Australian shares ended 2025 lower, with the S&P/ASX 200 dropping over 4% from its October high to 8714.3 points. This fall followed a shift in inflation outlook, as traders moved from expecting rate cuts to probable hikes. Two big Australian banks anticipate a rate increase in early 2026, ending hopes for further cuts. Higher interest rates often slow stocks by raising costs for businesses and consumers. Meanwhile, Wall Street outperformed with strong gains, helped by a December rate cut and booming AI-driven tech stocks, unlike Australia’s resource and bank-led market. David Bassanese, chief economist at Betashares, noted the key question for Australia in 2026: "whether inflation can moderate without the need for more monetary restraint and slower growth." Global and Australian markets are expected to grow in 2026 despite geopolitical risks such as tensions between Beijing and Taiwan and a US oil blockade of Venezuela. Traders usually ignore these risks until supply chains are hit. The AI sector is still seen as forming a bubble, with UBS warning investors to "be mindful of bubble risks." Crypto assets, including bitcoin, have dropped recently as bubble fears grow. Market analyst Tony Sycamore expects bitcoin to fall further in 2026, possibly revisiting its 2025 lows after tariff news linked to Donald Trump. Crypto is popular among younger Australians, with nearly one in four under 30 investing in it to manage high living costs like housing, according to Finder data. Precious metals have surged, with silver prices up over 150% and gold by roughly 70% in US dollars. CMC Markets analyst Luis Ruiz said, "precious metals are traditional safe-haven assets" that gain appeal in uncertain times. Despite some price corrections, gold and silver have quickly bounced back. Australia, rich in gold and silver deposits, stands to benefit. However, Ruiz warns the steep rise in precious metals could signal economic troubles ahead.