Global equities forge ahead

Global equities delivered strong gains in 2025, with international markets outperforming U.S. stocks for the first time since 2006. Explore how investors can balance growth opportunities with infrastructure and dividend strategies to build portfolio resilience amid elevated valuations and potential volatility in 2026.

Global equities capped a stellar year with healthy fourth-quarter gains, led by non-U.S. developed markets, with emerging markets (EM) performing nearly as well. Both topped the S&P 500 Index by double digits in 2025, the first calendar year that’s happened since 2006.

Despite rich valuations and concerns about narrow market leadership by a small group of mega cap technology names tied to AI, the S&P 500 Index posted its eighth consecutive positive month on hopes for continued U.S. Federal Reserve easing and strong corporate earnings. Monetary policy worldwide continued to diverge as central banks sought to nurture economic growth while remaining alert to a possible resurgence of inflation.

While the European Central Bank (ECB) left rates unchanged during the quarter, the Fed cut twice amid signs of a cooling labor market. In contrast, the Bank of Japan (BoJ) tightened policy as core inflation remained well above its 2% target. Modest economic growth, slowly declining interest rates and positive earnings momentum remain tailwinds for global equity markets.

Though valuations for AI-focused stocks look expensive, we believe they’re largely justified based on the earnings growth generated by dominant U.S. technology companies. However, we anticipate periods of volatility in equity markets in 2026. This suggests investors may be well-served by balancing more aggressive holdings with allocations such as global infrastructure and dividend-growing companies, areas that offer potential resilience in downturns, a degree of inflation protection and opportunities for stable growth.

Balance growth and resilience in your equity strategy
Discover how global infrastructure and dividend-growing companies can complement growth-oriented holdings as you navigate diverging monetary policies and potential volatility in 2026.

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