For our December newsletter it seems appropriate to assess the events of 2025 and what it teaches us going into 2026.
As ever, we’ve got insight from our fund manager partners at both Quilter Cheviot and Marlborough but first let’s summarise how markets have performed in a year that has seen widespread growth despite media hype about bubbles and imminent crises.
Global Stock Markets in 2025: A Year of Resilience
Despite trade shocks and geopolitical tensions, global equity markets delivered solid returns in 2025, showing notable resilience.
Japan led major markets, finishing the year up 24%, followed by the UK (+20%), Europe (+17%), and China (+16%). The U.S. returned 14%, making it one of the weaker performers among developed markets, while India lagged at 9%.
Markets were tested in early April following the announcement of sweeping U.S. trade tariffs (“Liberation Day”), which triggered sharp but temporary sell-offs worldwide. Europe and Japan experienced the largest drops (around 13%), while the UK took the longest time to recover. India proved the most resilient, with only a modest decline, reflecting its lower reliance on exports and limited exposure to U.S. trade.
All major markets rebounded as the year progressed. Japan reached record highs later in the year amid expectations of increased government spending and policy stability. U.S. markets recovered on the back of easing trade tensions with China, interest rate cuts, strong corporate earnings, and resilient consumer spending.
Bottom line: 2025 highlighted the importance of staying invested through volatility, as markets ultimately rewarded patience despite short-term shocks.
One of my favourite voices in the industry is Charlie Bilello who is based in the US and offers insightful commentary that helps you to look beyond the hyperbole of mainstream media and understand topical matters in the right context.
Here are his 7 keys takeaways of the year…
1) Don’t Fear All-Time Highs Markets hitting record highs isn’t a danger signal — historically, the S&P 500 has often continued to climb after new peaks, and 2025 saw dozens more all-time highs after a strong rally.
2) Panic Can Be a Signal Periods of extreme fear — like big volatility spikes or sharp sell-offs — have often preceded strong rebounds. In 2025, a sudden sell-off in April was followed by one of the biggest short-term rallies in history.
3) Comebacks Are Common Despite severe drawdowns early in the year, the market rallied strongly — one of the biggest comebacks on record. Sell-offs are a normal art of markets, and history shows that eventual recoveries are the norm.
4) The Status Quo Is Hard to Break Despite broad public concern over issues like government debt, political and policy inertia persists. In the U.S., federal debt continued to grow, highlighting how difficult major policy shifts can be without a crisis.
5) Diversification Matters Many investors entered 2025 questioning the need for anything beyond U.S. stocks. But broad diversification paid off as non-U.S. markets outpaced the U.S. at times, underscoring the value of owning a range of assets.
6) Every Bear Market Is Different Not all downturns behave the same. In 2025, a >20% slide quickly reversed, reminding investors that predicting the path of a downturn — or the right time to step in/out — is extremely difficult.
7) Time > Money The most important lesson isn’t financial: it’s about how we value time. Building wealth gives freedom, but how that time is spent matters even more — a reminder to align investment goals with life priorities.
Is there really an AI Bubble or is it just a media fabrication?
The words “AI” and “bubble” have been mentioned so many times in 2025 that it has become a theme that has taken on a life of its own. It’s a frequent topic that clients want to discuss and draw parallels with events of the past.
The way to look at the juggernaut companies dominating the S&P500 (aka ‘The Magnificent 7’) is that they are NOT AI companies. They are companies that we all use in daily life to the extent that they have become almost indispensable. Could you live without deliveries from Amazon, Whatsapp for work and personal life (owned by Meta), navigate your way without Google Maps, work without Mircrosoft etc?
The point is that these are huge companies that form a key part of work and personal life for almost every person on the globe. They are not AI companies but companies that are embracing AI to make themselves stronger.
When you look at it like that, the question is why would you choose NOT to invest in these companies and own a slice of their success?
Nathan Sweeney from our fund manager partners at Marlborough examined the situation with NVIDIA, comparing their valuation and profits growth with those of Cisco who were a major victim of the dot com stock market bubble:
Nathan writes…
One of the simplest ways to judge whether a stock looks expensive or cheap is by looking at the price-to-earnings multiple or P/E. The ‘P’ is the share price, and the ‘E’ is the company’s earnings (profits) over the past year. Divide one by the other and you get the P/E multiple.
If a company trades on a P/E of 20x, you’re effectively paying £20 for every £1 of profit. A lower P/E means you’re paying less for those profits (cheaper) and a higher P/E means you’re paying more (expensive).
The charts below highlight a crucial difference between Cisco and Nvidia. In the late 1990s, Cisco’s share price surge became detached from its underlying earnings. This drove up the P/E to a stratospheric 216x (as shown in the chart on the left). This increase in the P/E or ‘multiple expansion’ vastly outpaced the growth in earnings-per-share (EPS) achieved by Cisco (as shown in the chart on the right) over the same period. The disconnect between share price and earnings was a key reason why the bubble ultimately burst.
Nvidia’s share price rise, by contrast, has been driven by exceptional and accelerating earnings growth. As shown in the chart on the left below, the strength of this earnings growth means the P/E multiple has actually fallen (‘multiple contraction’) over the three years in which AI has really so far gripped investors’ attention. This is because in the P/E multiple, the ‘P’ has been outpaced by the growth of the ‘E’. The chart on the right underlines this point, showing powerful growth in Nvidia’s EPS over the three years, while the P/E multiple has actually fallen. It now stands at around 24x forecast earnings for the next four quarters.
The fact that Nvidia’s rising share price has been driven by earnings growth rather than ‘multiple expansion’ is an important distinction. It’s why we don’t view the recent wobble in AI-related stocks as a bubble bursting. Instead, it looks far more like a pause. A chance to catch a breath. Not collapsing but resting. Much like that vital time out between rounds, when even the strongest fighter needs to regroup before stepping back into the action.
And markets are never just about one fighter.
While some of the heavyweight names take a breather, we are already seeing a rotation into other areas of the stock market. There are always other contenders waiting for their moment. We believe the macro backdrop is now starting to favour them. With the US government taking steps aimed at supporting economic growth next year, and central banks expected to continue to cut interest rates, we believe the stage is set for a broader range of companies to perform.
The technology giants may yet return to the centre of the ring. However, they do not need to dominate every round.
For a look at more recent events, we turn to Richard Carter, Head of Fixed Interest Research at QUILTER CHEVIOT.
Last week was eventful from a stock market perspective – a US rate cut, markets hitting all-time highs, oh and the usual dose of tech sector jitters.
Starting with US rates, the Federal Reserve (Fed) did not disappoint all those futures traders and economists who had overwhelmingly predicted a quarter-point cut in the Fed Funds Rate to 3.50%-3.75%. There was dissent though. Three of the 12 on the policy-setting board voted against the quarter-point cut, the biggest revolt since 2019, as policymakers were torn between a softish/softening labour market and a stubbornly high inflation rate. Two of the three advocated no change, while the third was pushing for a larger 0.5% cut. Furthermore, questions remain over how many rate cuts there will be in the new year.
The Fed rate decision was enough to send major US stock indices to new highs, all the more impressive as there were tech sector wobbles to deal with too. Oracle acted as the trigger. The share price was marked down after quarterly revenue growth failed to meet analyst expectations. Not the best time then for the company to announce another hike in its already eye-catching artificial intelligence (AI) spending plans.
Chipmaker Broadcom suffered a double-digit fall in its stock price too. Gross margins were a concern, specifically worries that a US$21bn order from OpenAI rival Anthropic will have a negative impact due to higher costs. Broadcom’s quarterly sales and earnings topped expectations though, and quarterly revenue guidance was raised. But after such a strong run, markets, it seems, are increasingly demanding of the big tech names.
Just as well then, that US equity markets were able to shrug off Oracle’s news and go on to set record highs thanks to a broadening out in market leadership. Old world sectors such as financial, consumer discretionary, industrial and materials all stepped up and posted strong gains. Broadcom’s release the following day did mean the main US equity benchmarks failed to end the week at record levels. But if the increase in market breadth is a sign of things to come then that could bode well for stock markets going into the new year. After all, a broader market is a healthier market.
Weekly economic announcements:
The MSCI All Country World Index (MSCI ACWI) ended the week nursing a small 0.2% decline. Year-to-date (YTD), the index still boasts an impressive 22.1% gain.
United States:
One swallow does not make a summer and all that but the potential broadening out of US equity markets can be seen in the numbers. While the overall main US stock index ended the week off 0.6%, small caps, which are typically more interest rate sensitive, were up 1.2%. This means the smaller end of the market is catching up with larger peers on a YTD basis — up 15.8% compared to 17.5%. The same is true of growth and value stocks. Growth stocks, which count the previously all-conquering tech sector among their number, shed 1.5% (+18.0% YTD), while value added 0.6% (+16.1% YTD).
US Treasuries had a mixed week. At the short end, yields ticked lower following the Fed cut – the yield on the 2-year Treasury edged four basis points lower to 3.52% (down 72 basis points YTD). By contrast, yields on longer-term notes finished slightly higher – the 10-year Treasury yield added five basis points to end the week at 4.19% (down 38 basis points YTD).
United Kingdom:
UK large caps matched the global index with a 0.2% decline, although the YTD gain is still an impressive looking +22.1%. Mid caps fared worse, finishing the week off 0.8% (+9.8% YTD). Soft gross domestic product (GDP) data would not have gone down well with the more domestically focused medium-to-smaller end of the market. GDP contracted 0.1% in October, matching September’s reading and falling well short of the 0.2% expected expansion. The hope is the weak number is down to uncertainty in the elongated run up to the Budget and that, now this is out of the way, future readings will be more positive.
The October GDP data did not stop sterling’s recent run against the dollar, with the pound ending the week at US$1.34, up from US$1.33. UK government bond yields ticked modestly higher, with the 10-year UK Gilt yield rising six basis points to 4.54% (down four basis points YTD).
Europe ex UK:
For the second consecutive week European equities were the week’s outperformers with the MSCI Europe ex-UK Index up 0.1%. YTD the index is up 17.2%. Not having as much skin in the AI game would have helped. So too, comments from European Central Bank (ECB) president Christine Lagarde that the European economy is coping with global trade tensions rather well. This could lead to the ECB revising its growth forecasts upwards when the rate-setting committee meets this week. The market is expecting no change to rates.
As with the previous week, German stocks led the way with a 0.7% weekly gain (+21.5% YTD). Italy was not far behind with a 0.2% rise (+33.7% YTD). By contrast, Switzerland and France were among the laggards. Swiss stocks were 0.4% lower (+14.7% YTD), while the main French index closed down 0.6% (+13.0% YTD).
Like sterling, the euro edged higher against the US dollar, closing at US$1.17 compared to US$1.16 previously. And like UK Gilts, the yield on the 10-year German Bund rose six basis points to 2.86% (up 50 basis points YTD).
All that’s left to say is Merry Christmas to all our valued clients and partners and we look forward to 2026 whatever it may bring.
We firmly believe that your location in the world should not be a barrier to receiving fair, independent and transparent financial advice that you can trust.
We work with clients across the globe and can offer you a FREE initial consultation wherever you are.
It all starts by getting in touch!
Simply complete the contact form and someone will be in touch for an informal chat to discuss how we can help.
Market Update – December 2025
For our December newsletter it seems appropriate to assess the events of 2025 and what it teaches us going into 2026.
As ever, we’ve got insight from our fund manager partners at both Quilter Cheviot and Marlborough but first let’s summarise how markets have performed in a year that has seen widespread growth despite media hype about bubbles and imminent crises.
https://www.visualcapitalist.com/sp/ter01-stock-markets-in-2025-ups-downs-returns-globally/
Global Stock Markets in 2025: A Year of Resilience
Despite trade shocks and geopolitical tensions, global equity markets delivered solid returns in 2025, showing notable resilience.
Japan led major markets, finishing the year up 24%, followed by the UK (+20%), Europe (+17%), and China (+16%). The U.S. returned 14%, making it one of the weaker performers among developed markets, while India lagged at 9%.
Markets were tested in early April following the announcement of sweeping U.S. trade tariffs (“Liberation Day”), which triggered sharp but temporary sell-offs worldwide. Europe and Japan experienced the largest drops (around 13%), while the UK took the longest time to recover. India proved the most resilient, with only a modest decline, reflecting its lower reliance on exports and limited exposure to U.S. trade.
All major markets rebounded as the year progressed. Japan reached record highs later in the year amid expectations of increased government spending and policy stability. U.S. markets recovered on the back of easing trade tensions with China, interest rate cuts, strong corporate earnings, and resilient consumer spending.
Bottom line: 2025 highlighted the importance of staying invested through volatility, as markets ultimately rewarded patience despite short-term shocks.
One of my favourite voices in the industry is Charlie Bilello who is based in the US and offers insightful commentary that helps you to look beyond the hyperbole of mainstream media and understand topical matters in the right context.
Here are his 7 keys takeaways of the year…
1) Don’t Fear All-Time Highs
Markets hitting record highs isn’t a danger signal — historically, the S&P 500 has often continued to climb after new peaks, and 2025 saw dozens more all-time highs after a strong rally.
2) Panic Can Be a Signal
Periods of extreme fear — like big volatility spikes or sharp sell-offs — have often preceded strong rebounds. In 2025, a sudden sell-off in April was followed by one of the biggest short-term rallies in history.
3) Comebacks Are Common
Despite severe drawdowns early in the year, the market rallied strongly — one of the biggest comebacks on record. Sell-offs are a normal art of markets, and history shows that eventual recoveries are the norm.
4) The Status Quo Is Hard to Break
Despite broad public concern over issues like government debt, political and policy inertia persists. In the U.S., federal debt continued to grow, highlighting how difficult major policy shifts can be without a crisis.
5) Diversification Matters
Many investors entered 2025 questioning the need for anything beyond U.S. stocks. But broad diversification paid off as non-U.S. markets outpaced the U.S. at times, underscoring the value of owning a range of assets.
6) Every Bear Market Is Different
Not all downturns behave the same. In 2025, a >20% slide quickly reversed, reminding investors that predicting the path of a downturn — or the right time to step in/out — is extremely difficult.
7) Time > Money
The most important lesson isn’t financial: it’s about how we value time. Building wealth gives freedom, but how that time is spent matters even more — a reminder to align investment goals with life priorities.
Is there really an AI Bubble or is it just a media fabrication?
The words “AI” and “bubble” have been mentioned so many times in 2025 that it has become a theme that has taken on a life of its own. It’s a frequent topic that clients want to discuss and draw parallels with events of the past.
The way to look at the juggernaut companies dominating the S&P500 (aka ‘The Magnificent 7’) is that they are NOT AI companies. They are companies that we all use in daily life to the extent that they have become almost indispensable. Could you live without deliveries from Amazon, Whatsapp for work and personal life (owned by Meta), navigate your way without Google Maps, work without Mircrosoft etc?
The point is that these are huge companies that form a key part of work and personal life for almost every person on the globe. They are not AI companies but companies that are embracing AI to make themselves stronger.
When you look at it like that, the question is why would you choose NOT to invest in these companies and own a slice of their success?
Nathan Sweeney from our fund manager partners at Marlborough examined the situation with NVIDIA, comparing their valuation and profits growth with those of Cisco who were a major victim of the dot com stock market bubble:
Nathan writes…
One of the simplest ways to judge whether a stock looks expensive or cheap is by looking at the price-to-earnings multiple or P/E. The ‘P’ is the share price, and the ‘E’ is the company’s earnings (profits) over the past year. Divide one by the other and you get the P/E multiple.
If a company trades on a P/E of 20x, you’re effectively paying £20 for every £1 of profit. A lower P/E means you’re paying less for those profits (cheaper) and a higher P/E means you’re paying more (expensive).
The charts below highlight a crucial difference between Cisco and Nvidia. In the late 1990s, Cisco’s share price surge became detached from its underlying earnings. This drove up the P/E to a stratospheric 216x (as shown in the chart on the left). This increase in the P/E or ‘multiple expansion’ vastly outpaced the growth in earnings-per-share (EPS) achieved by Cisco (as shown in the chart on the right) over the same period. The disconnect between share price and earnings was a key reason why the bubble ultimately burst.
Nvidia’s share price rise, by contrast, has been driven by exceptional and accelerating earnings growth. As shown in the chart on the left below, the strength of this earnings growth means the P/E multiple has actually fallen (‘multiple contraction’) over the three years in which AI has really so far gripped investors’ attention. This is because in the P/E multiple, the ‘P’ has been outpaced by the growth of the ‘E’. The chart on the right underlines this point, showing powerful growth in Nvidia’s EPS over the three years, while the P/E multiple has actually fallen. It now stands at around 24x forecast earnings for the next four quarters.
The fact that Nvidia’s rising share price has been driven by earnings growth rather than ‘multiple expansion’ is an important distinction. It’s why we don’t view the recent wobble in AI-related stocks as a bubble bursting. Instead, it looks far more like a pause. A chance to catch a breath. Not collapsing but resting. Much like that vital time out between rounds, when even the strongest fighter needs to regroup before stepping back into the action.
And markets are never just about one fighter.
While some of the heavyweight names take a breather, we are already seeing a rotation into other areas of the stock market. There are always other contenders waiting for their moment. We believe the macro backdrop is now starting to favour them. With the US government taking steps aimed at supporting economic growth next year, and central banks expected to continue to cut interest rates, we believe the stage is set for a broader range of companies to perform.
The technology giants may yet return to the centre of the ring. However, they do not need to dominate every round.
For a look at more recent events, we turn to Richard Carter, Head of Fixed Interest Research at QUILTER CHEVIOT.
Last week was eventful from a stock market perspective – a US rate cut, markets hitting all-time highs, oh and the usual dose of tech sector jitters.
Starting with US rates, the Federal Reserve (Fed) did not disappoint all those futures traders and economists who had overwhelmingly predicted a quarter-point cut in the Fed Funds Rate to 3.50%-3.75%. There was dissent though. Three of the 12 on the policy-setting board voted against the quarter-point cut, the biggest revolt since 2019, as policymakers were torn between a softish/softening labour market and a stubbornly high inflation rate. Two of the three advocated no change, while the third was pushing for a larger 0.5% cut. Furthermore, questions remain over how many rate cuts there will be in the new year.
The Fed rate decision was enough to send major US stock indices to new highs, all the more impressive as there were tech sector wobbles to deal with too. Oracle acted as the trigger. The share price was marked down after quarterly revenue growth failed to meet analyst expectations. Not the best time then for the company to announce another hike in its already eye-catching artificial intelligence (AI) spending plans.
Chipmaker Broadcom suffered a double-digit fall in its stock price too. Gross margins were a concern, specifically worries that a US$21bn order from OpenAI rival Anthropic will have a negative impact due to higher costs. Broadcom’s quarterly sales and earnings topped expectations though, and quarterly revenue guidance was raised. But after such a strong run, markets, it seems, are increasingly demanding of the big tech names.
Just as well then, that US equity markets were able to shrug off Oracle’s news and go on to set record highs thanks to a broadening out in market leadership. Old world sectors such as financial, consumer discretionary, industrial and materials all stepped up and posted strong gains. Broadcom’s release the following day did mean the main US equity benchmarks failed to end the week at record levels. But if the increase in market breadth is a sign of things to come then that could bode well for stock markets going into the new year. After all, a broader market is a healthier market.
Weekly economic announcements:
The MSCI All Country World Index (MSCI ACWI) ended the week nursing a small 0.2% decline. Year-to-date (YTD), the index still boasts an impressive 22.1% gain.
United States:
One swallow does not make a summer and all that but the potential broadening out of US equity markets can be seen in the numbers. While the overall main US stock index ended the week off 0.6%, small caps, which are typically more interest rate sensitive, were up 1.2%. This means the smaller end of the market is catching up with larger peers on a YTD basis — up 15.8% compared to 17.5%. The same is true of growth and value stocks. Growth stocks, which count the previously all-conquering tech sector among their number, shed 1.5% (+18.0% YTD), while value added 0.6% (+16.1% YTD).
US Treasuries had a mixed week. At the short end, yields ticked lower following the Fed cut – the yield on the 2-year Treasury edged four basis points lower to 3.52% (down 72 basis points YTD). By contrast, yields on longer-term notes finished slightly higher – the 10-year Treasury yield added five basis points to end the week at 4.19% (down 38 basis points YTD).
United Kingdom:
UK large caps matched the global index with a 0.2% decline, although the YTD gain is still an impressive looking +22.1%. Mid caps fared worse, finishing the week off 0.8% (+9.8% YTD). Soft gross domestic product (GDP) data would not have gone down well with the more domestically focused medium-to-smaller end of the market. GDP contracted 0.1% in October, matching September’s reading and falling well short of the 0.2% expected expansion. The hope is the weak number is down to uncertainty in the elongated run up to the Budget and that, now this is out of the way, future readings will be more positive.
The October GDP data did not stop sterling’s recent run against the dollar, with the pound ending the week at US$1.34, up from US$1.33. UK government bond yields ticked modestly higher, with the 10-year UK Gilt yield rising six basis points to 4.54% (down four basis points YTD).
Europe ex UK:
For the second consecutive week European equities were the week’s outperformers with the MSCI Europe ex-UK Index up 0.1%. YTD the index is up 17.2%. Not having as much skin in the AI game would have helped. So too, comments from European Central Bank (ECB) president Christine Lagarde that the European economy is coping with global trade tensions rather well. This could lead to the ECB revising its growth forecasts upwards when the rate-setting committee meets this week. The market is expecting no change to rates.
As with the previous week, German stocks led the way with a 0.7% weekly gain (+21.5% YTD). Italy was not far behind with a 0.2% rise (+33.7% YTD). By contrast, Switzerland and France were among the laggards. Swiss stocks were 0.4% lower (+14.7% YTD), while the main French index closed down 0.6% (+13.0% YTD).
Like sterling, the euro edged higher against the US dollar, closing at US$1.17 compared to US$1.16 previously. And like UK Gilts, the yield on the 10-year German Bund rose six basis points to 2.86% (up 50 basis points YTD).
All that’s left to say is Merry Christmas to all our valued clients and partners and we look forward to 2026 whatever it may bring.
Links to original sources:
https://www.visualcapitalist.com/sp/ter01-stock-markets-in-2025-ups-downs-returns-globally/
https://www.marlboroughgroup.com/insights/chart-of-the-week-eye-of-the-tiger—why-tech-prize-fighters-may-simply-be-pausing-for-breath
https://www.quiltercheviot.com/news-and-events/articles/weekly-comment–broad-shoulders-mean-broad-smiles-despite-broadcom-and-oracle-concerns/?memberurlid=2T77685328856P7131
Get in touch for a FREE consultation
We firmly believe that your location in the world should not be a barrier to receiving fair, independent and transparent financial advice that you can trust.
We work with clients across the globe and can offer you a FREE initial consultation wherever you are.
It all starts by getting in touch!
Simply complete the contact form and someone will be in touch for an informal chat to discuss how we can help.