Market Commentary, News and Views

12 Month Market Commentary

The last 12 months have been positive for globally diversified investors. Global stocks climbed 20% in sterling terms and all major equity regions are in the black, while bonds have returned 5.2%. Momentum has shifted away from the previously dominant US in 2025. China is now the best performer on a 12-month basis – jumping 29.9% in sterling terms. The momentum shift away from the US has been largely down to policy uncertainty around the Trump administration. US stocks were volatile in the early part of 2025 and, despite a recovery rally since April, the weakness of the dollar has detracted from returns in sterling terms. Markets are optimistic, but policy uncertainty threatens an otherwise supportive outlook.

November 2024-January 2025

US stocks outperformed after Donald Trump’s election win in November, thanks to his expected pro-growth agenda. Outside the US, European bonds were spooked by the collapse of the French and German governments. UK yields, which are very closely linked to the US, also moved higher after the autumn budget. There was no ‘Santa Rally’ to finish 2024; global stocks pulled back in December after the US Federal Reserve signalled fewer upcoming interest rate cuts.

2025 started well for every major equity region, but particularly for Europe, which returned 8.2% in January thanks to expectations of greater defence spending.

February-April 2025

British, European and Chinese stocks continued their gains in February – but the US fell, resulting in the biggest rotation from the US into European equities in almost a decade. Investors became more concerned about Trump’s tariffs and more positive about growth prospects outside the US. Chinese stocks were also boosted by improved economic data and the release of low-cost AI start-up DeepSeek. Tariff panic continued building in March.

Trump announced his so-called “reciprocal” tariffs on 2 April, leading to the now infamous “Liberation Day” sell-off in stocks – and US and UK bonds. Thankfully, market mostly recovered once the president seemingly backed down.

May-July 2025

Trump’s pattern of threat and retreat continued in May. The so-called TACO trade (Trump Always Chickens Out) was potent fuel for equity returns, particularly in the US, but bond markets began selling off due to fears about US debt sustainability.

US debt fears dissipated in June, as investors focussed more on weaker economic data. That coincided with a sharp spike in oil prices, after US and Israeli strikes on Iran. The situation rapidly de-escalated, however, and markets were remarkably positive throughout. Positivity continued in July and stocks climbed across the board, propelled by trade agreements, some strong corporate earnings results and abundant market liquidity.

August-October 2025

The summer’s rally – and the market liquidity underpinning it – tailed off somewhat in August. Another tariff deadline at the start of the month caused concern, but stocks recovered, then largely traded sideways for the rest of August. September was more positive across the board, as markets were buoyed by an interest rate cut (and signals of more) from the Federal Reserve and expectations of stronger global growth.

October saw strong returns across the board, but with significant volatility through the month. The US government shutdown and the Fed’s surprisingly tight vote for a rate cut presented challenges, but strong company earnings overcame them. Market liquidity has tightened, partly due to the shutdown. That means volatility is likely to continue. Volatility does not mean bad returns, though. A bumpy ride to a good destination is the most likely outcome.

Important Information

The text is provided by Tatton Investment Management. The information in this document does not constitute investment advice or a recommendation for any product and investment decisions should not be made on the basis of it.

Tatton is a trading style of Tatton Investment Management Limited, which is authorised and regulated by the Financial Conduct Authority. Financial Services Register number 733471. Tatton Investment Management Limited is registered in England and Wales No. 08219008. Registered address: Paradigm House, Brooke Court, Wilmslow, Cheshire, SK9 3ND.

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