Throughout 2025, the United States economy demonstrated notable resilience despite persistent macroeconomic uncertainty surrounding fiscal and trade policy.

Consumer spending remained firm, supported by a healthy labour market and continued wage growth, while consumer-exposed companies consistently exceeded earnings expectations, citing durable demand, improved inventory discipline and easing input costs, particularly across the travel, leisure and discretionary sectors.

Economic growth was strong, with real GDP expanding 3.8 per cent in the second quarter and accelerating to 4.3 per cent in the third quarter, driven by robust consumer activity and constructive business investment led by substantial artificial intelligence-related spending, which helped to offset softer global trade.

Taken together, the combination of solid full-year growth and earnings strength underscores the durability of the US economy heading into 2026, with fundamentals continuing to support corporate profitability and investor confidence.

Equity markets performed well in 2025, with the S&P 500 advancing 16.4 per cent. Investor sentiment improved as concerns that tariffs would derail the economic expansion faded, while central banks, including the Federal Reserve, shifted towards easier monetary policy.

At its final meeting of the year, the Fed cut rates by 25 basis points to a target range of 3.50-3.75 per cent, marking the third consecutive cut in 2025 and a cumulative easing of 175 basis points since late 2024.

The Fed also ended quantitative tightening and reintroduced quantitative easing through active purchases of short-dated Treasury bills.

Looking ahead, investors should continue to respect technology-driven market leadership, with the most consequential structural theme remaining the capital-intensive expansion of AI infrastructure.

Investment in data centres and specialised semiconductors reached unprecedented levels in the second half of 2025, driving significant capital spending and rising energy demand.

Analysts forecast global AI capital expenditure to grow roughly 33 per cent year-over-year in 2026, after a sharp increase in 2025, with AI capex expanding from approximately $360 billion in 2024 to about $480 billion in 2026.

Over a longer horizon, projections call for a 25 per cent compound annual growth rate from 2025 to 2030, reflecting sustained, multiyear investment as compute and infrastructure scale.

Despite the powerful momentum behind AI, market participation is expected to broaden. For example, financial stocks delivered a solid performance in 2025, with the Morgan Stanley Capital International US Financials Index advancing 15.7 per cent, including dividends.

Banks are well positioned to benefit from a more normalised, upward-sloping yield curve, incremental deregulation and a resilient global economy.

Proposed modifications to the Enhanced Supplementary Leverage Ratio are expected to free up capital for major US banks, supporting shareholder-friendly actions such as higher dividends, increased lending and share repurchases. These gains in capital efficiency are reinforced by a broader, executive-led push towards deregulation, which should lower compliance costs and support earnings growth. Beyond financials, industrials and healthcare merit close attention.

Leading healthcare companies have begun to recover after underperforming for much of 2025, supported by favourable demographic trends and improving clarity around pricing dynamics. Across healthcare, financials and industrials, market leaders are also positioned to benefit from cost reductions and productivity gains, including efficiencies enabled by broader AI adoption.

• Bryan Dooley, CFA, is the chief investment officer at LOM Asset Management Ltd in Bermuda. Call LOM on +1 441-292-5000 or visit www.lom.com for further information. This communication is for information purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. Readers should consult their brokers if such information and/or opinions would be in their best interest when making investment decisions. LOM is licensed to conduct investment business by the Bermuda Monetary Authority