Summary
- Global equities rose in Q4 2025, led by Asia Pacific and Emerging Markets, particularly technology and semiconductor stocks; European equities also performed well.
- US equities lagged due to high valuations, political uncertainty, and concerns over potential AI-related overinvestment.
- Government bonds delivered positive returns, supported by UK budget confidence and interest rate cuts in the UK and US.
- Despite geopolitical risks, 2025 delivered strong overall returns, with diversification remaining central to managing volatility into 2026.
In the final quarter of 2025, equity market performance was positive, although returns varied by region. Asia Pacific and Emerging Markets equities performed particularly well, supported by their exposure to technology companies benefiting from increased investment in artificial intelligence. Taiwan and South Korea stood out, driven by strong performance from several semiconductor companies. European equities also delivered solid returns.
US equities experienced more muted performance over the quarter. This reflected higher market valuations, domestic political uncertainty, and the availability of more attractive investment opportunities outside the US. Throughout the quarter, investors remained focused on the risk of a potential AI bubble, with ongoing uncertainty about whether the substantial investments being made by US technology companies will ultimately deliver expected returns.
Regional Stock Market Performance, Q4 2025:
In bond markets, government bonds (gilts) delivered positive returns. The UK budget was well received by markets, helping to support sentiment, and interest rates were cut by both the Bank of England and the US Federal Reserve. Bond investors continued to monitor developments in the UK budget, the labour market—particularly rising unemployment—and inflation.
Looking back over the full year, markets delivered surprisingly strong returns in 2025 despite persistent geopolitical uncertainty. Non-US markets outperformed, as investors increasingly looked beyond the US for opportunities amid valuation concerns and growing uncertainty around AI-related investments.
Looking ahead, 2026 may see geopolitics, US domestic politics, artificial intelligence, and interest rates emerge as key drivers of market movements. Any of these factors could contribute to periods of volatility. It is important to remember, however, that volatility is a normal and permanent feature of financial markets, reflecting changing investor expectations and opportunities over time.
Our investment approach remains focused on diversification across regions, markets, and asset classes to help manage volatility and capture a broad range of opportunities. We continue to see value across equities, bonds, property, and infrastructure, and maintain exposure to these assets across different regions and industries.
For those already invested with us, if you would like an update on your investment portfolio, please contact your usual point of contact.
For those not yet invested, we would be happy to help you understand how these changes could impact your wider financial strategy – whether that means making the most of surplus cash, optimising pensions and ISAs, or ensuring your money is working efficiently. To arrange a meeting with one of our investment managers, please contact our reception team.”
Important Information: This update is provided for general information only and does not constitute personal financial advice. Past performance is not a reliable indicator of future results. Investments can go down as well as up, and you may not get back the amount originally invested. If you are unsure about how this information applies to your circumstances, please speak to your adviser.
