21 Jan 2025 in Review A Remarkable Year for Equities

2025 was an exceptional year for investors. Stock markets across the globe delivered strong double‑digit gains, from Emerging Markets to Asia Pacific, Japan, Europe, and the UK. What made 2025 truly unusual, however, was that both equities and gold rose together; a rare occurrence not seen in half a century.

A Shift in Global Market Leadership

For the first time in years, the US lagged behind other regions. Even with record‑level investment flowing into the “Magnificent Seven,” some investors grew cautious due to the high valuations and heavy tech-sector concentration within the S&P 500.

Meanwhile, Emerging Markets benefited from:

Strong growth forecasts

A softer US dollar

Investor appetite to diversify away from US concentration risk

Tariffs, Trade Tensions & A New Global Landscape

No review of 2025 would be complete without the events of early April, when the Trump administration announced sweeping new tariffs on “Liberation Day.” Markets reacted swiftly with bouts of volatility as:

• Negotiations stalled and resumed
• A patchwork of new trade agreements emerged
• Companies and consumers braced for shifting supply chains

The result: the US now faces its highest average tariff rate since 1935, with goods such as clothing, electronics, computers, and vehicles among the most affected.

The full long‑term economic impact is still unfolding.

AI: The Defining Mega‑Trend Going Into 2026

Artificial Intelligence continued to dominate headlines and investment flows.

2025 saw billions invested into AI‑focused companies, pushing valuations higher.
However, investors remain watchful about:

• How quickly AI will begin improving corporate profits
• Whether the long-term cost efficiencies will justify the scale of investment

AI remains one of the most influential forces shaping markets in 2026.

Central Banks Shift Their Stance

Across 2025, nine major central banks cut interest rates, including:

• The US Federal Reserve
• The European Central Bank
• The Bank of England

Inflation continued to cool from its peaks, although it remains above target in key economies.

Japan, in contrast, stood out by raising rates twice which provides another reminder of how varied global monetary policy has become.

What About Fixed Income?

Despite a noisy backdrop, Sterling credit markets proved resilient, rewarding investors with attractive yields supported by strong company fundamentals.

Other areas also showed promise:

• Government bonds became more attractive as falling rates boosted valuations
• Global inflation‑linked debt offered potential protection from unexpected inflation at far better prices than in recent years

Looking Ahead to 2026

Sticky Inflation

Inflation remains stubborn and this is especially the case in the US. New tariffs may increasingly feed through to consumer prices as retailers reach the limit of what they can absorb.

A Volatile Start to the Year

2026 began with fresh geopolitical uncertainty following the arrest of Venezuela’s Nicolás Maduro by the US administration. With no clear successor named, questions about the future of Venezuela’s oil production could impact global energy markets.

Expect More Volatility (But Stay Calm)

While markets have seen repeated bouts of turbulence in recent years, volatility itself is not new. Our Investment Committee continues to believe in diversification and remains committed to making allocation changes only when we have strong conviction.

We encourage investors to stay focused on the long term. Attempting to time short-term market swings is rarely effective and keeping a steady, rational approach allowed our portfolios to deliver positive returns over the past 12 months.

​​Risk Warnings

• The value of an investment and the income from it could go down as well as up.
• All investing is subject to risk, including the possible loss of the money you invest.
• Past performance is not a reliable indicator of future results.
• Diversification does not ensure a profit or protect against a loss.
• Please remember that all investments involve some risk. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income
• This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice as at 21st January 2026. You are recommended to seek competent professional advice before taking any action.