If you only checked your portfolio in April, 2025 probably felt uncomfortable. If you looked again in December, it told a very different story.
This was a year where headlines moved faster than fundamentals. Markets wobbled hard in the spring, largely on fears around tariffs, US politics and a sudden rush to de-risk. And then, just as quickly, they recovered. Once again, the so-called “TACO trade” played out. Trump talked tough, markets panicked, and then policy reality kicked in and the tariffs were watered down, paused or reversed. Trump always chickens out.
For patient investors, the year ended up being a reminder of why staying invested still matters.
Equities: A Bumpy Ride, Then a Recovery
In sterling terms, global equities delivered solid returns in 2025 despite the mid-year drama. It was a year though when the rest of the world caught up with the strong US returns from the previous years helped also by the decline in the dollar.
-
S&P 500 ended the year up around 10% in GBP. The FTSE All world index was up 13% (in sterling)
-
FTSE All-Share returned a massive 24%%
-
Europe ex-UK delivered close to 27 ,Emerging Markets were stronger, up around 25%, Japan up 17%, Asia ex-Japan up 24% .
April was the low point. Markets sold off on renewed tariff threats, particularly around US-China trade, alongside concerns that inflation might re-accelerate and force central banks to stay restrictive for longer.
What changed? Reality.
Tariffs tend to be announced loudly and implemented quietly, if at all. As Trump realised the economic damage would likely be limited, he backed down and risk assets bounced back. Corporate earnings, especially in the US, remained resilient. And the big structural theme of the year did not go away.
AI: Still the Dominant Force
Artificial intelligence continued to be the market’s main engine.
This wasn’t just hype. Investment in data centres, chips, cloud infrastructure and software kept feeding through into real revenues and profits. A narrow group of large US companies still did much of the heavy lifting, but the theme broadened slightly as the year went on.
That concentration made markets feel fragile during the April sell-off. When leadership is narrow, corrections feel sharper. But it also meant that once confidence returned, markets recovered quickly.
Bonds: Quietly Doing Their Job Again
If equities grabbed the headlines, bonds quietly reminded investors why they belong in a portfolio.
After the disaster of 2022, fixed income has been rebuilding its reputation. In 2025, that continued.
In sterling terms:
-
UK gilts returned around 5%
-
US treasuries were flat in sterling terms as the dollar weakened,
-
UK Inflation-linked gilts finally had a positive year again
The key driver was interest rates.
Central banks began to cut interest rates in 2025 as inflation gradually eased, though progress was slower than many anticipated. The U.S. Federal Reserve (Fed) and the Bank of England (BoE) both initiated rate cuts, which helped support market sentiment, though policy uncertainty and debates over central bank independence persisted.
What 2025 Reinforced
A few lessons stood out:
-
Markets hate uncertainty more than bad news
-
Political noise creates volatility, but rarely changes long-term outcomes
-
Diversification still works, even when it feels boring
-
Bonds matter most just after people give up on them
The April wobble was uncomfortable, but it was also short-lived. Investors who stayed invested, rebalanced calmly, or added during weakness were rewarded by year-end.
As ever, the biggest risk wasn’t markets. It was reacting to them.
Bring on 2026.
- This blog is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
- Past performance is used as a guide only; it is no guarantee of future performance.