Global stocks set for biggest annual advance in six years

MSCI’s gauge for global stocks has climbed an average 1.4% in January over the last 10 years and advanced in six of those instances, data compiled by Bloomberg showed.

• Global stocks set for biggest annual gain in six years, up 21% in 2025
• Fed rate cuts and AI enthusiasm fueled market surge to all-time highs
• Investors face high valuations and policy divisions heading into 2026

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Global stocks are poised for their biggest annual gain in six years, supported by Federal Reserve’s interest-rate cuts and a surge in enthusiasm for artificial intelligence companies.

The MSCI All Country World Index — one of the broadest measures of the equity market — has gained 21% this year with just one trading day of 2025 remaining. Asian equities are also set for a third annual gain, and the best since 2017. A number of markets are already shut for the year, including Japan and South Korea.

Equities climbed to all-time highs in 2025 as optimism over economic growth, corporate earnings and a looser monetary policy helped markets rebound from an April slump triggered by President Donald Trump’s tariff announcements. Still, heading into 2026, investors face elevated valuations and growing divisions among policymakers over the scope for further policy easing.

“The overriding theme is that global stock indices have lost momentum into year-end,” Kathleen Brooks, research director at XTB, wrote in a note. “There are plenty of reasons for this, including decent returns for 2025, and investors waiting to make big trading decisions until after the Christmas break.”

US stocks ended Tuesday modestly lower even after minutes from the Fed’s December meeting reinforced expectations for further rate cuts next year. Silver and gold bounced back after plunging from all-time highs.

The S&P 500 fell 0.1% — down for a third consecutive session — after barely budging for most of the day. Treasuries fell, with US 10-year yields rising one basis point to 4.12%. The Bloomberg dollar spot index rose.

Apart from the release of the Fed’s meeting minutes, there has generally been a lack of major catalysts to move markets in recent days, especially as news flow and trading volumes have been muted.

A record of the US central bank’s most recent meeting showed that most Fed officials supported cuts if inflation continues to slow. But it also highlighted the divisions among policymakers, and how difficult it was for them to lower rates by a quarter percentage point earlier this month.

To keep pushing higher next year, the equity market needs a dovish Fed, Amanda Agati, PNC Asset Management Group’s chief investment officer said on Bloomberg Television on Tuesday.

“I joke that the equity market is like a kid in a candy store, braving a sugar high for more policy accommodation, a more dovish Fed — but it doesn’t know what’s good for it,” she said.

Investors have reason to be optimistic heading into the new year. MSCI’s gauge for global stocks has climbed an average 1.4% in January over the last 10 years and advanced in six of those instances, data compiled by Bloomberg showed.