Endowus Q4 2025 Market Update and Outlook – Diversification reaffirms its relevance

In the 4th quarter of 2025, risk assets continued its positive march higher albeit at a slower pace compared to the 3rd quarter. November and December in particular saw more muted returns given the elevated uncertainty on geopolitical tensions, high equity valuations, and questions about central bank independence.

We saw wider breadth in the markets with laggard sectors like Healthcare showing the strongest performance in the fourth quarter and Japan, Europe, and Asia ex Japan countries leading the pack on a regional basis.

The FED made two 25bps rate cuts in 4Q25 (Oct and Dec) following its first rate cut in September, bringing the upper end of the FED funds rate to 3.75%. Despite the cuts, we saw relatively small changes in the 10 year treasury as the yield curve steepened.

Global equity market 

US tech only showed modest performance (+2%) despite stellar performers such as Alphabet (+28%). This was due to high expectations priced into its high valuations. Instead we saw laggard sectors playing catch up. 

The Healthcare sector in particular rose 9% given its defensive growth characteristics and relatively undemanding valuations. The US biotech sector rose 22% for the quarter proving to be the best performing sub-sector in healthcare. Materials also performed well after being the best performer in 3Q, given the strength of gold, silver, and copper and thus the strong performance of the miners.

The Financials sector benefited from widening net interest margins with yield curves that continue to normalize.

On a regional basis, Korea and Japan were up 19% and 9% respectively. They were some of the best performing markets thanks to the strength of semiconductors in Korea and the expectation for positive fiscal and monetary policies from the new prime minister in Japan. This was followed by positive performance in the European market as well as other markets in Asia such as Taiwan. China equities took a breather in 4Q25 following stellar performance up to 3Q in 2025.

For non-Asian emerging markets, Latin America continues to show strong performance in 4Q thanks to its undemanding valuations.

Overall, 2025 was the first year in a long while where Asia and EM outperformed the US equity market by a wide margin and non-tech sectors performed equally if not better than tech.

We believe this continues to show the importance of diversification moving into 2026.

‍Global fixed income market

While the 2 year treasury fell by 14bps to 3.47% in 4Q25, the 10 year treasury rose by 2bps to 4.17% as the yield curve steepened. With a relatively small move in interest rates and spreads, the bulk of the global fixed income returns in 4Q25 have come from carry. 

As credit spreads remain tight and investors continue to demand higher term premiums for longer duration bonds, the ability to diversify away from corporate credit, the ability to be flexible with duration, and the ability to diversify into other regions like emerging markets is increasingly important.

EM debt continues to be the bright spot for fixed income in 4Q25 following its strong performance in 3Q25. 

With digital wealth platform Endowus, you can plan and manage your money — whether held in cash, CPF, or SRS — by investing in globally diversified, intelligent, low-cost portfolios seamlessly. To get started, click here.