Markets finished the year strongly, with major indices ending on a high. Global equities looked past the turmoil caused by President Donald Trump’s tariffs, posting a third consecutive year of double-digit gains in 2025.
US stocks also enjoyed a robust year, supported by solid corporate earnings, enthusiasm around artificial intelligence and optimism over potential interest rate cuts from the Federal Reserve (Fed). Meanwhile, the FTSE 100 recorded its strongest annual performance since 2009.
Stocks and bonds rallied in December after the Fed cut interest rates by a quarter point to between 3.5% and 3.75%, a three-year low. However, the bank signalled that the pace of cuts could slow going forward amid a cooling labour market and persistently high inflation. With policymakers sharply divided at the latest meeting, projections now show just one rate cut in 2026.
US inflation slowed in November, although the report was distorted by missing data from the start of the month. Prices rose 2.7% in the 12 months to November, down from 3% in September and below many analysts’ expectations.
The headline unemployment rate continued to edge higher, reaching 4.6%, up from 4.4% in September and a four-year high. Jobs growth was stronger than expected in November, with employers adding 64,000 jobs following a decline of 105,000 in October. That earlier fall largely reflected a 162,000 reduction in federal employment linked to the Trump administration’s push to cut jobs.
