A banner year for markets and ETFs
2025 was a banner year for markets. Global stocks, bonds, and commodities all posted gains1 and, more importantly, all outperformed cash.2 This was the first time since 2019 that all three major asset classes beat cash in the same year.
A deep bench supported the market. Within equities, 41 out of the 47 countries in the MSCI ACWI Index had gains (average is 27).3 And 10 out of 11 US GICS sectors also had gains (average is 8).4 For bond markets, all major bond core and satellite sectors—across the maturity and credit spectrum—had gains in 2025.5
Amid these positive market returns, ETF fund flows raised their own banner.
Flows and assets surge to new records
US-listed ETFs took in a record $1.515 trillion in 2025, vastly outpacing 2024’s record $1.152 trillion. A massive $235 billion inflow in December—the industry’s first-ever $200 billion-plus month—boosted the total.
That mammoth month helped the industry take in $564 billion in the fourth quarter alone—double the Q4 average inflow of $265 billion. Risk-on optimism, the acceleration of secular trends (e.g., low-cost, active), and seasonal buying behavior acted as heavy-handed catalysts for this record run to finish 2025.
With 2025 inflows catapulted by this strong Q4 (Figure 1) and supportive market returns, total ETF assets under management surged to $13.4 trillion—another new record.
Strength was everywhere. All major asset classes had inflows in December—and record inflows for the year. In fact, every asset class posted double-digit growth rates in 2025 (inflows as a percentage of assets).
The more than $10 trillion equity ETF category took a record $175 billion in December (+$941 billion for the year) and fixed income ETFs’ $47 billion in December was the category’s third-highest inflow, with $448 billion for 2025 setting a record.
The commodity category’s $10 billion haul in December was boosted by gold ETFs’ fifth-best $6.3 billion and silver ETFs’ record $2 billion in inflows. Broad commodity funds added $400 million, pushing their full-year total to $3 billion (second-most ever for a year) as investors looked to real assets to help build resiliency.
Despite fixed income ETFs’ records, sentiment isn’t screening defensive. In fact, the rolling three-month differential between equity and bond ETFs broke past the 90th percentile to sit just below the all-time high (Figure 2)—indicating bullish risk-taking.
Expect some regression to start 2026, as we saw the same seasonal spike in activity to end 2024 followed by a dip, albeit one sparked by Liberation Day.
Upside sought in cyclicals and non-US equities
From a geographic perspective, a year after the US accounted for 86% of all equity flows, their share fell in 2025. The $687 billion of inflows to US equity ETFs accounted for 73% of all equity flows in 2025, as investors sought to increase regional diversification within their equity allocations.
Beyond the record-setting international-developed inflows in 2025 (+$124 billion), emerging market (EM) exposures were another bright spot driving interest into non-US equity exposures. The $37.2 billion into EM ETFs last year was their second-most ever for a year—closely behind the $37.4 billion of inflows from 2017. That momentum could be sustained this year if macro and return tailwinds continue.
Figure 3: Geographic flows
| In millions ($) | December | 2025 | Trailing 3-month | Year to date (% of AUM) |
|---|---|---|---|---|
| US | 127,886 | 687,526 | 286,720 | 10.15% |
| Global | 7,927 | 50,169 | 20,907 | 25.82% |
| International: Developed | 25,138 | 123,977 | 47,940 | 16.36% |
| International: Emerging markets | 7,513 | 37,204 | 16,826 | 14.04% |
| International: Region | 1,695 | 18,020 | 6,681 | 30.39% |
| International: Single country | 2,046 | 9,831 | 3,558 | 8.57% |
| Currency hedged | 168 | 5,227 | 1,201 | 19.34% |
Source: Bloomberg Finance, L.P., State Street Investment Management, as of December 31, 2025. The top two/bottom two categories per period are highlighted. Past performance is not a reliable indicator of future performance.
Sectors also reveal risk-on positioning. With $8 billion inflows in December, sectors took in nearly $30 billion on the year. And ending the year with seven consecutive months of inflows indicates risk-on optimism heading into 2026. Inflows into cyclical sectors also support this view.
Cyclical sectors had $9 billion of inflows in December, led by Materials, Real Estate, and Industrials. Meanwhile, defensive sectors had $1.1 billion of outflows, which would have been worse without the $500 million of inflows into Utilities as investors continued positioning for AI ecosystem beneficiaries. For the year, Utilities had $7 billion of inflows (third-most out of any sector).
Figure 4: Sector flows
| In millions ($) | December | 2025 | Trailing 3-month | Year to date (% of AUM) |
|---|---|---|---|---|
| Technology | -435 | 14,099 | 4,616 | 4.60% |
| Financial | -177 | -235 | -3,092 | -0.25% |
| Health Care | -1,066 | -2,303 | 4,779 | -2.64% |
| Consumer Discretionary | 1,091 | -1,184 | -472 | -2.81% |
| Consumer Staples | -631 | -1,043 | -1,246 | -3.83% |
| Energy | 566 | -3,849 | 1,888 | -4.95% |
| Materials | 3,305 | 896 | 4,585 | 2.44% |
| Industrials | 2,041 | 8,770 | 3,699 | 17.00% |
| Real Estate | 2,195 | 4,242 | 3,016 | 5.39% |
| Utilities | 515 | 6,778 | 2,032 | 25.07% |
| Communications | 476 | 3,706 | 310 | 13.70% |
Source: Bloomberg Finance, L.P., State Street Investment Management, as of December 31, 2025. The top two/bottom two categories per period are highlighted. Past performance is not a reliable indicator of future performance.
Bond flows hint at three trends
December marked another month of curve positioning bias toward the short end. Despite Federal Reserve (Fed) rate cuts (with more expected in 2026) that will reduce the yield on the more Fed-sensitive short end of the curve, investors deposited $6 billion into short-term government bond ETFs. At the same time, long-term government bond ETFs had outflows.
Combined with the $3 billion into the intermediate-term segment, the curve-related flow trends indicate investors’ unwillingness to take on outsized duration risks, a year-long trend.
Credit-related sectors also saw continued interest. Credit-related sectors saw $7 billion inflows in December and took in $77 billion for the year. And high yield bond ETFs themselves posted a record annual inflow (+$26 billion). Together, this represents a strong trend of taking growth-biased risks with bonds.
The last trend of note has been the ongoing inflows into inflation-linked bonds (IL bonds). The $330 million of inflows in December is now IL bonds’ 12th month with inflows, their longest stretch since 2022. This illustrates investors’ desire to build portfolio resilience in today’s stubborn inflation environment.
Figure 4: Fixed income flows
| In millions ($) | December | 2025 | Trailing 3-month | Year to date (% of AUM) |
|---|---|---|---|---|
| Aggregate | 22,445 | 179,197 | 62,010 | 28.70% |
| Government | 9,137 | 105,920 | 35,291 | 25.40% |
| Short term | 6,372 | 69,975 | 22,235 | 31.51% |
| Intermediate | 2,917 | 30,950 | 12,936 | 21.35% |
| Long term (>10 yr) | -152 | 4,995 | 120 | 5.92% |
| Inflation-protected | 330 | 12,058 | 2,125 | 21.41% |
| Mortgage-backed | 1,290 | 19,245 | -395 | 25.08% |
| IG corporate | 2,760 | 37,199 | 13,785 | 14.23% |
| High yield corp. | 3,116 | 26,120 | 6,967 | 30.82% |
| Bank loans and CLOs | 236 | 13,416 | -158 | 28.62% |
| EM bond | 1,555 | 4,354 | 3,162 | 15.46% |
| Preferred | 270 | 2,062 | 566 | 5.45% |
| Convertible | 204 | 820 | 1,073 | 11.64% |
| Municipal | 5,732 | 47,648 | 21,998 | 34.23% |
Source: Bloomberg Finance, L.P., State Street Investment Management, as of December 31, 2025. The top two/bottom two categories per period are highlighted. Past performance is not a reliable indicator of future performance.
Building toward another banner
With so much positivity and success, if market returns and flow trends were an NBA season they would resemble the 2014-2015 Golden State Warriors: not the record-setting 73-win season, but the season where they won 67 games, raised an NBA championship banner, and broke many scoring records while ushering in a new brand of basketball featuring a high-paced, three-point shooting offense.
Yet, unlike a team restructuring its nucleus during the offseason, the market’s core trends from 2025 are still in the game for 2026. Rising profits, positive economic growth, and increasing liquidity with the growth in money supply alongside lower rates are all in the lineup. But that doesn’t mean investors should order another banner for 2026 now. After all, the 2015-2016 Warriors brought back nearly the same team, and lost in the finals.
Just as the 2014-2015 Golden State Warriors sparked a new brand of basketball, changes in the fiscal and monetary landscape have ushered in a new macroeconomic paradigm. And in 2025, what worked best over the last 15 years (owning US equities) wasn’t the winningest trade. Non-US equities outperformed the US by the largest margin since 2009.6
As we discuss in our 2026 outlook, ensuring portfolios are diversified across assets (bonds were a source of return again in 2025), geographies, and shifting economic environments (with inflation-sensitive assets) may help investors raise another banner this year.