(The opinions expressed here are those of the author, a columnist for Reuters.)
By Mike Dolan
LONDON, Dec 17 (Reuters) - It was a year of two halves in world markets in 2025: a tariff-shocked first half and a relief-rally second, yet the initial instincts of global investors 12 months ago proved mostly right. That may make some wonder how actively they should trade at all.
December soothsaying on the year ahead always tends to be a bit artificial, given how fast economies, policies, markets and geopolitics can shift. This year, more than most, that felt especially true.
Calendar-based investing has its roots in tax-date cutoffs and annual planning, but year-end forecasting is now largely tradition - a convenient moment to reflect and take stock.
With 24-hour, and potentially 24⁄7, stock trading nearing, there’s no shortage of opportunity to trade. Banks and brokers clean up in volatile years and had a bumper 2025 as nervous investors and savers chopped, changed and hedged wild swings in financial prices.
But it’s worth looking back to December 2024 for a clue as to how major asset managers saw this year panning out and to gauge how they’d have done if they’d just closed their eyes and let it all ride.
One simple way to view it is to look at where consensus surveys saw funds positioned late last year.
Bank of America (BAC.N) provides one of the most closely watched and frequently updated surveys of fund managers around the world, with its latest edition, released on Tuesday, polling more than 200 investment houses managing more than half a trillion dollars in assets.
Aggregate readings from its monthly survey this time last year showed “super-bullish” stock sentiment, low cash levels, rising growth and profits optimism, dissipating recession fears and expectations for lower interest rates.
That looked very different come April with U.S. President Donald Trump’s tariff shock and amid numerous geopolitical disturbances through midyear.
But the positioning into the turn of last year - fueled by post-election bets that Trump’s return to the White House would usher in tax cuts and deregulation to overwhelm world trade jitters - ended up largely correct.
<h3>STICKING TO YOUR GUNS</h3>
At least that’s how it played out on stock markets this year, with U.S. earnings growth tracking 13%, only slightly below 14% estimates a year ago. After a near heart attack in spring, the S&amp;P 500 (.SPX) is heading into year-end up 15%, led by 20% gains in the “Magnificent Seven” mega caps and a 20% rise in MSCI’s all-country index.
Forecasts of 2.0% U.S. GDP growth and over 3% world GDP growth for 2025 look on track, if not exceeded. Fears of a world trade shock in 2025 look misplaced, with the U.N. trade body saying global trade likely grew 7% this year to a record $35 trillion.
After a long hesitation amid elevated inflation and the impact of tariff hikes, the Federal Reserve eventually obliged with three more interest rate cuts. The European Central Bank cut four times and other G7 central banks eased as well.
What’s more, the BofA survey’s record-high exposure to financial stocks this time last year also paid off - the MSCI World’s financial sector is up 25% year to date.
But there were flubs and some were related.
Back then, the BofA survey showed funds were the most overweight U.S. versus European stocks in 12 years, broadly neutral on long-term bond yields, and tilted toward U.S. small caps in the Russell 2000 (.RUT) over the tech-heavy Nasdaq.
In the end, euro zone stocks outstripped the S&amp;P 500 by 5 percentage points and rose more than twice the Wall Street benchmark in dollar terms. Long-term G7 bond yields climbed everywhere despite central bank easing, and small caps lagged the Nasdaq yet again.
Germany’s dramatic post-election fiscal U-turn probably explains a lot of that, and overwhelming dollar bullishness at the start of the year was bamboozled as the greenback swooned in the first half and never really recovered. Euro/dollar (EUR=) is still up 12% for 2025.
But perhaps the survey spotted that dollar turn by identifying it as the second “most crowded trade” a year ago.
<h3>SEER OR CONTRARIAN</h3>
So if the consensus can be mostly correct - and not a contrarian indicator as often suggested - maybe we should take more notice of this year’s year-end positions.
Despite more intense hand-wringing about artificial intelligence stocks and jarring politics, this month’s survey looks mighty familiar.
BofA analysts say it’s the most bullish reading in 3-1⁄2 years, with macro optimism the highest in four years on a “run-it-hot” belief in government policies. Cash levels are at a record low 3.3% - often seen as a sell signal - and a net 38% of funds expect long-term rates to be higher next year, the most in more than three years.
“Long Magnificent Seven” stocks are still considered the most crowded trade, as they were last year too. After stellar 63% gains this year, gold joins them in second place on that list.
Of course all this bullishness may come asunder through the next 12 months - in fact, it most likely will at different junctures. Whether it still stacks up 12 months hence is worth considering if you are minded to buy and hold.
The opinions expressed here are those of the author, a columnist for Reuters. – Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI on LinkedIn. Plus, sign up for my weekday newsletter, Morning Bid U.S.
Bank of America chart from December 2024 on global investor positioning
<img src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/3L5UV9U?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="751" height="479" original-src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/3L5UV9U"/>
A game of two halves for markets in 2025
<img src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/3XYwSga?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="921" height="690" original-src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/3XYwSga"/>
Bond yield curves steepen throughout 2025
<img src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/3XYiXXj?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="921" height="689" original-src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/3XYiXXj"/>
Bank of America chart from December 2025 on global investor positioning
<img src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/49cBTIa?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="612" height="732" original-src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/49cBTIa"/>
(by Mike Dolan; Editing by Marguerita Choy)

Mike Dolan reflects on 2025's market trends, noting that initial investor instincts were mostly correct despite geopolitical shocks. The BofA survey showed bullish sentiment, low cash levels, and optimism for growth, which largely played out. U.S. earnings and GDP growth met expectations, while financial stocks performed well. However, euro zone stocks outperformed U.S. stocks, and small caps lagged. The survey's predictions for 2026 remain bullish, with low cash levels and expectations for higher long-term rates.

- The article discusses the contrasting performance of global markets in 2025, marked by an initial tariff shock followed by a relief rally.  
- It highlights how major asset managers’ bullish positions last December largely proved correct, leading to notable stock market gains despite mid-year geopolitical disturbances.  
- The column reflects on current investor sentiment, indicating high optimism and low cash levels, while suggesting caution for potential reversals in the upcoming year.

ROI-Investment herd got it mostly right a year ago: Mike Dolan