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The shortest month of the year certainly didn’t feel brief as markets lurched in response from one geo-political drama to another. US markets took the brunt of the damage as Trump’s proposed (and delayed for now) tariffs on Mexico and Canada led to inflation fears. Consumer confidence numbers didn’t help matters, and lingering fears over the sustainability of earnings from big US tech stocks saw the NASDAQ suffer its biggest monthly decline in ten months.

As the month progressed, Trump’s willingness to cut support for Ukraine in its war against Russia became more apparent, forcing many European leaders to start reappraising defence spending. Friedrich Merz, fresh from his expected victory in the German election, announced plans to lift the constitutional limit on borrowing (aka the ‘debt brake’) that’s been in place since 2009, and in turn greatly increase spending on defence and infrastructure. It was a good month for defence spending across the continent – delivering returns of 9.3%, with major firms like BAE and Rheinmetall benefiting.

Here in the UK, large banks, defence and big pharma lifted the FTSE 100 higher. Sterling strengthened over the period, and despite the UK budget having been received poorly and consensus that the UK government has failed to hit the ground running, the UK equity market, like other non-US equities, delivered positive returns above 5%. In doing so, the FTSE 100 hit all-time highs.

In China, good results from Alibaba and the ongoing ramifications of DeepSeek’s AI reveal in January, continued the recent tech-stock fuelled equities revival. Conversely, DeepSeek raising question marks about US tech’s ability to dominate the AI market was still hampering US tech equities. Its innovative product seems to be capable of delivering the same results by using far less computational power than it’s US rivals, and at a fraction of the cost. Emerging markets also benefited from a weakening dollar.

The Japanese equity market declined and finished February with a negative return of -2.1%. The Nikkei fell due to weak performance from large cap tech and exporters. Developments in the US also had a knock-on effect, leading to a sell-off of AI-related stocks. The interest rates on government bonds climbed following remarks from Bank of Japan (BoJ) officials, hinting at a potential shift towards stricter monetary policies that could increase the cost of borrowing. Additionally, the value of the Japanese yen rose compared to the US dollar, which added more strain on companies that sell goods abroad, causing their stock prices to feel the pressure.

Bond markets were generally positive as fears of a slowdown in the US resulted in gains across fixed income markets. Global bonds proved to be a good diversifier against equity losses. Strong performance and positive returns in fixed income served as an important reminder that investors need to remain diversified to help protect portfolios against any further volatility that may lie ahead.

Commodities were pulled back as fears of a global slowdown grew. Meanwhile gold continued to act as a go-to asset class for investors seeking safety in these uncertain times.

Looking forward, we expect the year to be interesting and challenging as no one quite knows exactly what to expect from Trump, and markets do not like uncertainty.

However, this will not be the only story for markets and as always it is likely that select opportunities will present themselves.

The new year has started strongly across financial markets, with equities, bonds, and alternative investments all delivering positive returns. A weakening sterling provided an additional boost to international holdings for UK investors, adding to the strong start.

European equities led the way, gaining over 8% in January, despite ongoing political uncertainty in France and Germany and persistently weak economic data from Germany, the Eurozone’s largest economy. Investor optimism appears to be driven by the potential for the European Central Bank (ECB) to cut interest rates. They proceeded with a rate cut at the end of the month to 2.75%, and the market is factoring in further cuts to 1.75% by year-end.  European markets have also been buoyant since Trump’s return as there seems a greater possibility to the end of the conflict in Ukraine.

In the United States, the return of Donald Trump to the White House has added a new layer of complexity to the economic outlook. His administration’s early policy proposals, including tax cuts, tariffs, and immigration restrictions, have already influenced market sentiment. Inflation in the US unexpectedly rose to 3% in January, up from 2.9% in December, driven by rising food and energy prices. The market is now starting to question the Federal Reserve’s ability to cut interest rates going forward. We have seen a strengthening the dollar and government bond yields have increased.

At the same time, the rapid emergence of DeepSeek (a large language model from China) has sent ripples through the technology sector. This new Artificial Intelligence (AI) model appears capable of delivering responses on par with established American models, such as OpenAI’s ChatGPT and Meta’s Llama, but at a fraction of the cost. By optimising computational efficiency, DeepSeek has bypassed the need for the vast processing power and financial resources that have traditionally dominated the sector. While there are still questions about its underlying costs and data sourcing, the development suggests a shift in the competitive landscape, one that could have lasting implications for the AI industry and the broader technology market.

Despite a UK budget that was poorly received and early signs of a government struggling to gain momentum, UK equities mirrored global trends, posting gains of over 5%. The FTSE 100 reached record highs, supported by a sector rotation into traditional areas such as energy and mining, which are a large part of the FTSE 100 index, following DeepSeek’s disruptive impact on the technology sector.

Bond markets experienced positive returns in January but with increased volatility. Concerns over Trump’s policy agenda, particularly inflationary pressures linked to tax cuts and tariffs, led to a rise in US bond yields. However, despite these fluctuations, bonds still managed to deliver modest gains. Meanwhile, commodities performed strongly, returning over 5% for the month. Gold and industrial metals rallied on renewed tariff concerns, while oil prices climbed due to continued sanctions on Russian exports and increased demand driven by colder weather.

Economic indicators globally have presented a mixed picture. China’s consumer price index rose by 0.5% year-on-year in January, marking its fastest pace in five months, largely due to increased spending during the Lunar New Year holiday. However, the manufacturing sector continued to struggle, with producer prices remaining weak. In the US, job creation slowed, with employers adding 143,000 jobs in January, falling short of expectations. Despite this, the unemployment rate declined to 4%, and wage growth remained strong, with average hourly earnings increasing by 0.5% from December and 4.1% year-on-year. These factors could add to inflationary pressures in the coming months.

Looking ahead, the economic environment looks uncertain, shaped by political developments, monetary policy shifts, and technological disruptions. Trump’s policies are likely to add further concerns, while advances in artificial intelligence and their potential impact on corporate profitability will continue to be a key theme for investors.

The final month of 2024 offered a mixed bag for global markets, capping off a year that was largely favourable for risk assets but ended on a more cautious note. December’s economic pulse reflected a challenging environment, as markets navigated the implications of a shifting policy landscape, persistent geopolitical tensions, and regional economic divergences. Performance across asset classes was mixed, with equities delivering modest gains in some regions but generally underwhelming results overall. Alternatives and bonds faced broad declines, while currency movements highlighted the strength of the dollar against its major counterparts.

The U.S. equity market continued to shine, posting a 10.7% return over the fourth quarter and cementing its position as the top-performing region for the year. December’s performance was bolstered by strong GDP growth and investor confidence in the continuation of Trump’s 2.0 economic agenda. Policies centred on tax cuts and deregulation have invigorated various sectors, with financials and small-cap stocks starting to join the growth alongside the “Magnificent Seven” mega-cap tech giants that dominated earlier the year.

The strengthening U.S. dollar added an additional tailwind for sterling-based investors, appreciating by 6.6% against the pound during the quarter. This currency dynamic amplified returns and underscored the relative strength of the U.S. economy compared to other developed markets.

In stark contrast, Europe ended the quarter as the worst-performing region, with equities declining by 4.4%. The continent’s manufacturing sector faced significant headwinds, including rising costs, weak export demand, and intensifying competition from China. Political instability in key economies such as France and Germany further weighed on sentiment, exacerbating the poor performance of European equities.

UK equities posted a marginal decline of 0.7% for the quarter but managed a respectable near10% gain for the year. December’s performance was subdued as the UK autumn budget introduced higher than expected tax hikes, dampening investor enthusiasm. However, attractive valuations and robust merger and acquisition activity provided a silver lining, hinting at potential upside in the medium term. The first positive net inflows into UK equities in years, observed in November, suggest a gradual shift in investor sentiment toward the region.

Asian and emerging markets closed the year on a weak note, with equities declining in quarter four. Persistent macroeconomic challenges in China—including soft economic data, falling property prices, and concerns over debt sustainability—cast a shadow over the region. Emerging markets also struggled with the ripple effects of U.S.-China trade tensions and a stronger dollar, which discouraged capital flows into these economies. Japanese equities were a notable exception, delivering modest gains for the quarter. The ongoing benefits of corporate reforms and optimism about the end of deflation supported the market, offering a glimmer of hope in an otherwise challenging environment for the region.

Throughout most of 2024, declining inflation enabled central banks to cut interest rates, providing a supportive backdrop for fixed-income assets. However, December saw cracks in this narrative as concerns emerged about the inflationary potential of Trump’s fiscal policies, particularly the reintroduction of tariffs. This shift in sentiment led to weakness across interest rate-sensitive assets, including bonds, infrastructure, and real estate.

Gold, a perennial safe haven, rebounded strongly with a 5.9% gain for the quarter, reaching all-time highs in October before stabilising. The metal’s performance was underpinned by geopolitical uncertainty and continued central bank purchases. In contrast, other commodities faced headwinds as slowing global growth tempered demand.

As 2024 drew to a close, markets exhibited a cautious optimism tempered by emerging risks. The U.S. continued to lead the global recovery, buoyed by robust economic growth and market-friendly policies. However, the divergence in regional performance highlighted the fragility of the global economy, with Europe and emerging markets lagging behind. Looking ahead, the interplay between fiscal stimulus, monetary policy, and geopolitical developments will shape the narrative for 2025. While December may not have ended the year with fireworks, it provided a fitting conclusion to a complex and dynamic year for global markets.

The world’s economic pulse in November could be summed up in one phrase: risk is back in vogue. After a tumultuous year marked by uncertainty and caution, investors seemed ready to embrace risk across most asset classes, resulting in a month of strong performances, albeit with some notable exceptions.

Leading the pack, the U.S. equity market surged ahead, delivering a stellar 6.2% return (in sterling terms) for the month. This rally came on the heels of a decisive political shift as Donald Trump and the Republicans secured commanding victories in the U.S. elections. Far from the anticipated messy or drawn-out results, the election outcome was clear and immediate, setting the stage for a market-friendly outlook. Investors interpreted Trump’s proposed policies as a signal of economic stimulation through fiscal stimulus, tax reforms, and deregulation, all of which were welcomed enthusiastically by various market sectors.

The U.S. equity market’s standout performance also drove the broader global benchmark to post a 5.3% return for November. Notably, the technology-driven gains that had defined much of the year’s rally began to broaden. The “Magnificent 7” mega-cap tech giants, which had been the sole engine of market returns earlier in the year, shared the stage with other sectors such as financials and small-cap stocks. These shifts suggest that Trump’s fiscal and deregulation plans may breathe life into previously lagging areas of the market, particularly small-cap companies that stand to benefit directly from tax cuts and infrastructure spending.

However, not all regions joined the party. Emerging markets and Europe struggled, posting negative returns for the month. For emerging markets, the looming spectre of increased U.S.-China trade tensions spooked investors, prompting a sell-off. In Europe, Germany’s soft economic data and political unrest in France weighed on sentiment, leading to a decline in continental European equities.

UK equities managed to deliver a decent 2.5% return, bolstered by a flurry of merger and acquisition activity. In a surprising turn, November marked the first positive net inflow into UK equity markets in over 42 months, breaking a consistent outflow trend that had persisted since mid-2019. While it’s too soon to declare a full reversal of fortune, this shift hints at a potential change in investor sentiment toward the UK market.

As central banks across the globe cut interest rates to counter slowing growth and inflation, fixed-income assets saw solid positive returns. Both credit and government debt benefited from the favourable monetary environment, giving investors an alternative avenue for gains. However, the longer-term outlook remains uncertain. Market watchers are cautious about the potential inflationary effects of Trump’s trade policies, particularly the reintroduction of tariffs, which could curb central banks’ ability to continue rate cuts. For now, the fixed-income rally holds firm, but the road ahead may be less smooth.

Infrastructure investments and commodities added to the risk-on narrative, delivering positive returns in November. Commodities, however, had a notable outlier: gold. After hitting all-time highs at the end of October, gold prices fell 1.7% as the appetite for risk assets drew investors away from safe havens. This decline underscores a broader shift in market sentiment as investors moved from a defensive stance to a more growth-oriented outlook.

November’s strong market performance offers a snapshot of cautious optimism. Yet, risks linger on the horizon. The impact of U.S.-China trade tensions, the political landscape in Europe, and the trajectory of central bank policies will continue to shape global markets.

Global markets faced a turbulent October as a mix of economic, political, and policy-related challenges weighed on investor sentiment. 2024 has seen equity markets deliver positive returns but part of these returns were given up in October. Markets had several things that they looked to address through the month, which included the UK budget, a weaker U.S. jobs report, mixed corporate earnings from major tech companies, and uncertainties surrounding the U.S. election. Additionally, the Federal Reserve’s slower path for rate cuts, ongoing inflation concerns, and fluctuating oil prices due to Middle Eastern tensions added to market pressures, while gold continued to rally on the back of all these market uncertainties.

The dollar rallied over +3% versus the pound during October. This meant that the global equity index and US equities were positive from a sterling perspective, but all driven by movements in the currency markets.

As we move into November, investors are focusing on central bank decisions, potential shifts in fiscal policy, and economic resilience in both developed and emerging markets, all of which could shape the investment landscape for the months ahead.

In the UK, Labour’s first budget since 2010 unveiled plans to increase both taxes and spending for 2025, raising concerns about higher borrowing. UK inflation fell to 1.7% in September, creating an opportunity for the Bank of England to cut interest rates, which they did—reducing the rate by 0.25% to 4.75%. While such moves typically lead to positive returns for bonds, the market reacted differently. UK Gilts and corporate bonds sold off by -2.3% and -1.1%, respectively, as investors had already priced in a faster and more aggressive series of rate cuts than the Bank may now deliver. The UK equity market also declined, with a sell-off of -2.0%.

The Alternative Investment Market (AIM), a sub-market of the London Stock Exchange designed for smaller UK companies to raise capital with less regulation, has faced significant pressure in recent months. Concerns arose that the budget would eliminate key benefits of being listed on the AIM index. However, while the outcome was less severe than feared, the market only rebounded slightly and remains underwater for the year.

In the U.S., corporate earnings offered a bright spot amid broader economic uncertainty. Most S&P 500 companies reported stronger-than-expected third-quarter earnings, supporting investor confidence and marking five consecutive quarters of year-over-year growth. This corporate resilience has contributed to limited recessionary fears for now.

European equity markets were the worst performing region over the month, declining -3%. This was driven by mixed economic data and inflation concerns. However, the European Central Bank’s recent rate cut, its third this year, could provide some relief going forward.

Emerging markets were impacted by a stronger U.S. dollar, with Chinese equities in particular seeing volatility as investors awaited more concrete results from recent support measures. Investors are eagerly anticipating more specifics on potential stimulus measures, which could include increased government spending, new bond issuances, and added support for China’s troubled property sector. China’s fiscal strategy may also be shaped by the outcome of the U.S. election, particularly if Trump’s trade policies affecting Chinese exports come into play.

November is shaping up to be a pivotal month for markets, as President Trump prepares to take office, and his potential fiscal policies begin to affect market expectations. Investors are also watching central bank actions globally, as rate changes continue to guide both stock and bond market dynamics. While the current landscape remains challenging, selective opportunities may arise. Although ongoing economic uncertainty, inflationary pressures, and geopolitical tensions could lead to persistent bond market volatility, further rate cuts are likely to lend support as markets adapt to the evolving environment.