Global Markets
Note: All quoted equity performance figures are in GBP terms.
During the final quarter of 2025, global markets delivered positive but steady gains, closing the year on an upward trajectory. The MSCI World Index rose 3.20% over the quarter, contributing to a total annual gain of 12.80%. The global economy continued to demonstrate resilience despite a range of headwinds, including a prolonged 43-day US government shutdown, softer labour data, and growing debate around AI-related equity valuations.
US equities generated solid returns, supported by a weaker US dollar and the Federal Reserve’s third consecutive rate cut of the year in December. The S&P 500 gained 2.80% over the quarter, with market strength broadening beyond technology into sectors such as healthcare and financials. Although concerns about elevated valuations in large technology companies persisted, their substantial capital expenditure plans represented a significant bet on future demand. Market leadership remained highly concentrated, with the seven largest companies expanding to account for over 35% of the S&P 500 by quarter end.
The FTSE All-Share Index was one of the strongest performers globally, rising 6.40% over the period. As a result, the UK market outperformed the US on both a quarterly and annual basis, delivering its best calendar-year return since the post-financial crisis recovery. Leading sectors included financials, mining, defence, and other commodity-linked industries, which benefited from rising precious and industrial metal prices.
Emerging markets extended their positive momentum into the fourth quarter, with the MSCI EM Index returning 5.20%. Performance was underpinned by continued strength in the global AI theme, particularly in technology-heavy markets such as Taiwan and South Korea. Supportive macroeconomic conditions, including a weaker US dollar and the start of global rate-cutting cycles, also aided returns. By contrast, China ended the year with a negative final quarter, as declines among major AI-focused firms and ongoing weakness in the property sector weighed on equities, particularly in real estate and financial stocks. Despite this, emerging markets overall delivered an exceptional year, with the MSCI EM Index rising 30.60% in 2025.
Precious metals had another strong quarter. Gold ended 2025 with an annual gain of 65%, although this was eclipsed by silver’s remarkable 146% increase over the year, reflecting both safe-haven demand and its role as an industrial input. Copper also recorded a positive quarter, while oil prices continued to decline amid global oversupply and softer demand conditions.
Equity Styles
Large-cap equities continued to outperform small-cap stocks in Q4, led by strong performance among large-cap growth companies. However, unlike earlier in the year, value stocks outperformed growth, signalling broader market participation and a shift away from highly concentrated, technology-led leadership.
Inflation
UK inflation eased steadily over the quarter, falling from 3.80% in September to 3.20% in November. This trend allowed the Bank of England to reduce the base rate to 3.75% in December and indicate that further cuts could follow in 2026 if disinflationary pressures persist.
A similar pattern emerged in the United States, where inflation fell to 2.70% following the October government shutdown. Easing price pressures and a cooling labour market prompted the Federal Reserve to deliver two further rate cuts during the quarter.
In the eurozone, inflation gradually fell from 2.10% in October to 2.00% in December, in line with the European Central Bank’s target. The decline was largely driven by lower energy prices and moderating food inflation.
Fixed Income
Note: All quoted fixed income performance figures are in GBP-hedged terms.
Regionally, UK fixed income assets outperformed, supported by a favourable market response to the November budget. In the US, the US Treasury curve steepened, reflecting concerns around inflation and employment that pushed long-dated yields higher, while two further Federal Reserve rate cuts reduced short-term yields.
Japanese government bond yields reached their highest level since 2007 during the quarter, with the JPM Japan Global Bond Index posting a significant negative return of -7.80%. This was driven by persistent inflation, which has remained above the Bank of Japan’s 2.00% target since April 2022, and a new fiscal stimulus package from the incoming Prime Minister that relies heavily on higher government spending.
Across credit markets, tightening spreads combined with falling interest rates supported positive returns, with euro- and sterling-denominated investment-grade bonds outperforming government bonds.
If you would like to discuss how recent market developments may affect your portfolio or investment strategy, please contact your adviser.
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