Where To From Here?

As we fast approach the end of 2025, we look back at the events that shaped the financial year and share our views on what we expect in 2026.

This year has been complex, surprising, volatile, but also resilient for financial markets and investors. It was a year in which it is important to remember core financial planning and investment management principles.

In December 2024 we wrote about perhaps diversifying away from the growing concentration at the top of the US stock market, under the heading Take the Win. It was good timing as the following months saw a pull back in the markets through the start of 2025. We saw stock markets steady and improve towards the end of quarter one 2025 until we came to what the US administration labelled ‘Liberation Day’.
This introduction of US tariffs on its international trading partners led to heavy stock market falls in March 2025. More importantly, it led to a US bond market blow out, requiring the US government to moderate and defer many of their tariff plans. We wrote about tariffs in April 2025 to provide context on how they relate to your investment plans. Whilst we saw a steady and relatively brisk recovery in the US stock market and a return to normalcy in the bond market from quarter 2, the US dollar continued to fall. It fell from 97 cents to the Euro down to 83 cents. Unlike the stock market and bond markets, the US Dollar did not recover. At the time of writing it is still down 11.91% year to date.

The fall in the US dollar has been one of the most impactful events for investors in 2025. We can illustrate this by looking at the US stock market. If you were an investor in the US stock market – we will use the S&P500 index as a proxy- and you were invested in US dollars, since 1 January 2025, as at today you would be up 15.21%, an excellent year. If however, you are invested in Euros, the same index return, adjusted for currency produced a return of 2.02%. Even in US dollar terms 2025 has been volatile. Looking at the current largest individual stock in the world, the AI driven multinational tech company and leader in accelerated computing called Nvidia, was down 30% by April to be up 31% by December. That is a wild ride for some investors depending on when they bought and when they sold.

There have also been several stock market’s indexes that have outperformed the US in 2025. South Korea, Canada, Japan, Spain and the UK all outperformed the S&P 500 in 2025. We never set out to stock pick or predict the next hot investment. This is a reinforcement of our position that diversification is important.  An investment producing the best performance in one year does not mean it will do it every year. We mentioned core financial planning principles at the top of the article, this is one of them.

Another principle that had you followed it in 2025 would have benefited you, is to remain focused on your objectives. That means not reacting to short term market movements. Financial planning is a complex mix of maintaining a long term focus and adapting objectively to evolving market dynamics. It’s not as easy as it sounds and is where we can add real value for our clients. We encourage all our clients to speak with us regularly. If you haven’t, that could be a useful 2026 new year resolution: to make sure you take full advantage of our regular review meetings.

What do we see for 2026?

We wrote a number of articles in October 2025 and produced a special newsletter on the state of the markets. We covered the dangers hidden in indexes, reinforcing they are not the safe haven they are often portrayed as, and are not a one-size-fits-all solution. We also presented the Black Swan Capital assessment of the market at that time, where we analysed the debate around market bubbles. We complemented these with a practical article on how best to respond when there is a market correction. This last one is particularly important because the question is not IF there will be a market correction, but WHEN. Markets inevitably correct over time, but more importantly, markets also recover.

These articles provide some insight into the Black Swan Capital view of the markets. We are being cautious for conservative investors and those with a short time frame but can be more opportunistic for those with a higher risk return expectation, a higher capacity for loss, and with a longer time frame.

We do feel that the top end of the US stock market which is almost entirely focused on technology and artificial intelligence, is exhibiting signs that resemble a market bubble. That doesn’t mean a market is necessarily about to crash. We could be wrong. Or we could be right but early: market bubbles do have a habit of running longer than many people expect.

One of our themes for 2026 is caution around the AI concentration in the US stock market. This does not mean avoiding it; it means being appropriately invested for your particular circumstances. What is best for one person may be quite different for another.

The second theme is global diversification continuing. Global trade and geopolitics continue to change with new patterns emerging. This is manifesting in other, non-US markets performing strongly. This happened in 2025 and we expect it to continue in 2026.

Therefore, diversification is important.

We expect interest rates to remain low, commodities to remain high, oil to stay challenged, and bond markets to be steady, and to act in a more predictable pattern, serving as useful asset class diversification to equities. With inflation back in its long-term low range in most economies, there is some potential for stability 2026.

Geopolitics and unfortunately the ugliness of conflict will also be expected to impact markets in 2026. This is unpredictable and a negative impactor which requires having contingencies in place.

The above represents our current and best understanding of the financial markets and global economy. It is not a prediction- we do not do that- and it is certainly not a guarantee. It might also be redundant in a couple of months as new data becomes available.

To refer to the Black Swan theory, that as events occur which are unpredictable and materially impactful, we should endeavour to make ourselves, our financial plans and our investments, ‘anti-fragile’ to further quote the author Nassim Nicholas Taleb. This influences our advisory approach at Black Swan Capital.

For most people, we remind you that it is not what 2026 will do in isolation that is important, it is how it fits in with 2025 and the years 2027 to 2035, and perhaps longer depending on your objective. It is one year in a journey and the most important question is to address whether you remain on track to achieve your objectives in your financial plan.

We are here to help you realise that, to remove the complexities of managing the bombardment of news, information and misinformation, and to filter and distil what is most applicable for you specifically.

If you are a client, speak with us to book in your next review. if you are not yet a client and you are an international professional living in Europe, reach out to us to arrange a call and see how we can potentially help you.

Finally, we ask if you have colleagues, friends or family that can benefit from our advice, feel free to share our newsletter and contact details or introduce them to us. It is our mission to help expats and international professionals in Europe to achieve their most important financial and life goals. And if you are a client and are happy with us, we would be delighted if you would give us a (hopefully 5 star) Google review. It also helps potential new clients to make an informed decision.

As we move to the holiday season, wherever you are and whatever you celebrate, we wish you the very best for the season and for the new year ahead.

We look forward to continuing to advise and support our clients in 2026.