ATTIVO
December 2025 Market Summary
Global Market Overview
2025 was a year dominated by market volatility and trade disputes, lead by US President Donald Trump’s sweeping tariff announcement back in April 2025.
Despite this, it has also been an incredibly strong year for global equities, driven by a boom in AI investment. It was not the US, however, who dominated market returns in 2025. Instead, the highest returns were seen in the Asian markets, with both the South Korean and Japanese markets performing well, potentially showcasing an end to the dominance we have seen in the past few years from the United States.
Overall, nations did well in 2025 to continue the trend of growth, with central banks playing a key role in rate cuts and avoiding recessions.
Global Indices (12 months to 31 December 2025)
- FTSE 100: +21.53%
- S&P 500: +17.25%
- Europe’s STOXX 600: +15.90%
- Japan’s Nikkei 225: +28.07%
UK insights
The Bank of England in the UK voted to lower the base rate to 3.75%, it’s lowest level since 2023. The vote was a narrow decision, with four of the nine members of the Monterary Policy Committee voting against the rate cut. The Bank of England has cited concerns about rising unemployment, and weaker economic growth following its decision.
The ONS on the 22 December released figures showing that GDP growth in the third quarter in 2025 was 0.1%, down from 0.2% the previous quarter. These decisions outweiged inflation, which remains higher than the 2% target, but is falling, and which the bank predicts will reach 2% by next summer.
Other economic developments
USA
In the US, the Federal Reserve voted for interest rates to be cut by a quarter percentage point with less data than usual, following the government shut down that occurred during October and November. This marks the third reduction to the base rate of interest this year, with the key interest rate now sitting at 3.50% – 3.75%. This decison comes as the US labour market continues to cool, and inflation sits above the 2% target. Despite inflation remaining elevated, Federal Reserve Chair Jerome Powell said he was optimistic that tariff-related inflation would not spread to the wider economy.
Asia
The Chinese economy grew well during the third quarter of 2025, bringing year-to-date GDP growth to 5.2%, in line China’s own target of 5% growth for 2025. Despite the uncertainty of tariffs, a property crisis and persistent levels of unemployment within the economy, the economy continued to grow substantially in 2025, with China’s trade surplus reaching over $1trillion for the first time ever. The trade surplus, led by non-US shipments, highlights China’s exporting strength. However, imports remain weaker due to subdued domestic demand.
In Japan, consumer sentiment boosted in November, with the consumer confidence index rising to 37.5 from 35.8 in October – the largest increase of 2025, and its highest level since April 2024. This change highlights increased confidence from Japanese households and comes following the appointment of new Japenese Prime Minister Sanae Takaichi two months ago.
Japanese markets continued to show strength into December in 2025, with the Nikkei 225 up over 2%. This comes from jumps in AI names, such as Fanuc, a global leader in factory robots and automation systems, which jumped 12% in one day following the announcement of a partnership with Nvidia, and was up over 20% in December. Under the deal, FANUC robots will be integrated with Nvidia’s advanced AI computing stack, with the goal of bringing physical AI into mainstream manufacturing.
Europe
Eurozone annual inflation data was released in December, unexpectedly revealing that core inflation had remained steady at 2.1% for November. The service sector remains a pressure on inflation at 3.5%, these have been offset by drastically falling energy prices for the region, with energy falling in price by 0.5% year-on-year. All in all, inflation remains around the ECB’s target rate of 2%, and expectedly, on 18 December 2025, the central bank voted to keep interest stable.
Following the ECB’s more aggressive approach to rate cuts –which all happened during the first half of 2025 –investors expect the bank will be more cautious with rate cuts going forward, with policymakers under the impression that core inflation is under control. Moving into 2026, GDP growth forecasts are up, with consumers and businesses showcasing in the final months of 2025, proving they are able to manage the effects of tariffs well and counteracting a still relatively subdued manufacturing sector.
Outlook
Moving into 2026, investors should continue to pay attention to AI news and themes, with AI-related investment and integrations expected to only increase. Talks of an AI bubble will likely persist, but investors should remain vigilant and stay invested in a well-diversified portfolio, capturing any further upside in AI, whilst mitigating the sector specific risks that do exist. It will also be important to monitor central banks and their policy decisions. Both the Bank of England and Federal Reserve have highlighted perhaps only one rate cut each in 2026, and important data such as inflation, GDP growth and unemployment will be closely watched.
References
Bank of England (2025) Interest rates and Bank Rate: our latest decision. Available at: https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate (Accessed 29 December 2025).
BBC News (2025) China targets 5% growth as it reels from Trump tariffs. BBC News. Available at: https://www.bbc.co.uk/news/articles/c8x4vj8rj9wo (Accessed 29 December 2025).
Eurostat (2025) Inflation in the euro area. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Inflation_in_the_euro_area (Accessed 31 December 2025).
Federal Reserve Board (2025) Federal Reserve issues FOMC statement, 10 December. Available at: https://www.federalreserve.gov/newsevents/pressreleases/monetary20251210a.htm (Accessed 31 December 2025)
Reuters (2025a) China trade surplus tops $1 trillion for first time on non-US growth. Reuters. Available at: https://www.reuters.com/world/asia-pacific/chinas-november-exports-top-expectations-imports-underperform-2025-12-08/ (Accessed 30 December 2025).
Reuters (2025b) Euro-zone business activity ends 2025 weaker than expected, PMI shows, 16 December. Available at: https://www.reuters.com/world/europe/euro-zone-business-activity-ends-2025-weaker-than-expected-pmi-shows-2025-12-16/ (Accessed 31 December 2025).
Trading Economics (2025) Japan Consumer Confidence. Available at: https://tradingeconomics.com/japan/consumer-confidence (Accessed 29 December 2025).
This article is intended for information only. It is not financial advice or a recommendation and should not be considered as such. If you are unsure whether an investment is right for you, please seek independent financial advice. If you choose to invest, please remember the value of investments and any income derived from them can fall as well as rise and you may get back less than you put in.