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• Equities advanced, led by Japan (+2.7%), emerging markets (+2.1), the US (+2%), Europe (+1.9%) and the UK (+1.7%), in sterling terms
• Brent crude oil gained +4.3% and gold +4.1% in dollar terms

• The euro and yen slipped a little against sterling, -0.3% and -0.2% respectively

The FTSE 100 made history in its first full trading week of 2026, closing above 10,000 points for the first time, finishing Friday at 10,124. The milestone crowned an exceptional 2025 for the index.

2025 was a standout year. The FTSE 100 delivered a total return of +25.8%, making it the fifth-best year since the index launched in 1984 and its strongest since 2009. It closed at record highs 41 times throughout 2025, according to London Stock Exchange Group.

So, what powered the 2025 rally? Commodities led the charge, as precious metals and diversified miners benefitted from firm prices and generous shareholder returns. Financials and banks were boosted by balance sheet strength and stable net interest margins. Defence and aerospace rallied as heightened global tensions drive increased government defence spending. 

Zooming out, the FTSE 100’s success in 2025 reflects its distinctive composition. Unlike growth-heavy, tech-dominated US indices, the FTSE is rich in internationally diversified earnings, cash-generative business across more defensive sectors – financials, healthcare, energy, mining and consumer staples. In a world of geopolitical uncertainty and slower growth, those qualities proved especially attractive to investors. 

2025 was a strong year for most financial asset classes. All major global equity indices rose. There was some significant volatility along the way – most notably the Trump administration’s “Liberation Day” tariff announcement in early April, and the emergence of a Chinese Artificial Intelligence (AI) powered chatbot in February. Elsewhere, investor concerns around long-term inflation risks and the potential for currency debasement saw demand for precious metals continue to rise, with gold and silver posting their largest annual gains since the late 1970s. The oil price declined however, driven by oversupply and moderating demand. Noteworthy index returns include the following (in sterling terms unless otherwise stated):

•    UK equities: +25.8%
•    US equities: + 9.2%
•    European equities: +26.1%
•    Japanese equities: +16.0%
•    Asia ex-Japan equities: +20.6%
•    Emerging market equities: +24.3%
•    UK Government bonds: +5.0%
•    US Government bonds: +6.2% (US dollar terms) 
•    European government bonds: +13.9% (euro terms)
•    UK Index-linked bonds: +1.3%
•    UK Corporate bonds: +7.0%
•    UK High Yield bonds: +8.7%
•    FX: USD/GBP: -7.1% (dollar weakened / sterling strengthened)
•    Brent crude oil: -18.5% (dollar terms)
•    Gold: +64.6% (dollar terms)

In 2025, the performance of portfolios blending asset classes in different ratios depended on several factors, including mandate, risk profile, security selection and currency exposure.

The European Commission has approved a controversial trade deal with Mercosur – a bloc of Latin American countries including Brazil, Argentina, Uruguay and Paraguay – despite opposition from some member states. France, Poland, Hungary, Austria and Ireland voted against it, while Belgium abstained. Italy swung the deal, approving it only after obtaining specific concessions for farmers from the EC, including a reported extra €45bn to support European farmers in a new seven-year budget starting in 2028. The European parliament and Mercosur members still need to ratify the deal in the next couple of months. The Mercosur – or Southern Common Market – deal took almost 25 years to negotiate and will cut most trade tariffs in a bloc of 700 million people. The EU is Mercosur’s second biggest trading partner for goods (c.17%), after China and ahead of the US. The EC is about to sign a similar deal with Australia, India, Malaysia and Mexico.

• US Justice Department allegedly probes Federal Reserve Chairman Powell – Reports suggest the probe relates to Powell’s Senate testimony about building renovations, Powell believes it’s about the Fed’s mandate to set monetary policy without political interference. Markets have so-far reacted calmly to the news
• Rio Tinto–Glencore in $200bn mega-merger talks – After previously collapsing last year, the two are again discussing a deal that could create the world’s largest mining company
• European data supports no interest rate change – With December’s 2% preliminary inflation estimate in line with the European Central Bank’s target of 2%, and unemployment ticking lower to 6.3%, the ECB looks set to hold its deposit rate at 2% this year
• UK construction still weak – With a reading above 50 signalling expansion, December’s S&P Construction PMI fell to its second lowest level since May 2020 to 40.1, with companies noting sharp declines in activity and new projects
• Spain services shining – The latest S&P Global Services PMI for Spain rose to 57.1 in December, surpassing expectations of 54.5 and marking the 28 consecutive month of growth
• China carmaker BYD overtakes Tesla – BYD outpaced Elon Musk’s Tesla in 2025, becoming the world’s biggest EV maker for the first time
• AI demand – Nvidia CEO Jensen Huang announced new self-driving car technology, indicating further scale in the application of AI
• Trump’s pledge to improve affordability – The President wants to stop institutional investors from purchasing single homes and instructed Freddie Mac and Fannie Mae (two government-sponsored mortgage firms) to purchase $200bn of mortgage-backed bonds. Both moves aim to drive interest rates lower for borrowers
• US defence companies – Trump also said he will look to block US defence companies from paying dividends or buying their own shares back until they speed up weapons production

Disclaimer

Past performance is not a reliable indicator of future returns. Nothing herein should be construed as a recommendation to hold, buy or sell any security or encourage any investment decision. The mention of any particular asset class, sub-asset class or company does not imply that it is held, or may ever be held, in any product or service.