Written by Ashwin Gurung
Global equity markets posted modest gains during the holiday-shortened final week of 2025, with the MSCI All Country World Index rising +0.1%. In contrast, global bond markets declined, as the Bloomberg Global Aggregate Index fell -0.2% in GBP Hedged terms. Despite the week’s mixed performance, both equities and bonds closed out 2025 strongly, delivering total returns of +13.9% in GBP terms and +4.8% in GBP Hedged terms, respectively.
In the US, initial jobless claims eased from recent highs, even as the unemployment rate, released in mid-December, rose to 4.6% in November, the highest level in more than four years. Some economists interpret the continued divergence between these two key labour market measures as a “no hire, no fire” environment, in which employers are retaining existing staff but pausing new hiring while awaiting policy clarity under President Trump and assessing workforce needs amid the rapid adoption of productivity-enhancing Artificial Intelligence (AI) tools. However, last week’s release of initial jobless claims data appears to have been distorted by seasonal adjustments, while the recent unemployment rate was impacted by the record-long federal government shutdown.
Nonetheless, the Federal Reserve (the Fed) will be watching these data closely, as it continues to seek to balance support for growth and the labour market while keeping inflation in check in 2026. Minutes from the Fed’s December meeting highlighted divisions among policymakers following a 25 basis point rate cut earlier in the month. While most officials indicated that further easing could be appropriate if inflation continues to decline, others favoured keeping rates unchanged for some time. The S&P 500 declined -0.2% over the week.
Elsewhere, in the UK, the FTSE 100 Index, made up mostly of companies that earn a large portion of their revenue overseas, briefly rose above 10,000 points on Friday, reaching new highs for the first time. UK manufacturing also showed signs of recovery, with output increasing for the third month in a row and new orders rising for the first time since September 2024. However, the prior week’s data showed that the UK economy expanded by just 0.1% in Q3 2025. Nevertheless, the FTSE 100 returned +0.2%, while the broader FTSE All-Share Index, which better reflects the overall UK market, returned +0.1% over the week.
Emerging markets were the standout performers over the shortened week, with the MSCI Emerging Markets Index returning +1.4%, led by gains in China and Taiwan, which rose +2.2% and +1.4%, respectively. In China, manufacturing activity improved modestly in December, ending a prolonged period of contraction and supporting expectations that the government is likely to support growth cautiously in 2026.
Meanwhile, in Japan, long-term borrowing costs continued to rise, approaching levels not seen since 1999, driven by expectations of further gradual interest rate increases by the Bank of Japan and concerns over already stretched public finances.
As we enter the new year, which will inevitably bring uncertainties and challenges, we remain confident that the best approach for achieving sustainable, long-term, risk-adjusted investment returns is through a multi-asset globally diversified portfolio.
All performance figures are stated in Sterling terms, unless otherwise specified.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 5th January 2026.
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