As 2025 comes to a close we can take breath and reflect on how turbulence, or volatility as we often refer to it, does not necessarily mean losing money.
In 2024 the talk was all about monetary normalisation, as central bank’s sought to bring inflation under control and interest rates back down. In 2025 we could barely get through a month without talking about President Trump and his trade tariffs. The noise at the moment is about the AI bubble and the dominance of US technology stocks. With stockmarkets hitting record highs, in both the US and the UK, there is always speculation about what could go wrong, even thought plenty has gone right.
We will touch on all of these topics below as we cover off December’s market news and look forward to 2026.
UK
At its 17th December policy meeting, the Bank of England’s Monetary Policy Committee lowered the Bank Rate by 0.25 percentage points to 3.75 percent — the fourth cut in 2025. The committee voted 5-4 in favour of the cut, underlining some internal uncertainty on the outlook.
The decision was assisted by cooling inflation. Consumer Price Inflation (CPI) fell to 3.2%, which remains well above the 2% target but is trending downwards, and there is an expectation of further cuts to come if it continues to drop. The Committee summary statement itself says ‘On the basis of the current evidence, Bank Rate is likely to continue on a gradual downward path. But judgements around further policy easing will become a closer call.’ The rate has come down by 1.5% since August 2024.
The UK stockmarket rallied on the news of the CPI figures and in anticipation of the rate cut, with an expectation that with inflation seemingly trending downwards, further rate cuts could be used to boost the economy.
The ONS data on the UK labour market was also concerning. The unemployment rate was estimated at 5.1% in August to October 2025. This is up in the latest quarter and above estimates of a year ago. It was also estimated that the number of payrolled employees for November 2025 decreased by 171,000 (0.6%) on the year, and by 38,000 (0.1%) on the month, to 30.3 million.
Annual growth in employees’ average earnings in Great Britain for regular earnings (excluding bonuses) was 4.6%, from August to October 2025. Wage growth was 3.9% for the private sector and 7.6% for the public sector.
Black Friday has had a major influence on the UK retail market since it made it’s way over from the US. Whilst this helps businesses with their November figures, it has dampened the more traditional December retail splurge in recent years. However, there was renewed appetite for the Boxing Day sales this year, with £3.8bn expected to be spent on that one day alone, 2% up on last year. Black Friday figures were lower than expected, possibly due to price sensitive consumers holding out for better bargains than were on offer.
A survey by KPMG found that a significant number of people were holding back on expenditure going into 2026 because of “a combination of concern about the economy and household cost pressures”.
One sector which appears to be benefiting from this caution is the DIY sector. With the property market slowing, and more people fixing up rather than moving or committing to major rebuilding, paint and sofas are selling well. Wickes are the the biggest winners, although all DIY retailers will have benefited from the closure of Homebase.
It will take a little more to fix up the UK economy as a whole in 2026, but the FTSE 100 hit record highs in December, finishing the year close to a record high on 9,923.06, and registering a 22% gain throughout the whole of 2025. The index came tantalising close to reaching 10,000 in December but waited until 2nd January to hit that milestone.
The leap to 10,000 happened only 171 days after it hit 9000 on the 15th July 2025. This is the shortest time to move from one 1000 mark to the next since it launched. It will be music to the ears of Chancellor Rachel Reeves who is desperate to get Britain investing. The UK is often seen as a boring alternative to other regions, with an emphasis on banking, natural resources and defence, rather than technology. But that has served it well in recent times given tariff turbulence and AI bubbles fears.
United States
The Fed cut interest rates by 0.25% in early December, for the third time in 2025, lowering the federal funds target range to between 3.5% and 3.75%. The lack of data caused by the recent government shutdown did not hold up a decision.
There were three dissenters to the rate cut on the committee, one who wanted a 0.5% cut and two others who wanted to hold rates steady, illustrating the range of opinion now within the committee membership.
The language used by Fed chair, Jerome Powell, when talking about future cuts was muted. There appears to be a ‘sit and wait’ approach so decisions in 2026 will be influenced by economic data, in particular the softening labour market and not just inflation figures.
Powell has been criticised by President Trump throughout 2025, and as his term as chair is due to expire in May 2026, there will be plenty of noise about who his successor might be. Trump would want a pro-growth appointment, which may be viewed positively by the markets, but his political interference has also caused concern for the central bank’s independence, and it’s ability to keep inflation under control.
In 2025, the dollar saw one of its steepest declines in years, as a result of Fed interest-rate cuts and Trump’s tariff policies. This has been a clear Trump policy designed to improve export growth, with the hope of knock on improvements for the labour market and share prices for those businesses who benefit. There is a downside for US consumers who want to buy from abroad, as their purchasing power is weakened. The imposition of tariffs, which are simply added to the price of imported goods and passed onto purchasers, could be a double whammy for US consumers, which is why so much caution is applied when looking at US inflation data in 2025 and into 2026.
One huge question for US equities, which really effects global equities such is their importance, is whether we will see a market correction in 2026 relating to a revaluation of technology prices related to Artificial Intelligence. Plenty of scepticism has been vocalised about the ‘AI bubble’. Bubbles happen, and reprices happen, but the fact that there is so much money concentrated in such a small number of US technology stocks makes this concern understandable. Some pain from a reprice is inevitable for everyone.
As we’ve repeatedly said, we can’t stop portfolios going down from time to time. The only sensible approach is to have a well diversified portfolio. For example, some European stocks have benefited in 2025 from investment from those looking to diversify away from technology and access different sectors away from the US.
The S&P 500 index delivered another 16.4% of gains in 2025, hitting double digits for the third consecutive year.
Inflation and interest rates have been under control for some time in the Eurozone, leaving the region to focus on stimulating economic growth. A resolution to the deadlock in the Ukraine would be a boost but political uncertainty continues to cast a shadow over some countries, notably France. The farcical situation which has seen a succession of French Prime Ministers face-off against the National Assembly over the budget could drag on into early 2027 when the next presidential election is due.
Europe also remains vulnerable to global political policy, despite showing resolve and resilience on 2025. US trade and tariff policy is the most obvious example, and we are yet to see how much this changes the global economy. There remain underlying concerns around some traditional industries, such as the German automobile industry which faces a constant threat from China’s electric vehicle manufacturers.
Despite these concerns growth has been resilient. The European Central Bank (ECB) left interest rates unchanged at 2% in December, with inflation hovering around the 2% target. Growth figures have been better than expected on 2025, as tariffs have been less damaging than predicted. The ECB forecasts the region’s gross domestic output at 1.4% in 2025, up from a previous estimate of 1.2%. The labour market also appears strong. There has been some speculation than the ECB could hike interest rates in 2026 to ensure than inflation hits the 2% target, such is its growing confidence in the economy, but this is a decision which will depend on the economic data in early 2026.
The CAC 40 index climbed 10% in 2025, while the DAX 40 index was up 22%, in France and Germany respectively.
Far East
Whilst China’s real GDP grew in line with it’s 5% target for the first three quarters of 2025, there were signs it softened in the third quarter. GDP growth slowed to 4.8% in Q3, down 0.4% from Q2, and the seasonally adjusted quarter-on-quarter pace had dropped to one of the lowest on record.
There remains some optimism that the 5% target will still be met for 2025, but a property slump has contributed to a more negative sentiment than the headline figures suggest. Whilst government spending policy has boosted tech-heavy industries such as AI and electric vehicles, smaller more traditional businesses are possibly being left behind.
Much of China’s household wealth is invested in domestic property, so the major downturn in house prices will inevitably leave many people feeling less wealthy. According to China’s National Bureau of Statistics, in the first 11 months of this year, new home sales fell 11.2% by value from a year earlier.
Whilst this might not immediately trouble the headline statistics, the consequent drop in consumer confidence might cause longer term damage for a country desperate to improve domestic consumption, at a time when export prices have dropped 20% since early 2022, according to HSBC.
This could be just part of a transition period for China, as it moves away from the industries which created growth in the past to the ones which will stimulate growth in the next decades. Success in 2026 will be determined by a number of factors which are all within the Chinese government’s hands.
Firstly, concluding a longer term trade agreement with US is a priority, as China can already see the immediate benefits generated from the recent easing of tensions between the two economic superpowers. This should support exports and businesses. Secondly, the fiscal policy measures announced in 2025 need to bear some tangible fruit. Strengthening domestic demand should put China firmly on course for its 5% growth target.
The People’s Bank of China has gradually appreciated the renminbi against the U.S. dollar in 2025, which will also reduce trade tensions.
There will be much interest in the progress of Japan in 2026 as the new Prime Minister’s stimulus and defence spending program takes shape. The direction of travel appears to be towards a normalising monetary policy after years of deflation, but concerns about the country’s ageing demographic and increasing debt burden throughout this transition will persist.
Emerging Markets
India took Japan’s place as the world’s fourth largest economy in December, in what was a huge moment for this emerging economy. The government’s figures need to be verified against the International Monetary Fund figures in the first half of 2026, but there was a confidence in their press release which talks of them overtaking Germany next. It said ‘With GDP valued at $4.18 trillion, India has surpassed Japan to become the world’s fourth-largest economy and is poised to displace Germany from the third rank in the next 2.5 to 3 years with projected GDP of $7.3 trillion by 2030.’
India has been the world’s fastest growing major economy for some time, having doubled over the past 10 years. Steep US tariffs triggered by India’s purchase of Russian oil, did not stop India’s real GDP expanding by 8.2% in the second quarter of 2025-26, accelerating from 7.8% in the preceding quarter and 7.4% in the final quarter of 2024-25. India’s equity markets has had its wobbles this year, but the high growth, low inflation environment has kept the economy firing.
Emerging markets equities on the whole finished 2025 strongly where they have benefited from a weaker dollar and an expectation of more Fed rate cuts. Tech heavy emerging economies such as Taiwan and Korea have suffered the turbulence we have seen in the US tech stockmarket.
Summary
You could be forgiven for thinking that 2025 was a difficult year if you just listened to the bad news for investors. In reality, equity markets have been delivering results, especially since early April. Speculation about what could go wrong in 2026 is largely down to the success of 2025. Those people who have little or nothing invested will not have seen the benefit of these gains, and may struggle to see the positives. This seems to be a problem in many countries.
It is almost impossible to predict the future with any precision, but we do know that we can control a few key factors. We can ensure you have a well diversified portfolio. We can make sure you use all of your tax allowances to make your money work as hard for you as possible. We can also give you help and advice if we do need to make tweaks to your financial plan, and avoid making the damaging, impulsive changes so many others make when emotions are flying high.
Early April, when markets tumbled after the tariff announcements, was a great example of how patience is rewarded and panic is punished. Investor behaviour is so often a crucial factor in achieving optimal results.
As we move into 2026 that patience will no doubt be tested again from time to time, and we remain right by your side, giving you the confidence you need to make the right decisions.
And finally…
You can buy square watermelons in Japan.
They are expensive, decorative items, and not meant for eating, but you can pick up a square watermelon in high end department stores. They are grown in special molds and harvested before they are ripe to keep their shape, hence why they shouldn’t be eaten.
If this blog has raised any questions why don't we have a quick chat?
Garry Hale MD & Certified Financial Planner
A brief meeting might be of interest, especially if you’re unsure just how wealth management and financial planning could help you.
It would only require the investment of an hour or so of your time, and the coffee’s not bad either.
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January Market Commentary
Introduction
As 2025 comes to a close we can take breath and reflect on how turbulence, or volatility as we often refer to it, does not necessarily mean losing money.
In 2024 the talk was all about monetary normalisation, as central bank’s sought to bring inflation under control and interest rates back down. In 2025 we could barely get through a month without talking about President Trump and his trade tariffs. The noise at the moment is about the AI bubble and the dominance of US technology stocks. With stockmarkets hitting record highs, in both the US and the UK, there is always speculation about what could go wrong, even thought plenty has gone right.
We will touch on all of these topics below as we cover off December’s market news and look forward to 2026.
UK
At its 17th December policy meeting, the Bank of England’s Monetary Policy Committee lowered the Bank Rate by 0.25 percentage points to 3.75 percent — the fourth cut in 2025. The committee voted 5-4 in favour of the cut, underlining some internal uncertainty on the outlook.
The decision was assisted by cooling inflation. Consumer Price Inflation (CPI) fell to 3.2%, which remains well above the 2% target but is trending downwards, and there is an expectation of further cuts to come if it continues to drop. The Committee summary statement itself says ‘On the basis of the current evidence, Bank Rate is likely to continue on a gradual downward path. But judgements around further policy easing will become a closer call.’ The rate has come down by 1.5% since August 2024.
The UK stockmarket rallied on the news of the CPI figures and in anticipation of the rate cut, with an expectation that with inflation seemingly trending downwards, further rate cuts could be used to boost the economy.
On that point, the recent growth projections from the Office for Budgetary Responsibility (OBR) produced for the Autumn Statement and the historic data from the Office for National Statistics (ONS) shows some growth but the economy remains sluggish and seems brittle. GDP was estimated to have increased by 0.1% in the quarter from July to September.
The ONS data on the UK labour market was also concerning. The unemployment rate was estimated at 5.1% in August to October 2025. This is up in the latest quarter and above estimates of a year ago. It was also estimated that the number of payrolled employees for November 2025 decreased by 171,000 (0.6%) on the year, and by 38,000 (0.1%) on the month, to 30.3 million.
Annual growth in employees’ average earnings in Great Britain for regular earnings (excluding bonuses) was 4.6%, from August to October 2025. Wage growth was 3.9% for the private sector and 7.6% for the public sector.
Black Friday has had a major influence on the UK retail market since it made it’s way over from the US. Whilst this helps businesses with their November figures, it has dampened the more traditional December retail splurge in recent years. However, there was renewed appetite for the Boxing Day sales this year, with £3.8bn expected to be spent on that one day alone, 2% up on last year. Black Friday figures were lower than expected, possibly due to price sensitive consumers holding out for better bargains than were on offer.
A survey by KPMG found that a significant number of people were holding back on expenditure going into 2026 because of “a combination of concern about the economy and household cost pressures”.
One sector which appears to be benefiting from this caution is the DIY sector. With the property market slowing, and more people fixing up rather than moving or committing to major rebuilding, paint and sofas are selling well. Wickes are the the biggest winners, although all DIY retailers will have benefited from the closure of Homebase.
It will take a little more to fix up the UK economy as a whole in 2026, but the FTSE 100 hit record highs in December, finishing the year close to a record high on 9,923.06, and registering a 22% gain throughout the whole of 2025. The index came tantalising close to reaching 10,000 in December but waited until 2nd January to hit that milestone.
The leap to 10,000 happened only 171 days after it hit 9000 on the 15th July 2025. This is the shortest time to move from one 1000 mark to the next since it launched. It will be music to the ears of Chancellor Rachel Reeves who is desperate to get Britain investing. The UK is often seen as a boring alternative to other regions, with an emphasis on banking, natural resources and defence, rather than technology. But that has served it well in recent times given tariff turbulence and AI bubbles fears.
United States
The Fed cut interest rates by 0.25% in early December, for the third time in 2025, lowering the federal funds target range to between 3.5% and 3.75%. The lack of data caused by the recent government shutdown did not hold up a decision.
There were three dissenters to the rate cut on the committee, one who wanted a 0.5% cut and two others who wanted to hold rates steady, illustrating the range of opinion now within the committee membership.
The language used by Fed chair, Jerome Powell, when talking about future cuts was muted. There appears to be a ‘sit and wait’ approach so decisions in 2026 will be influenced by economic data, in particular the softening labour market and not just inflation figures.
Powell has been criticised by President Trump throughout 2025, and as his term as chair is due to expire in May 2026, there will be plenty of noise about who his successor might be. Trump would want a pro-growth appointment, which may be viewed positively by the markets, but his political interference has also caused concern for the central bank’s independence, and it’s ability to keep inflation under control.
In 2025, the dollar saw one of its steepest declines in years, as a result of Fed interest-rate cuts and Trump’s tariff policies. This has been a clear Trump policy designed to improve export growth, with the hope of knock on improvements for the labour market and share prices for those businesses who benefit. There is a downside for US consumers who want to buy from abroad, as their purchasing power is weakened. The imposition of tariffs, which are simply added to the price of imported goods and passed onto purchasers, could be a double whammy for US consumers, which is why so much caution is applied when looking at US inflation data in 2025 and into 2026.
One huge question for US equities, which really effects global equities such is their importance, is whether we will see a market correction in 2026 relating to a revaluation of technology prices related to Artificial Intelligence. Plenty of scepticism has been vocalised about the ‘AI bubble’. Bubbles happen, and reprices happen, but the fact that there is so much money concentrated in such a small number of US technology stocks makes this concern understandable. Some pain from a reprice is inevitable for everyone.
As we’ve repeatedly said, we can’t stop portfolios going down from time to time. The only sensible approach is to have a well diversified portfolio. For example, some European stocks have benefited in 2025 from investment from those looking to diversify away from technology and access different sectors away from the US.
The S&P 500 index delivered another 16.4% of gains in 2025, hitting double digits for the third consecutive year.
Europe
European equities finished the year strongly, with broad gains in banking, commodities and defencestocks. Whilst these have been partly down to government fiscal stimulus, with Germany a notable investor in defence and infrastructure, it has resulted in some optimism for 2026.
Inflation and interest rates have been under control for some time in the Eurozone, leaving the region to focus on stimulating economic growth. A resolution to the deadlock in the Ukraine would be a boost but political uncertainty continues to cast a shadow over some countries, notably France. The farcical situation which has seen a succession of French Prime Ministers face-off against the National Assembly over the budget could drag on into early 2027 when the next presidential election is due.
Europe also remains vulnerable to global political policy, despite showing resolve and resilience on 2025. US trade and tariff policy is the most obvious example, and we are yet to see how much this changes the global economy. There remain underlying concerns around some traditional industries, such as the German automobile industry which faces a constant threat from China’s electric vehicle manufacturers.
Despite these concerns growth has been resilient. The European Central Bank (ECB) left interest rates unchanged at 2% in December, with inflation hovering around the 2% target. Growth figures have been better than expected on 2025, as tariffs have been less damaging than predicted. The ECB forecasts the region’s gross domestic output at 1.4% in 2025, up from a previous estimate of 1.2%. The labour market also appears strong. There has been some speculation than the ECB could hike interest rates in 2026 to ensure than inflation hits the 2% target, such is its growing confidence in the economy, but this is a decision which will depend on the economic data in early 2026.
The CAC 40 index climbed 10% in 2025, while the DAX 40 index was up 22%, in France and Germany respectively.
Far East
Whilst China’s real GDP grew in line with it’s 5% target for the first three quarters of 2025, there were signs it softened in the third quarter. GDP growth slowed to 4.8% in Q3, down 0.4% from Q2, and the seasonally adjusted quarter-on-quarter pace had dropped to one of the lowest on record.
There remains some optimism that the 5% target will still be met for 2025, but a property slump has contributed to a more negative sentiment than the headline figures suggest. Whilst government spending policy has boosted tech-heavy industries such as AI and electric vehicles, smaller more traditional businesses are possibly being left behind.
Much of China’s household wealth is invested in domestic property, so the major downturn in house prices will inevitably leave many people feeling less wealthy. According to China’s National Bureau of Statistics, in the first 11 months of this year, new home sales fell 11.2% by value from a year earlier.
Whilst this might not immediately trouble the headline statistics, the consequent drop in consumer confidence might cause longer term damage for a country desperate to improve domestic consumption, at a time when export prices have dropped 20% since early 2022, according to HSBC.
This could be just part of a transition period for China, as it moves away from the industries which created growth in the past to the ones which will stimulate growth in the next decades. Success in 2026 will be determined by a number of factors which are all within the Chinese government’s hands.
Firstly, concluding a longer term trade agreement with US is a priority, as China can already see the immediate benefits generated from the recent easing of tensions between the two economic superpowers. This should support exports and businesses. Secondly, the fiscal policy measures announced in 2025 need to bear some tangible fruit. Strengthening domestic demand should put China firmly on course for its 5% growth target.
The People’s Bank of China has gradually appreciated the renminbi against the U.S. dollar in 2025, which will also reduce trade tensions.
Hong Kong Stock Exchange was the international number one exchange by IPO funds raised in 2025. Additionally, Shanghai Stock Exchange (SSE) ranked 5th and Shenzhen Stock Exchange (SZSE) 8th.
There will be much interest in the progress of Japan in 2026 as the new Prime Minister’s stimulus and defence spending program takes shape. The direction of travel appears to be towards a normalising monetary policy after years of deflation, but concerns about the country’s ageing demographic and increasing debt burden throughout this transition will persist.
Emerging Markets
India took Japan’s place as the world’s fourth largest economy in December, in what was a huge moment for this emerging economy. The government’s figures need to be verified against the International Monetary Fund figures in the first half of 2026, but there was a confidence in their press release which talks of them overtaking Germany next. It said ‘With GDP valued at $4.18 trillion, India has surpassed Japan to become the world’s fourth-largest economy and is poised to displace Germany from the third rank in the next 2.5 to 3 years with projected GDP of $7.3 trillion by 2030.’
India has been the world’s fastest growing major economy for some time, having doubled over the past 10 years. Steep US tariffs triggered by India’s purchase of Russian oil, did not stop India’s real GDP expanding by 8.2% in the second quarter of 2025-26, accelerating from 7.8% in the preceding quarter and 7.4% in the final quarter of 2024-25. India’s equity markets has had its wobbles this year, but the high growth, low inflation environment has kept the economy firing.
Emerging markets equities on the whole finished 2025 strongly where they have benefited from a weaker dollar and an expectation of more Fed rate cuts. Tech heavy emerging economies such as Taiwan and Korea have suffered the turbulence we have seen in the US tech stockmarket.
Summary
You could be forgiven for thinking that 2025 was a difficult year if you just listened to the bad news for investors. In reality, equity markets have been delivering results, especially since early April. Speculation about what could go wrong in 2026 is largely down to the success of 2025. Those people who have little or nothing invested will not have seen the benefit of these gains, and may struggle to see the positives. This seems to be a problem in many countries.
It is almost impossible to predict the future with any precision, but we do know that we can control a few key factors. We can ensure you have a well diversified portfolio. We can make sure you use all of your tax allowances to make your money work as hard for you as possible. We can also give you help and advice if we do need to make tweaks to your financial plan, and avoid making the damaging, impulsive changes so many others make when emotions are flying high.
Early April, when markets tumbled after the tariff announcements, was a great example of how patience is rewarded and panic is punished. Investor behaviour is so often a crucial factor in achieving optimal results.
As we move into 2026 that patience will no doubt be tested again from time to time, and we remain right by your side, giving you the confidence you need to make the right decisions.
And finally…
You can buy square watermelons in Japan.
They are expensive, decorative items, and not meant for eating, but you can pick up a square watermelon in high end department stores. They are grown in special molds and harvested before they are ripe to keep their shape, hence why they shouldn’t be eaten.
If this blog has raised any questions why don't we have a quick chat?
MD & Certified Financial Planner
A brief meeting might be of interest, especially if you’re unsure just how wealth management and financial planning could help you.
It would only require the investment of an hour or so of your time, and the coffee’s not bad either.