December marked the end of a positive 2025 for global financial markets, but also the emergence of a more cautious attitude on the part of investors. After a year characterized by widespread returns across almost all asset classes, the end-of-year environment shows a growing focus on risk, valuations, and the sustainability of the rally ahead of 2026.
Bond markets
Yields on major long-term government bonds remained within relatively narrow ranges for months. The US 10-year Treasury closed the year at around 4.19%, the German Bund at 2.90% and the 10-year BTP at 3.57%, with the Italy-Germany spread at its lowest since summer 2009. Japan is an exception, where yields continue to rise, with the 30-year yield close to its all-time high of 3.5%
However, upward pressure on government bond yields has not completely subsided. In the United States, the movement mainly affected the long end of the curve, driven by real interest rates, while short-term maturities remained more anchored to monetary policy expectations. In the euro area, on the other hand, both short- and long-term maturities were penalized, with Bunds and BTPs maintaining a high correlation.
On the central bank front, the Federal Reserve cut rates for the third consecutive meeting, but signaled a possible pause and adopted a more cautious tone on the labor market. Surprisingly, it also resumed purchases of short-term Treasuries, favoring a marked steepening of the curve. The ECB left rates unchanged, reiterating a strongly data-dependent approach, but revised its growth and inflation projections upwards, reinforcing the idea that the cycle of cuts may be nearing its end.
In the credit sector, corporate bonds were affected by government bond performance, but the narrowing of spreads, limited duration, and high carry enabled the high-yield segment to close the month with positive overall performance.
Equity markets
Equity markets closed 2025 at new all-time highs. Wall Street and European stock exchanges benefited from a still favorable environment, supported by earnings growth and relatively accommodative financial conditions. The S&P 500 index ended the year at 6,845 points, confirming an upward trend that, at present, shows no technical signs of reversal, despite historically high valuations, especially in the technology sector.
The theme of Artificial Intelligence continues to support growth stocks, but questions are beginning to emerge about the sustainability of investments, rising debt, and actual economic returns in the short term. In this context, Wall Street appears more vulnerable than other geographical areas, despite well-defined technical support levels.
Of note was the outperformance of European stock markets—with Italy at the forefront—and emerging markets (with the exception of China), favored by lower valuations and less technological concentration. European stock markets benefited in particular from the resilience of the banking, insurance, and infrastructure sectors, while interest in the technology sector remained more selective.
Commodities
Commodities showed mixed performance. The energy sector, despite being a key component of hard assets, continued to underperform, penalized by fears of oversupply and price dynamics that appear inconsistent with a “Goldilocks” macro scenario. Natural gas was affected by mild weather conditions, while oil ended the year under pressure.
On the other hand, industrial metals benefited from production issues at some major mining sites, while precious metals ended 2025 on a high note, driven in particular by platinum and silver.
Conclusions
2025 closes with markets still strong but less linear than in the first part of the year. The rally across all asset classes benefited from expansionary monetary policies, resilient economic growth, and investor confidence, but is showing signs of crowding and cycle maturity. In this context, a more selective approach focused on quality, geographic and sector diversification, and careful risk management will be key in 2026, avoiding indiscriminate momentum chasing.