Market Commentary Q4 2025

From Narrow Leadership to Broader Opportunity

Outlook

Global markets finished 2025 on a strong note, with positive returns in the fourth quarter despite episodic volatility. Early concerns around artificial intelligence (AI) valuations, geopolitics, and U.S. political uncertainty faded as trade tensions eased, earnings remained resilient, and financial conditions improved. The U.S. economy continued to grow at a healthy pace, supported by fiscal stimulus and easing monetary policy. Europe advanced as governments shifted decisively away from austerity toward infrastructure, defense, and industrial investment. While China faced near-term challenges, targeted fiscal and credit support are helping stabilize expectations and refocus attention on longer-term growth. A key development in Q4 was the broadening of market leadership. Performance extended beyond a narrow group of U.S. mega-cap stocks, with greater participation from international equities, value, small caps, and cyclical sectors, an encouraging signal for the durability of the expansion.

Macro Backdrop

Despite persistent “stagflation” headlines, the data continue to point to moderation rather than slowdown. Inflation has eased, labor markets remain balanced, and growth is cooling from a position of strength. Central banks are increasingly shifting from restrictive policy toward supporting economic activity. U.S. rate cuts have improved liquidity, while tariffs and geopolitical risks are acting more as growth headwinds than inflation drivers. Overall, the global economy appears to be transitioning into a more sustainable phase of expansion, not stalling.

Policy Environment

Fiscal policy has become a primary driver of growth across major regions:

• United States: Large-scale fiscal programs and selective deregulation are supporting investment in manufacturing, infrastructure, energy efficiency, and advanced technologies.
• Europe: A historic pivot toward aggressive spending on defense, infrastructure, and digitalization, led by Germany and reinforced across the EU.
• China: Targeted fiscal and credit measures aimed at stabilizing growth and supporting manufacturing and technology.
  

This coordinated fiscal impulse, combined with easier monetary policy, provides a supportive backdrop for global risk assets.

Key Investment Themes

Artificial Intelligence:

The narrative is shifting from speculation to implementation. AI is increasingly being deployed in practical applications that enhance productivity and efficiency across industries. We view AI as a long-term, foundational technology, with benefits expected to broaden well beyond mega-cap technology companies over time.

Real Assets & Infrastructure:

Elevated fiscal spending, energy transition, and geopolitical considerations continue to support infrastructure investment, defense, and commodities such as copper.

Resilience Assets:

Gold remains an important hedge against policy uncertainty, geopolitical risk, and higher structural volatility.

Portfolio Positioning

MLD portfolios remain constructive but disciplined, emphasizing:

• Global diversification as leadership broadens beyond the U.S.
• International equities benefiting from fiscal expansion and improving breadth
• Infrastructure, defense, and real assets for structural and policy-driven tailwinds
• Healthcare and quality income-oriented equities to manage volatility
• Selective growth themes where fundamentals support durable cash flows

Outlook for 2026

Recession risk remains low as inflation cools, liquidity improves, and fiscal spending accelerates globally. While political events and shifting rate expectations may contribute to higher market volatility, the underlying growth backdrop remains supportive. Markets are transitioning from a narrow, U.S.-centric cycle toward a more balanced global expansion. We remain focused on diversification, resilience, and selectively capturing global opportunities as economic activity continues to broaden.

‍