Most bond indices finished the period lower. Government bond yields moved higher (resulting in bond prices finishing lower) as concerns that the recent surge in oil prices would feed into higher inflation. This was particularly notable to us in the UK where expectations shifted from Bank of England interest rate cuts (prior to the Iran conflict) to potential rate hikes. The UK’s reliance on imported energy may potentially amplify the inflationary impacts of higher energy prices and as a result, gilts fell -3.8% over the month. Short- dated investment grade bonds also finished lower, although the drawdowns were more muted.

US equity returns have been modest, returning just under 1% so far this year. Interestingly, we have seen a meaningful rotation away from mega-cap US technology and growth names over the past couple of months. While some earnings remain strong, there have been concerns about the likely return on investment from artificial intelligence (AI). Companies who have announced more capital expenditure have typically been punished, for example early in the month Amazon had $300bn wiped off their market capitalisation when they reported a 25% higher than expected increase in capital expenditure. 

Worries about the impact AI agents and tools will have on software and wealth management firms dragged share prices down in both sectors. In the final week of February, a viral ‘doomsday’ essay by Citrini Research spooked investors, sparking another sell off that hit firms like Uber and Mastercard particularly hard. Conversely, we’ve started to see other areas such as value and small to mid-cap stocks start to outperform, benefitting the more diversified way we’ve positioned our portfolios.

Bond markets posted decent gains, particularly in the latter half of the month. Growing economic uncertainty, moderating inflation signals and increasing geopolitical risks all helped push bond prices up. Expectations of lower interest rates helped infrastructure related investments while gold also benefitted from geopolitical uncertainty (+7%).

Looking at the UK equity market, it was pleasing to see small caps and the Alternative Investment Market (AIM) return far more than the broader market (+4.6% & +6.8% respectively). These smaller company stocks have been out of favour with investors for some time, but expectations of further interest rate cuts from the Bank of England (BoE) should help this part of the market which tends to be more sensitive to borrowing costs. Small cap businesses also tend to be more insulated from geopolitical noise which was rife over the month.

President Trump gave markets a lot to digest in January. Just two days into the year, the US launched airstrikes on military bases in Caracas and captured Venezuelan President Nicolás Maduro in a 2am raid. Within days the US intervention in Venezuela was knocked off the headlines when Trump stepped up his campaign to take “ownership” of Greenland and threatened to impose new tariffs on eight Nato allies over their opposition to his planned takeover of the country.

Domestically, protests erupted across the US following the murders of Renee Good and Alex Pretti by ICE and Border Patrol agents. Concerns about the independence of the Federal Reserve were heightened when the Department of Justice (DOJ) launched a criminal investigation into Fed Chair, Jerome Powell. In response, Powell said he was being threatened with criminal charges because the Fed had been setting interest rates, “based on our best assessment of what will serve the public, rather than following the preferences of the president.” Later in the month, Trump nominated Kevin Warsh to replace Powell when he leaves his post in May. Warsh has backed maintaining higher interest rates in the past and markets reacted positively to what many perceive to be a safer choice than some of the other rumoured candidates. However, Warsh’s ties to Trump allies like Ronald Lauder, and the DoJ’s investigation into Powell could hold up the confirmation process.

Although most equity regions brushed off all the political drama, gold rallied extremely hard on these tensions with the asset class +13.5% over January. More broadly, commodities had a strong month delivering a return of +7.3%. Oil and gas prices rallied over double digits on the back of colder winter weather and an associated fall in storage levels.

The US equity market softened -0.6% over the month but still added just under 10% for the year. 2025 was, in recent times, an outlier year where other major regions significantly outperformed the US equity market in sterling terms. This was, as noted above, largely attributed to dollar weakness as the dollar experienced its largest annual decline since 2009. Artificial Intelligence (AI) has been a dominant theme in the US driving most of the gains over the year. However corporate profits have broadly outperformed expectations and GDP growth remains quite strong compared to developed market counterparts.

Though returns across bond markets were subdued relative to equity markets, they were still positive providing a good ballast to portfolios. Government bonds (Gilts and US Treasuries) both generated gains on the view that the BoE and Fed are likely to cut rates into the New Year. Credit strategies also posted gains as corporate profits and balance sheets remain robust.

Equity markets though negative overall for November, rebounded from a deeper trough in the month. The US equity market was down nearly -5% at the lowest point. Markets began to recover on the back of stronger than expected economic data and expectations of a central bank interest rate-cut by the Fed in the US. Another positive was that 80% of US companies that reported third quarter earnings beat expectations. This included Nvidia, the world’s highest valued company, whose sales grew by 62% as profit exceeded expectations to reach $31.9bn.

The markets least impacted by the US and AI sell-off were Europe and the UK, which were both essentially flat. Investors in the UK had been waiting for announcements from the Autumn Budget on the 26th of the month. What was delivered whilst not great (a tax & spend budget), was not as negative as many had feared. Even though the Budget proposals are not as supportive for growth as had been hoped, they potentially provide scope for the Bank of England (BoE) to be able to cut UK interest rates going forward, which could be a positive for UK equities and the bond market.

Emerging markets and the Asian equity markets have been the leading markets so far this year. These markets sold-off – 3.1% and -2.6% in this risk-off environment. The Nikkei was hit by tensions between Japan and China. A war of words, sparked by Japanese Prime Sanae Takaichi saying Chinese action against Taiwan would prompt a Japanese military response, escalated into Beijing implementing a no-travel advisory for Japan and banning Japanese seafood.

Defensive assets delivered positive returns and good diversification for multi-asset portfolios. With equity markets retreating, and with the prospect of rate cuts from the Fed, we saw gold rebounding strongly with a return of +5.0%. At the same time fixed income markets delivered marginally positive returns.

The rally was also heavily influenced by AI speculation which has been a dominant driver of economic activity both in the US and globally. This has particularly benefitted sectors in information technology (e.g. semiconductors, software, data centres) as well as utilities and energy companies that can help meet the future energy requirements for this technology. Throughout the month we did see a growing number of commentators and major institutions, including the Bank of England (BoE) and the International Monetary Fund (IMF), express concerns about an AI bubble and US tech-stock valuations (my colleague, Richard Warne wrote an article on this subject last week). The collapse of two regional US banks also raised alarm bells about the broader health of US private credit. In the end, October turned into a rather contradictory month where US markets posted positive returns despite an array of gloomy headlines.

The UK and Europe also provided solid results, returning 4.4% and 3.9% respectively. Asia and emerging markets finished the period on a particularly strong note although there was volatility along the way as Trump’s tariff threats in early October escalated to “massive increases” on Chinese goods and the potential cancellation of bilateral talks between the US and China. However, sentiment bounced back after both sides met and agreed a deal that would pause steeper US tariffs and limit China’s export controls on rare earths materials, a key component in the AI supply chain. This boosted markets like South Korea and Taiwan that are heavily reliant on these materials. As a result, the emerging markets indices rose 6.6% by the end of October.

Although returns across bond markets were once again subdued in comparison to equity markets, they were still positive providing a good ballast to portfolios. Rate cuts in the US and controlled inflation were major contributors. The US government shutdown could have stoked concerns, but these were generally overlooked by markets. In the UK, softer than expected inflation data in October coupled with expectations of further rate cuts helped boost Gilts over the month.

Global equities were broadly up +2.1%, with the US +2.8%. Technology and AI-heavy stocks were the leaders on the back of continued euphoria over AI-driver optimism, while expectations of further interest rate cuts could potentially provide a tailwind for markets.

Japan, Europe and the UK lagged but still posted positive returns. If we take Japan as an example – the Nikkei 225, the index of the largest 225 companies hit an all-time high, passing through the 45,000 level for the first time. More positive news on tariff deals, corporate reforms and share buybacks were some of the drivers. It was a similar situation in our home market with the FTSE 100 also hitting all-time highs. While there remains concerns about what November’s UK budget might bring, this did not hold the market back, and what was particularly pleasing to see was the domestic and small cap parts of the market outperforming large cap shares. Halfway through the month, we also saw Trump make his second UK state visit and agree to invest £150bn in the UK as part of the “Tech Prosperity Deal”.

Though returns across bond markets were subdued relative to the equity markets, they were still positive, providing a good ballast to portfolios. Rate cuts in the US and controlled inflation were major contributors. The US government shutdown could have stoked concerns but was generally overlooked by markets.

The macro-economic environment has evolved over the year as the initial shock of tariffs appears to be waning and markets take a less knee-jerk reaction to trade policy decisions made by President Trump. On the tariff front, there were a couple of developments over the month. In late July, the EU & US agreed to a 15% tariff on most EU exports which was higher than previous average tariff but lower than the threatened 30% and includes some exemptions. The US and China extended their trade truce until November 10^th, leading to a rally in Chinese equities. Conversely, the US imposed a crushing 50% tariff on Indian goods to punish the country for purchasing Russian oil.

While markets now appear to be shrugging off tariff news, there are growing concerns that inflationary pressures are re-emerging at a time when the US economy is showing signs of slowing and the US government deficit levels continue to grow. To add to this, political noise intensified after Trump’s contested firing of Federal Reserve Governor Lisa Cook, fuelling debate on central bank independence. As a result, investors are demanding more compensation in higher interest rates for holding longer-dated US Treasuries, despite the Fed indicating a higher probability of future interest rate cuts. This has also led to growing demand for precious metals by both Central Banks and investors, resulting in the gold price hitting all-time highs.

Markets demonstrated their ability to climb the “wall of worry” despite complex geopolitical tensions, trade policy developments and monetary policy uncertainty. They were buoyed by a successful US earnings season, with 80% of US companies beating consensus estimates. Major US banks did particularly well as, according to Morgan Stanley CEO, Ted Pick, corporate clients and boardrooms now “appear more accepting of ongoing uncertainty”. While on the trade policy front there were some major developments, with Trump’s administration agreeing deals with Japan, Europe and Vietnam, and a deal in principle with China, reduced fears of an escalating trade war. Trade uncertainty has driven volatility since the initial announcement on 2^nd April. The average US tariff rate has risen to 18% from the 2% level on 1^st April but markets responded positively with policy clarity, particularly after the passage of the “One Big Beautiful Bill Act” (OBBBA), which supported risk sentiment. It was a busy month from a legislative perspective with Trump also signing the cryptocurrency related GENUIS Act and three executive orders on AI as part of the US’s AI Action Plan.

The UK equity market delivered healthy returns, with the large cap section of the market (FTSE 100) leading the charge. A significant number of the index has global exposure so the strength of the dollar over the month contributed to performance.

While markets breathed a sigh of relief over tariff policy clarity, there were certain areas that were hit quite hard. Copper saw an intra-month fall over -20%, as Trump imposed a 50% tariff on certain copper products. As soon as July finished, we got to see the final (for now at least) tariff rates. Brazil, Canada and Switzerland were struck with particularly aggressive rates. Latin America’s largest country was given a 50% rate for purely political reasons as Trump retaliated over the charges facing his ally, the former Brazilian President Jair Bolsonaro.

With the market in “risk-on” mode and equities delivering positive returns, it was no surprise to see bond markets were generally flat over the month, with the exception being emerging market bonds finished up 5% – in keeping with the “risk-on” narrative.

Year to date, most regions outside of the US have generated gains, while the US has lagged, particularly in sterling terms as the US dollar has depreciated against the pound. We believe there are several factors driving this shift. First, the valuations of many international companies had been trading at more attractive levels than their US counterparts. In Europe, we’re seeing a move away from austerity to fiscal stimulus which should help accelerate economic growth. In Emerging Markets, we have higher growth rates and an expanding consumer base which is attractive relative to other developed markets. As a result, we continue to see good opportunities outside the US and want to maintain exposure to fund managers that can take advantage of these investments.

Bonds generally delivered strong returns over the period, led by Global and UK corporates delivering 4.3% and 27% respectively. UK Gilts also rose the quarter by 1.8%. Politically, June was a bit of a mixed bag here in the UK, as we saw separate trade deals with the US and Gulf States announced, a £500mn investment in quantum computing and Rachel Reeves’ welfare cuts being countered by rebels throwing her budgetary plans up the air. Conversely, Global Bonds fell -2.2% due mainly to the impact of falling US Treasuries. In the US, rising fiscal concerns led to a downgrade of the US sovereign credit rating by Moody’s and the selling of long-dated bonds pushed yields higher.