Periodic Table of index returns 

2025 was a momentous year for geopolitics, challenging global financial markets. The United States shifted to a policy path unseen since the mid-20th century, emphasizing tariffs to reclaim power over trade partners large and small. Initially taken off guard, governments gradually recognized a pattern of US policy hesitation by mid-year. As alternative investment destinations gained popularity, a caffeine-inspired “MOCHA” theme (Making Other Countries Hip Again) emerged, highlighting the growing appeal of other nations.

Despite this, global economic growth was only mildly affected. Central banks grappled with “lower but not low enough” inflation, while rapid advances in artificial intelligence (AI) fuelled a new technological era. These factors kept investors alert. How did asset classes perform?

Mercer’s Periodic Table of annual index returns shows market performance over time. An interactive version is available here. Produced annually, it colour-codes 18 major market indices and ranks their yearly performance in Australian dollars over the past decade.

Attributed to ancient Chinese philosopher Lao Tzu, this quote suggests that true wisdom understands the inherent uncertainty and complexity of the world. For investors, it means short-term predictions on investment returns should be approached with caution. Year to year, markets rarely behave as expected.

Looking back, let’s explore key themes and outcomes from the past year. 

At the start of 2025, investors were focused on four global equity risks: market concentration, high valuations, macro uncertainty, and variable emerging market performance.

Despite near-constant global uncertainty, dominated by shifting US trade and foreign policies, investors largely shrugged it off. The MSCI World Index rose 18.7% (hedged) and 12.5% (unhedged) as the USD weakened. Emerging markets performed strongly returning 24.0%. Australian shares returned 10.7%, while Australian Small Caps topped the table at 25.0%.

Concerns about valuations and concentration persisted. Markets traded at high valuations, though still below the dot-com peak. The US market forward P/E ratio rose slightly but was supported by strong earnings growth, led by the “Magnificent 7” stocks, fuelling high growth expectations for 2026 and beyond.

The MSCI World Index grew more concentrated. Ten years ago, the top 10 securities made up about 10% of the index; by the end of the most recent calendar year, this had risen to over 28%. These leading companies are mostly high-quality businesses— they are highly profitable, have limited debt, strong recurring revenues and high barriers to entry. Though the US accounts for over 70% of the index by market cap, over half these companies' revenues come from outside the US.

While the US market performed well, many European markets outperformed the S&P 500 (18%) in 2025. Spain, Poland, and Greece returned over 70%. South Africa and Peru also excelled. Asia led regionally, with South Korea’s market nearly doubling.

Currency exposure offers both risk and opportunity. For local investors the decision to hedge or remain unhedged made a lot of difference in 2025. Despite a mixed currency performance against the major global currencies, the Australian dollar rose from 0.62c at 2025’s start to 0.67c by year-end.

Government bonds faced fiscal concerns and yield curve steepening in several major countries. However, inflation fears tied to tariffs didn’t materialize. Labour market worries led the US Federal Reserve to cut rates by 75 basis points in the later half 2025, supporting bond prices. Default rates in US and European high-yield bonds rose slightly, but corporate balance sheets remained generally strong. Credit spreads tightened broadly over 2025, boosting returns for investors.

Emerging market debt led (up 10.7%), was supported by strong fundamentals, investor demand, and currency gains—especially in Latin America. Australian government bonds returned 3.2%, slightly below global sovereign bonds at 3.4% (AUD-hedged), as the RBA stayed more hawkish than other central banks.

Commodities, especially precious metals, was a standout asset class in 2025, returning 15.3%. Gold dominated headlines as central banks diversified reserves, and gold exchange-traded funds saw strong inflows. Silver’s near 150% return was remarkable.

Global listed infrastructure and property finished mid-table in 2025, up 12.3% and 8.6%. Australian direct property returned 7%, while hedge funds had a strong year at 12.1%. The RBA cut rates from 4.35% to 3.6%, and Australian cash returned 4%, just above 3.8% inflation.

Returning to our Chinese philosophy quote, true knowledge accepts uncertainty, while predicting often reflects an illusory desire for control. The Periodic Table reminds us that financial markets are inherently volatile. For many investors, understanding personal risk tolerance, building a diversified portfolio that reflects it, and maintaining a long-term approach can improve investment outcomes.

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