also performed well, as did the banking sector and certain commodities. Returns on cash and bonds remained limited, while real estate once again generated attractive returns.

Weak dollar erodes returns

In 2024, European equities delivered an average gain of 8%. Wall Street performed even better, with a return of 26.5%. In contrast, 2025 was mainly a good year for those invested in Europe. At first glance, the US market also appeared to perform solidly, with gains of 16.7% for the S&P 500 and as much as 20.5% for the Nasdaq. The Euro Stoxx 50 rose 17.8%, while the Bel20 even gained 19.1%.

However, the US dollar had its worst year since 2017, losing 13.4% against the euro. For a European investor who invested in an S&P 500 or Nasdaq basket, this meant that the final return in euro terms was reduced to just 1.06% and 4.35% respectively. Against that backdrop, the Euro Stoxx 50’s gain of 17.8% suddenly looks far more attractive.

It clearly shows why diversification is always essential. The hugely popular ETF tracking the S&P 500 can certainly be interesting, but if it was your only investment, then 2025 was not a good stock market year. That diversification pays off is also evident from the performance of the major US technology giants. People often talk about the “Magnificent Seven”, but the differences between them are substantial. An investment in Alphabet delivered a gain of 65.2% in dollar terms in 2025, while an investment in Amazon returned just 4.8% in dollars over the same period, or a loss of 9.2% in euro terms.

Revival of China and Alibaba

An investment in Asia also produced attractive returns in 2025. Japan’s Topix index rose 22.4% over the year. But here too, the depreciation of the local currency (the yen) eroded most of the gains for European investors. In euro terms, Japan delivered an annual gain of just 6.1%.

China performed better. In Hong Kong, the Hang Seng index gained 30.6% in Hong Kong dollars. Converted into euro, investors earned an average of 12.7% in Hong Kong last year. Market favourite Alibaba performed strongly, with a gain of 74.7% in HKD and still 51.3% in euro terms.

Banks and commodities

Beyond geographical differences, sector performance also varied widely. Relatively high long-term interest rates combined with lower short-term rates gave banking stocks a major boost. The Euro Stoxx Banks index surged no less than 81% last year. In Madrid, Banco Santander shares now trade 132% higher than at the start of the year; in Amsterdam, ABN Amro’s share price doubled; and closer to home, KBC performed well with a gain of 49.2%.

Another sector that shone in 2025 was commodities. Gold and silver are once again in the spotlight, which is also reflected in the prices of ETFs tracking these metals. The iShares Physical Gold ETF is now 41.4% higher in euro terms than a year ago, while WisdomTree Physical Silver posted an annual gain of no less than 111.2%.

Bonds and real estate companies

Because long-term interest rates remain relatively high, there was little price appreciation to be found in bonds. Shares of regulated real estate companies, due to their relatively defensive nature and high dividends, are often seen as an alternative for income-oriented investors. In this segment, Cofinimmo performed particularly well. The share price rose 44%, and thanks to an attractive net dividend, shareholders in the healthcare real estate specialist achieved a total return of 52% last year.

The biggest losers in 2025 were savers who stayed on the sidelines. Those who were too afraid to invest and used the whims of the US president as an excuse had to make do with a return of barely 1% or at most 2%. In real terms, that meant a loss, as inflation stood at 2.06% in December. Over the year, purchasing power declined by 2.06%. This erosion of money’s value makes investing almost a necessity.

Did you know…

that central banks worldwide aim for inflation just below 2%? That may sound modest, but it means money loses a quarter of its value over 14 years. After 34 years, purchasing power is reduced by as much as 50%.

This article was translated from Dutch and was originally published on Spaarvarkens.be.