Outlook
Market Review – December 2025
2 min read 7 Jan 26
December proved to be a mixed month for financial assets, with stockmarkets generally making further gains, while developed market sovereign bonds (government bonds issued by countries with strong, stable economies) in the US and the eurozone fell slightly. However, UK Gilt (UK government bonds) prices ended the last month of the year on a small positive note.
Overall, stockmarkets ended December higher. Indices in Europe and the UK, as well as the MSCI Emerging Markets Index (which measures performance of shares in developing countries) recorded good returns. However, the US S&P 500 Index (which tracks the 500 largest US stocks) ended the month largely unchanged and the NASDAQ (which tracks US technology and growth companies) fell in value.
It was a difficult month for developed market government bonds generally, with US Treasuries (US government bonds) and German Bunds (German government bonds) posting small losses. On the other hand, UK government bonds were a notable exception as Gilts were supported by a Bank of England interest rate cut of a quarter of a percentage point to 3.75%, signs of a slowing economy and better-than-expected inflation data.
As expected, the US Federal Reserve (Fed) cut rates by 0.25 percentage points to between 3.5% and 3.75%, while the European Central Bank (ECB) held rates at 2%. At its December decision, the ECB upgraded its forecasts for growth and core inflation. Out of step with other central banks, the Bank of Japan raised rates by a quarter of a percentage point to 0.75%, their highest level in 30 years.
Despite the interest rate rise, the Japanese yen continued to weaken in December against other major currencies. By contrast, the UK pound strengthened against both the US dollar and the euro.
Precious metals ended the year strongly, particularly silver, which rose above US$70 per ounce, while gold climbed above US$4,500 per ounce. Precious metal prices have been supported by expectations of further Fed rate cuts, concerns about future inflation and safe-haven demand.
Copper prices enjoyed a strong month in December, driven by continued concerns over supply shortages and demand resulting from the shift from fossil fuels to renewables and the boom in the construction of data centres that power artificial intelligence. The oil price continued to decline on fears of oversupply.
Investments involve risks and may not be suitable for all investors. Past performance is not indicative of future results. The value of investments may go up or down and is not guaranteed. You may not recover the full amount you invested. The views expressed in this document should not be taken as a recommendation, advice or forecast. If you are in any doubt about the contents of this document, you should seek independent professional advice.