Rolling back the year: A review of 2025

Looking back over the first 11 months of 2025, we’ve seen further equity market gains as well as some headway in bond markets. The MSCI ACWI, a global equity index, rose by 18.8% and the ICE BofA Global Government Bond Index – which trailed corporate credit markets – added 2.9% in local terms. But what have been the issues that counted and had a big impact on financial markets? Let’s look at three of the factors that came into play and helped define the year.

After much anticipation, US President Donald Trump announced his new trade plan in early April, which surprised markets in its scope and immediacy. The tariffs to be introduced were broadly higher than anticipated, applied to almost every country and trading bloc, and were announced as coming into force within just a few days. However, after several sessions of equity and bond market volatility, as well as a sharp selloff in the US dollar, the US declared a pause in the tariff implementation, which helped to calm markets. As the year progressed, new trade agreements were put in place between the US and a number of other trade counterparts, including the European Union, Japan, South Korea and the UK. These agreements helped in muting the tariff issue somewhat through the remainder of the year. However, ongoing tit-for-tat and on-off trade restrictions between the US and China caused occasional worries for investors. For example, in October, a substantial fall in US stocks was triggered by US rhetoric on potential new harsh trade tariff restrictions on China that took several weeks for the market to recoup, while progress in discussions between President Trump and China’s President Xi helped to ease concerns somewhat by month-end.

Interest rates at major central banks continued to on two distinct paths in 2025. Benchmark rates in the US, Europe and UK saw further cuts as inflation was judged to still be sufficiently low, while there was also enough concern about strength in their respective economies to spur these decisions. The US Federal Reserve (Fed), despite experiencing pressure from the US government, waited until September to loosen monetary policy with an interest rate reduction. It cut rates again in October and December – reducing the fed funds rate by a total of 75 basis points (bps). The ECB cut rates by 25 bps on four occasions between January and June, and the Bank of England made three interest rate reductions of 25 bps from February to August. Please note that at the time of writing, the ECB and BoE have not yet had their final meetings of the year. As we approach year-end, investment markets are trying to decide if these three central banks are at or near the bottom of the rate-cutting cycle. In contrast, the Bank of Japan, after years of ultra-low rates, has been looking to steadily normalise monetary policy by increasing interest rates. It added 25 bps back in January, taking rates to a 17-year high, but rhetoric from the bank’s policymaking committee appears to have been signalling recently that another hike may be due in the near future, and it also has a further policy meeting to come this year.

As the year progressed, new trade agreements were put in place between the US and a number of other trade counterparts.

Global equity markets remained heavily swayed by the theme of artificial intelligence (AI) amid broad enthusiasm for the potential of this fast-developing technology. This has pushed up stock prices in technology and other growth sectors and led to a high level of market concentration in the US, for example. However, there have been moments of caution and reflection in markets as some investors have questioned, for example, the speed of AI adoption and capital expenditure levels of AI companies. While, in January 2025, the emergence of apparently strong AI competition from China from AI company DeepSeek caused a temporary but steep dive in US tech stocks. Nvidia was particularly hard hit before surging for much of the rest of the period. Nvidia, a maker of important components and software for AI, is one of the most notable players in this area and overall, it posted a strong share price gain as it became the first company to surpass US$4 trillion and then US$5 trillion market capitalisation in the second half of 2025. On a global basis, during the 11 months to end-November, growth segments of the equity market, such as AI-related operators, have generally continued to outpace value. Yet, with November proving a solid month for value stocks, the performance gap has been narrowing lately.

Note: As at end-November 2025, local currency terms.
All index data are shown in total return local currency terms.
Source: FE Analytic

In January we will publish our 2026 outlook and discuss our views on some of the potential influences on markets going forward.