As the year 2025 draws to a close, it's a perfect opportunity to reflect on the investment opportunities we may have overlooked. For those with a keen eye or a stroke of luck, investing in mining stocks at the beginning of the year proved to be a goldmine (pun intended!).
Take Liontown Resources, a battery minerals company, as an example. Despite reporting a $193 million loss in the previous financial year, it has seen its share price surge by an incredible 180% since January. How did this happen? Well, Liontown has some powerful backers. Mining billionaire Gina Rinehart, through her company Hancock Prospecting, holds a significant stake of almost 20% in Liontown. Additionally, the company has secured lithium supply deals with industry giants Tesla, Ford, and LG, and received a $50 million investment from the federal government as part of its Future Made in Australia strategy. This combination of factors has propelled Liontown's share price to new heights.
But Liontown isn't alone in its success. Its rivals, such as Core Lithium (up 220%), PLS (up 89%), and IGO (up 65%), have also experienced substantial gains. This rally can be attributed to a rebound in lithium prices, which had crashed in 2023 due to concerns about an oversupply, and the growing demand for electric vehicles, particularly in China.
Now, let's talk about another surprising development: the performance of gold miners. A significant number of gold mining companies made it to the list of this year's best-performing stocks. Companies like Regis Resources, Genesis Minerals, Evolution Mining, and Newmont Corporation saw their share values triple in the past year. The price of physical gold reached new record highs throughout 2025, even climbing as high as $US4,532 an ounce last week. So, what's driving this gold rush? According to Gemma Dale, nabTrade's head of investor behavior, central banks buying gold as they move away from the US dollar and US dollar assets like Treasury bonds is a major factor. Gold is seen as a safe-haven asset, performing well during times of global uncertainty.
Financial commentators also attribute gold's popularity to US President Donald Trump's erratic policymaking and ever-changing tariff policies. There are concerns about the Federal Reserve's independence in making interest rate decisions, especially given Trump's recent efforts to appoint rate-cutting loyalists. Additionally, the Fed's three interest rate cuts in 2025 and the likelihood of further cuts in 2026 have contributed to the US dollar losing 10% of its value this year. These factors, along with concerns about US economic exceptionalism and geopolitical conflict, have led to a huge demand for bullion, resulting in record-high share prices for many Australian gold mining companies.
Now, let's talk about the local share market. Overall, the ASX 200 has performed reasonably well, with a 10% gain (including dividends), and the broader All Ordinaries index has gained 7%. However, those who bought into the Australian market in early April, after Trump's so-called liberation day tariff caused a global crash, and sold at a record high in late October, would have seen gains of around 24%.
Jun Bei Liu, Ten Cap's lead portfolio manager and stock picker, describes 2025 as a year of volatility and stress due to the unexpected nature of tariff negotiations. Gemma Dale also found the year to be quite stressful for share investing, with concerns about the potential impact of Trump's tariff announcements and the fear of a catastrophic collapse in global trade, similar to what was seen during COVID. As these fears failed to materialize, investors jumped on the TACO trade.
TACO, an acronym for "Trump always chickens out", is a term used by traders to describe Trump's tendency to make grand tariff threats that cause investor panic, only to backtrack later, allowing markets to recover. The TACO trade has pushed many countries' share markets to their highest levels ever. However, the ASX appears to have underperformed compared to its overseas peers, particularly Wall Street's S&P 500, Japan's Nikkei, and South Korea's KOSPI.
One reason for this underperformance is the size of Australia's technology sector, which makes up only 3% of the local share market's value. As a result, the ASX hasn't benefited as much from the AI investment boom, which has driven the share prices of companies like Nvidia, Apple, Microsoft, Amazon, Meta, Alphabet, and Tesla to new heights. Additionally, foreign stock markets belong to countries that have seen significant falls in their exchange rates, making them potential recipients of further stimulus in 2026, which could further boost their markets.
In contrast, Australia is more likely to see interest rates rise next year due to the return of higher inflation. This could lead to a different market dynamic, with lower interest rates usually resulting in rising stock markets as investors seek riskier investments. Rate hikes, on the other hand, tend to have the opposite effect, causing investors to sell down and take profits.
Over the past year, concerns about the share market being overvalued have grown. Commonwealth Bank, for example, has gained a reputation for being the most expensive bank in the world, especially when considering its price-to-earnings ratio. After hitting a record high of $191.40 in June, CBA's share price underwent a correction, dropping 16% in six months. The collective value of the ASX's technology and healthcare stocks has fallen by more than 20% this year, with tech and health care being the worst-performing sectors.
Jun Bei Liu believes that valuations are too high for some tech and AI-related stocks, but expects companies like NextDC and Goodman Group, AI data center owners, to earn strong profits next year, supporting their share prices. Looking ahead to 2026, Ms. Liu expects resources stocks, particularly copper and gold, to continue performing well. She also predicts that airlines will do better due to reasonably low oil prices, and that some "oversold" tech companies could make a comeback. Ms. Liu expects the share market to deliver a return of between 8 and 10% next year, with volatility still expected due to the ongoing uncertainty surrounding China and US tariffs.
Gemma Dale believes that Trump's influence on markets will be significantly reduced in 2026. She argues that markets no longer believe his dramatic announcements, seeing them as negotiating tactics rather than credible threats. As a result, the market is more relaxed, expecting Trump to back down. Overall, 2026 is expected to be a solid, albeit boring, year with major sectors holding up well, but without sensational levels of growth.
