- Monday 22 December 2025
For many investors, 2025 will be remembered as a strong year for portfolios-yet that is not how it felt along the way. Beneath the positive annual figures, the year delivered several sharp market swings, most notably a steep equity sell-off in March following tariff announcements. For a period in April, global equities were down double digits from the start of the year, and sentiment was understandably fragile.
But what happened next is the more important story. Markets recovered steadily as the year progressed, with most of our Vanguard and Dimensional model portfolios ending 2025 with healthy gains.
Looking back now, the turbulence of early spring already feels distant. This is a pattern we see again and again in long-term investing: the difficult months are rarely visible in the rear-view mirror, but they are precisely the moments when staying disciplined matters most.
As Investment Advisors, a significant part of our role is to help clients avoid impulsive decisions at the wrong time. 2025 offered a clear demonstration of why that matters.
Equity Markets: A Sharp Drop, a Strong Finish
The most dramatic moment of the year occurred in March, when new tariff measures triggered a rapid reassessment of global growth expectations. Equity markets fell sharply-some regions by more than 10% and volatility spiked.
By April, many investors feared a prolonged downturn. However, markets proved once again that they tend to incorporate new information quickly. As companies continued to report resilient earnings and economic activity remained firm, equity prices rebounded. By the end of the year, most major indices had fully recovered and moved higher.
The performance charts across your portfolios highlight the shape of this journey clearly:
A mid-March to mid-April trough, visible across all equity-based portfolios.
- A strong upward trend from late April onwards, with global equities driven by robust US earnings, ongoing AI-related investment, and stable economic conditions in Europe.
- A broad-based recovery that supported balanced mandates such as Vanguard 60, Dimensional 60/40, and Sustainability 60/40 through the second half of the year.
Despite the unsettling headlines in March and April, portfolios that remained fully invested finished the year with solid, positive returns.
Vanguard and Dimensional Portfolios: Consistency Through Volatility
Our most commonly recommended portfolios-those built using Vanguard’s globally diversified index funds and Dimensional’s evidence-based factor strategies-performed as expected in a year defined by shifting narratives.
Vanguard Portfolios
The Vanguard 60 Portfolio in particular benefited from:
- Strong US equity returns,
- Steady performance from European markets, and
- The stabilising effect of high-quality bonds in periods of drawdown.
The three-year view also shows just how consistently a disciplined 60/40 allocation has rewarded long-term investors
Dimensional Portfolios
Dimensional’s models reflected similar patterns, with an added tilt towards:
- Smaller companies,
- Lower-priced (value) companies, and
- Higher-profitability businesses.
Research from Dimensional in 2025 (see Small Caps Have Done Better Than You Think) emphasised that small caps have delivered returns broadly in line with their long-term averages, even if headline indices dominated by large technology firms captured more attention. This reinforces the value of diversification rather than chasing specific parts of the market after the fact.
Overall, both Vanguard and Dimensional portfolios captured the global economic recovery that unfolded from late spring onwards.
Currencies: A Story of Short-Term Noise, Not Long-Term Meaning
2025 was also a year in which currency movements influenced the experience of returns for euro-based investors. A stronger euro at various points in the year muted returns from US assets when translated back into EUR. This effect is visible in your global equity charts, where EUR returns appear more muted than local-currency returns.
However, as we have written previously, currency impacts tend to be short-lived and self-balancing. Research from Dimensional (Currency Hedging? Consider the Asset Class) shows that:
- In equities, currency hedging has little impact on long-term volatility or returns.
- In bonds, hedging is more important for stability but most global bond allocations already hedge by default.
This reinforces our longstanding position: for long-term, globally diversified equity investors, currency fluctuations matter far less than staying invested.
The Real Lesson of 2025: Staying the Course Works
When we look back on this year with the benefit of time, what happened in March and April will be a footnote, not the headline. Annual performance figures rarely reveal the emotional difficulty of staying invested during sharp market falls. Yet it is in those moments that outcomes are determined.
Had a client exited the market in April, they would have:
- Missed the strong rebound of late spring and early summer,
- Locked in losses at the worst possible time, and
- Ended the year far behind where a disciplined investor finished.
Our job is to help prevent precisely that.
2025 reminded us that markets do not move in straight lines, and the periods that feel most uncomfortable are often those in which long-term investors earn their returns-simply by not reacting.
Looking Ahead
The economic backdrop heading into 2026 remains broadly supportive. Global growth is steady, corporate earnings are resilient, and central banks are closer to loosening than tightening. The long-term case for global diversification and disciplined portfolio management remains as strong as ever.
Most importantly, 2025 reinforced the timeless principles on which your financial plan is built:
- Stay diversified.
- Stay invested.
- Stay focused on long-term outcomes, not short-term headlines.
