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Geopolitical tensions have intensified since the start of the year, spanning Venezuela, Greenland and Iran. At the same time, resource nationalism is on the rise, with major powers increasingly competing for control of strategically critical commodities. While this backdrop underpins gold, equity markets remained largely unscathed last week: small caps outperformed as earnings momentum broadens beyond the technology sector. This week, the Davos summit will shine more light on geopolitics, as concerns about Greenland are rising.

For several years now, Switzerland and Asia have been vying for the title of ‘World's Leading Wealth Management Centre’. The competition is fierce, but it can also be highly instructive.

Despite geopolitical tensions, investors embraced equities, with broader sector participation signalling hopes that corporate earnings growth will stretch beyond technology this year. The US dollar continued to soften, though this week’s inflation data is unlikely to spark any sharp drops.

Despite geopolitical turbulence, equity markets closed 2025 with the third consecutive year of double-digit performances, while gold and fixed income also recorded solid annual returns. Looking ahead, the outlook for 2026 is broadly seen as constructive. However, recent short-term equity rotations reinforce the case for broadening exposures to structural growth themes. This week, investors will focus on US labour market data.

As the year draws to a close, 2025 delivered robust return across all asset classes. We maintain our conviction in US equities and have upgraded emerging market debt from 3/5 to 4/5.

The Federal Reserve cut its key rates by 25 basis points to 3.25 - 3.75% last week, and surprised observers with the resumption of purchases of short-term Treasuries. The Fed also raised its 2026 growth forecasts to 2.3%. However, we maintain our current scenario of several Fed rate cuts in 2026.

On the equities markets, valuation concerns have resurfaced for AI-related companies, even as the Artificial Intelligence (AI) investment outlook remains robust, while risk appetite expends to cyclical equities. Such dynamics underscore the need for diversification and selectivity as we enter 2026.

Global equities closed the first week of December in positive territory, supported by rising expectations of a Fed rate cut, while the bond market experienced rate volatility. Attention now turns to the Federal Reserve, which is expected to deliver a 25-bp interest rate cut on Wednesday. A still-supportive backdrop continues to underpin equities, with fiscal stimulus measures, easing monetary policy and structural growth drivers encouraging investors to keep a broader perspective.

China is positioning itself to become a global leader in technological innovation.