December 22, 2025 10:31 PM GMT Global Macro Commentary | Global December 22: Risk-On Into Year- End USD/JPY retraces down to 157 as Japan MoF reiterates potential FX action; bunds outperform slightly after ECB's Schnabel moderates rate hike expectations; oil rises on geopolitical tensions in Venezuela; weak 2y UST auction; US equities extend rally; DXY at 98.27 (-0.3%); US 10y at 4.17 (+1.6bp). The Global Macro Commentary will resume on Friday, January 2. Global rates see mixed but muted moves while JPY ret ...

Core Insights - International stocks and related ETFs are expected to outperform the S&P 500 in 2025, with the WisdomTree International Equity Fund (DWM) showing a performance margin of over 2-to-1 against the S&P 500 as of November 20 [1][2] - Professional investors are optimistic about international equities for 2026, with 42% of respondents in Bank of America's Global Fund Manager Survey believing they will be the top-performing asset class [3][4] Performance Analysis - DWM has outperformed the MSCI EAFE Index by 300 basis points and has exhibited lower annualized volatility compared to developed markets [1] - The fund, which has a market size of $602.3 million, is approaching its 20th anniversary and is not considered overbought despite its strong performance in 2025 [4] Market Sentiment - The global rebalancing theme is gaining traction, with U.S. policies contributing to lower oil prices and fiscal stimulus in other regions [4] - Only 10% of professional investors surveyed believe Japan's Nikkei will be the best-performing equity index next year, which is relevant for DWM as it allocates nearly 25% of its weight to Japanese stocks [6] Overbought Markets - Countries identified as having the most overbought equity markets include South Korea, South Africa, Brazil, Spain, and Taiwan, with only Spain represented in DWM at 5.91% [5]

Group 1 - Japanese shares are expected to continue setting records following the election of Sanae Takaichi, who is anticipated to adopt an expansionist fiscal and monetary agenda [1][2] - A "Takaichi trade" has emerged, characterized by long positions on stocks and bearish positions on Japanese government bonds, particularly longer maturities, in anticipation of her victory [2] - The Nikkei index reached a record closing high of 45,769.50, driven by investor optimism regarding a more dovish successor to Prime Minister Ishiba [3] Group 2 - Short positions on the Nikkei index have been accumulating, which may lead to a short-covering rally, potentially pushing the index towards the 47,000 level [4] - The Japanese government bond market has faced challenges due to declining demand from traditional buyers and concerns over increasing debt, with the 30-year JGB yield reaching a record 3.285% [4][5] - Recent market dynamics showed a slowdown in the Nikkei's momentum, with longer-term JGBs rallying as Takaichi appeared to moderate her stance on fiscal policies [6]