Content

• UK: strong market returns, despite a slowing economy

• Europe: slower growth and more subdued market returns

• US: robust economic growth and strong market performance

• Asia: the strongest market performance of the year

• How this affects your investments and long-term plans

• Looking ahead

In the final months of 2025, global investment markets continued to rise, rounding off a particularly strong year for investors. Although economic growth slowed in some regions, falling inflation helped create a more stable economic environment.

Despite ongoing uncertainty during the year, markets performed well overall. This underlines the importance of staying focused on long-term goals, rather than reacting to short-term headlines or market noise.

UK: strong market returns, despite a slowing economy

The UK ended 2025 on a mixed note. Economic growth slowed, but falling inflation and a strong stock market helped improve the overall picture for investors.

Economic growth weakened during the year. In the third quarter of 2025, the economy grew by just 0.1%, down from 0.3% in the previous quarter. This slowdown was largely due to weaker performance in manufacturing and production¹.

Inflation continued to ease, falling to 3.2% in November from 3.6% in October. This was the lowest level seen since March, helped by slower price rises for everyday items such as food and drink².

As inflation began to fall, the Bank of England reduced interest rates to 3.75% in December and indicated that further cuts could follow if inflation continues to ease³.

UK markets performed well towards the end of the year. The FTSE All-Share index, which represents around 900 of the country’s largest companies, rose by 6.4% in the final quarter. Overall, it gained 24% across 2025, making it one of the strongest years for UK investors in over a decade⁴.

Europe: slower growth and more subdued market returns

Europe ended the year in relatively steady shape, although its stock markets did not perform as strongly as those in some other parts of the world.

Inflation in the eurozone stood at 2.1% in November. Some countries, such as France and Italy, experienced lower inflation, while others, including Germany and Spain, saw slightly higher rates⁵.

Economic growth in the eurozone showed signs of improvement, with growth of 0.3% in the third quarter, up from 0.1% previously⁶.

European shares ended the year on a positive note. While returns were lower than in some other regions, European markets still delivered a healthy gain of just over 20% in 2025⁷.

US: robust economic growth and strong market performance

The US had a mixed end to the year. The economy continued to grow strongly, but US stock markets did not perform as well as those in some other regions.

Inflation continued to fall towards the end of the year, dropping to 2.7% in November from 3% in September⁸.

Despite inflation remaining above its long-term target, the US central bank reduced interest rates in December to support the economy and jobs market⁹.

Economic growth was particularly strong in the third quarter, supported by higher consumer spending, stronger exports, and increased government activity¹⁰.

In the markets, the S&P 500 (which tracks 500 of the largest, most influential public companies like Apple, Microsoft, Amazon) rose 2.7% in the final three months of the year. Although it remained the weakest-performing major index in 2025, it still delivered a respectable gain of 17.9% for the full year¹¹.

Asia: the strongest market performance of the year

Asian markets were the strongest performers globally in 2025, supported by improving inflation trends across the region.

In Japan, the TOPIX index, which tracks a wide range of companies, rose 8.8% in the final quarter and delivered an impressive annual gain of 25.5%¹². Inflation eased slightly towards the end of the year, falling to 2.9% in November¹³.

Elsewhere in Asia, markets also performed strongly, including in China, where inflation rose to 0.7% in November, reaching its highest level since February 2024¹⁴.

How this affects your investments and long-term plans

The final quarter of 2025 delivered positive returns across all major markets. The year was exceptionally strong, and even areas hat performed less well still made good progress.

Despite ongoing geopolitical uncertainty and market ups and downs, overall performance remained positive. This reinforces the value of taking a long-term approach, rather than reacting to short-term events.

Looking ahead

While there may be some twists and turns on the horizon in the year ahead, many of the conditions that support longer-term growth remain in place. These include easing inflation, relatively stable economic fundamentals, and the potential for further interest rate cuts.

A well-diversified portfolio should be well placed to make the most of a favourable economic climate, without the need for frequent changes in response to short-term market movements.

If you have any questions about your portfolio, or would like to discuss your plans, your adviser will be happy to help.

¹06.01.26 United Kingdom GDP Growth Rate Trading Economics ²17.12.25 Consumer price inflation, UK: November 2025 Office for National Statistics ³18.12.25 Interest rates and Bank Rate: our latest decision Bank of England ⁴02.01.26 Review of Markets over 2025 JP Morgan ⁵06.01.26 Euro Area Inflation Rate Trading Economics ⁶06.01.26 Euro Area GDP Growth Rate Trading Economics ⁷02.01.26 Review of Markets over 2025 JP Morgan ⁸06.01.26 United States Inflation Rate Trading Economics ⁹10.12.25 Fed lowers interest rates but future cuts uncertain BBC ¹⁰06.01.26 United States GDP Growth Rate Trading Economics ¹¹02.01.26 Review of Markets over 2025 JP Morgan ¹²02.01.26 Review of Markets over 2025 JP Morgan ¹³06.01.26 Japan Inflation Rate Trading Economics ¹⁴06.01.26 China Inflation Rate Trading Economics

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Please note: This guide is for general information only and does not constitute advice. The information is aimed at retail clients only. The content of this guide was accurate at the time of writing. While information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may affect the accuracy of the guide.

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