Mercer’s ‘Periodic Table’ of Investment returns
Investment Roundup: Which Asset Classes Have Been Topping the Table?
2025 was a momentous year for geopolitics, creating much for global financial markets to process. The United States shifted to a policy path not seen since the mid-20th century, seemingly overturning the established economic consensus with a renewed emphasis on tariffs as a tool to reclaim power and influence over trade partners both large and small. Many countries reacted with surprise at the prospect, though by mid-year a pattern of US hesitation had become apparent. As alternative investment destinations gained popularity, a caffeine-inspired “MOCHA” theme (Making Other Countries Hip Again) emerged, highlighting the growing appeal of other nations.
Amid this backdrop, global economic growth was only mildly affected. Most central banks grappled with “lower but not low enough” inflation, and swift developments in artificial intelligence (AI) gave further impetus to the emergence of a new technological era. All these factors and more kept investors on their toes. So how did different asset classes perform?
A perspective of the myriad returns generated by markets over time is displayed in Mercer's ‘Periodic Table’ of investment returns. An interactive version can be found here. Produced annually, the Periodic Table colour-codes 16 major asset classes and ranks their performance, on a yearly basis, over the past 10 years.
“Those who have knowledge don’t predict. Those who do predict don’t have knowledge”.
This statement, attributed to the ancient Chinese philosopher Lao Tzu, suggests that true wisdom lies in understanding the inherent uncertainty and complexity of the world, fostering humility. For investors, this implies that making definitive predictions on future returns, at least over the short-term, should be approached with caution. Year to year, financial markets rarely deliver exactly what we expect.
With more of a backward than forward lens, let’s explore some of the main themes and outcomes in investment markets over the past year.
Equities led the way (again)
At the start of 2025, four key global equity risks were top of mind for investors: market concentration, high valuations, macro uncertainty and variable performance from emerging markets.
While global uncertainty was nearly constant throughout 2025, dominated by frequent shifts in US trade and foreign policies, investors largely shrugged it off. The MSCI World Index finished up 18% for the year. Meanwhile, emerging markets performed even more strongly, returning 30% and finishing at the top of the Periodic Table by a wide margin.
Concerns over valuations and concentration within global equities persisted. Markets ended the year still trading at high valuations relative to most points in history, though still below the peak of the dot-com boom near the turn of the century. The forward Price-to-Earnings (P/E) ratio of the US market rose slightly, from 23x to 24x, amplifying these concerns. However, valuations were generally supported by strong earnings growth, led by the “Magnificent 7” group of stocks, which increasingly took on hero status as the year progressed, fuelling ever higher expectations for growth in 2026 and beyond.
The MSCI World Index became even more concentrated during the year. A decade ago, the top 10 securities represented about 10% of the index; by year end this had risen to over 28%. It is worth remembering that the world’s leading companies are, for the most part, high-quality businesses – they are highly profitable, have limited debt, strong recurring revenues and high barriers to entry. They also provide genuinely global economic exposure - while the US accounts for over 70% of the MSCI World Index by market capitalisation, well over half of these companies’ revenues come from non-US markets.
While the US market had a strong showing, many European equity markets outperformed the S&P 500 Index (18%) in 2025. Notably, Spain, Poland and Greece all returned over 70%. Elsewhere, South Africa and Peru also excelled. However, the top regional prize went to Asia, with South Korea’s share market nearly doubling in value over the year.
Closer to home, the story was far more subdued. The S&P/NZX 50 Index eked out a modest 4% gain in 2025, making it one of the world’s worst performing share markets. This proved a low hurdle for Australia, which returned 10% in AUD terms, helped by strong performances in the Financials and Materials sectors, allowing our Trans-Tasman neighbour to take out the investment Bledisloe Cup for the fifth year running (ouch!).
While currency exposure can be a source of both risk and opportunity, for local investors the decision to hedge or remain unhedged made little difference in 2025. Despite a mixed performance against the major global currencies, the New Zealand dollar finished the year close to where it started against the MSCI World basket of currencies.
Moderate returns from defensive asset classes
Government bonds faced fiscal concerns and yield curve steepening in several major countries. However, inflation fears linked to tariffs did not materialise, and labour market worries prompted the US Federal Reserve to cut interest rates by 75 basis points (0.75%) in the latter half of the year, supporting bond prices. Default rates in US and European high yield bonds edged up slightly, though corporate balance sheets remained generally strong. This helped credit spreads to tighten broadly over 2025, bolstering returns for investors.
Geographically, emerging market debt (up 8%) was the best place to be positioned, supported by solid economic fundamentals, investor demand and currency gains - especially in Latin American bonds. New Zealand government bonds produced a respectable 5% return, just edging out global aggregate bonds (NZD-hedged).
Best of the rest
Commodities, particularly precious metals, was a standout asset class in 2025. Gold dominated headlines as international central banks continued diversifying their reserve holdings, and gold exchange-traded funds saw strong inflows. Silver’s extraordinary return of close to 150% also deserves mention. Other commodities fared less well, especially oil, meaning the commodities basket as a whole delivered a 15% return for the year.
Global private equity (+6%) experienced a rebound in dealmaking in 2025, especially in the second half, driven by returning investor confidence, improved financing, and widespread AI adoption. This occurred despite ongoing muted fundraising, with many investors hesitant to add exposure ahead of greater evidence of cash distributions.
Rounding out the field, global listed infrastructure and property finished in the middle of the Periodic Table in 2025, up 11% and 7% respectively. New Zealand direct property had a similar year (+8%), while hedge funds returned a more moderate +5%. With the Official Cash Rate (OCR) nearly halved over the year to 2.25%, NZ cash – widely considered a safe asset class – delivered a modest return below 4%, only slightly above New Zealand’s 3% inflation rate for the year.
Choosing your path
To revisit our quote from Chinese philosophy, the wise person understands that true knowledge fosters acceptance of uncertainty, while the act of predicting often stems from a desire for control that is illusory. The Periodic Table reminds us that financial markets are inherently volatile, and that the path to investment success lies in knowing the risks you can tolerate, setting your portfolio accordingly and, perhaps most importantly, staying the course.
As Lao Tzu would say:
“If you do not change direction, you may end up where you are heading.”
Interactive version of the Periodic Table
Static and printable version of the Periodic Table
The information contained in this article is intended for general guidance only and does not take account of the investment objectives, financial situation and/or particular needs of any person. Before making any investment decision, you should take financial advice as to whether your intended action is appropriate in light of your particular investment needs, objectives and financial circumstances. Past performance is no guarantee or indicator of future performance. Copyright 2026 Mercer (N.Z.) Limited. All rights reserved.
