Global equity funds closed 2025 on a strong footing, attracting sizable inflows in the final week of the year as investors leaned into optimism around artificial intelligence-driven growth and resilient corporate earnings. The renewed appetite for risk underscores how market participants are positioning portfolios heading into 2026, favoring equities over bonds despite lingering macroeconomic and geopolitical uncertainties.

Year-End Flows Reflect Confidence in Equity Markets

According to data from LSEG Lipper, global equity funds recorded $26.54 billion in net inflows during the final week of 2025, extending momentum from the prior week’s $37.05 billion in purchases. While year-end flows are often influenced by portfolio rebalancing, the scale of the inflows suggests more than technical positioning. Investors appear increasingly comfortable maintaining equity exposure after a year in which markets delivered robust returns.

That confidence is anchored in performance. The MSCI World Index rose 20.6% in 2025, marking its strongest annual gain since 2019. The rally has been broad-based, but leadership from technology and AI-linked companies has played a decisive role in shaping investor sentiment.

Earnings Expectations Support the Bullish Narrative

Forward-looking fundamentals are reinforcing the year-end optimism. LSEG estimates show global corporate earnings are expected to grow by 12.11% in 2026, broadly in line with the 12.32% growth forecast for 2025, based on coverage of more than 11,800 large- and mid-cap companies. That consistency is important for markets that have already repriced higher, as it reduces fears of a sharp valuation reset.

Psychologically, steady earnings growth helps justify elevated equity allocations even as monetary policy remains restrictive relative to the pre-pandemic era. For many investors, the perception that AI-driven productivity gains can sustain profit margins has become a central pillar of the current cycle.

Regional and Sector Allocation Trends

The latest data show that U.S. equity funds led inflows with $16.89 billion, marking a second straight week of net buying. European and Asian equity funds also attracted capital, with inflows of $5.75 billion and $2.67 billion, respectively, suggesting a globally coordinated risk-on posture rather than a U.S.-only phenomenon.

At the sector level, financials, real estate, and industrials drew consistent interest, reflecting expectations of stable growth and selective cyclical recovery. Healthcare, by contrast, continued to see outflows, highlighting a rotation away from defensive positioning toward areas perceived as better leveraged to economic expansion and investment spending.

Bonds, Cash, and Commodities Tell a Nuanced Story

While equities benefited, global bond funds posted $1.97 billion in net outflows, their first weekly withdrawals since mid-April. This divergence underscores the ongoing tension between growth optimism and interest-rate uncertainty. Notably, money market funds attracted $79.4 billion, indicating that investors are still maintaining liquidity buffers even as they add equity exposure.

Gold and precious metals funds extended their streak of inflows for an eighth consecutive week, reinforcing the idea that portfolio construction remains barbell-shaped: risk assets on one side, and hedges against volatility and currency risk on the other.

What the Flows Signal for 2026

The strong finish to 2025 suggests investors are entering 2026 with constructive expectations rather than caution. However, elevated equity positioning also raises sensitivity to earnings disappointments, policy surprises, or a sharper-than-expected slowdown in global growth. For now, flows indicate that confidence in AI-led expansion and earnings resilience is outweighing those risks, but maintaining flexibility may prove critical as the new year unfolds.