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Overview
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Inflation, risk appetite, macro, and structural tailwinds
support real assets
The real assets strategy maintained its
momentum during the fourth quarter, benefiting from stronger risk appetite, stubborn inflation, and further easing in monetary policy. These same forces, alongside powerful secular tailwinds, should continue to support real assets going forward.
Despite concerns over trade tariffs, a cooling labor
market, the US government shutdown, and elevated technology valuations, 2025 proved to be an exceptionally strong year for risk assets, supported by robust earnings growth, AI-driven optimism, and central bank rate cuts. Investors rotated toward financials and cyclicals, supported by the Federal Reserve’s three rate cuts in September, October, and
December, which lowered the federal funds target
range to 3.50%–3.75%. This pivot toward monetary easing reinforced expectations of a soft landing and boosted sentiment across rate-sensitive sectors such as financials, real estate, and consumer discretionary.
Inflation data trended lower but remained above target,
prompting a cautious tone in the Fed’s December meeting minutes. Global equity markets posted moderate gains in Q4 2025. Treasuries posted modest gains in Q4 and solid returns for the year, driven by rate cuts and resilient economic conditions. The US dollar index edged up 0.5% in Q4 but finished the year lower. Commodities advanced broadly, led by gold, which surged more than 12% in the quarter, bringing its annual gain to over 62%.
Real assets started the quarter facing headwinds
from the US government shutdown, labor market uncertainties, and persistent geopolitical risks. While overall inflation was contained, shelter and food prices were stickier. Real assets were up for the quarter, supported by a strong US corporate earnings season, reduced trade-related uncertainty, sustained momentum in AI-driven technology stocks, and additional rate cuts by the Federal Reserve. The real assets strategy (strategy) advanced for all three months of the quarter, adding to earlier gains and bringing the year-to-date return to 19.9%. The strategy closed the quarter with a gain of 3.5%, just behind its composite benchmark by 2 basis points. The longer- term returns remain solid and since its inception in 2005, the strategy continues to maintain its lead over the composite benchmark by over 22 basis points annually and has provided an annualized return of 4.7%.
Real assets insights
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Figure 1: Real assets strategy—total returns for
the quarter Note: The performance data quoted represents past performance. Past performance does not guarantee future results. Performance returns of periods of less than one year are not annualized.
The performance figures for the strategy contained herein are
provided on a gross of fees basis and do not reflect the deduction of advisory or other fees. The performance includes the reinvestment of dividends and other earnings and is calculated in US dollars. For strategy and asset indexes please refer to the disclosures. Source: State Street Investment Management, as of December 31, 2025.
Commodities, as tracked by the Bloomberg Enhanced
Roll Yield Total Return Index, rose 5.1% in Q4, driven largely by strong performance in precious metals and industrial metals. However, energy was a drag on returns, offsetting some of the overall upside. For the full year, the index posted a positive return of 18.7%, despite weaker oil demand weighing on performance.
Precious metals and industrial metals were the primary
contributors to this growth. While precious metals led the rally, agriculture and energy sectors recorded negative returns.