Introduction
The Autumn Statement on 26th November dominated UK headlines. In the US the longest government shutdown in history came to an end, and China will hope that the trade war ceasefire will start to show improving results in their end of year economic performance.
Volatility did creep in during November, driven by speculation around the Budget and global concerns about current valuations, but the markets showed resilience and quickly recovered.
UK
November was a month of contrasts for the UK. On the economic side, growth remained sluggish, and inflation continued to sit above the Bank of England’s target, leaving households feeling the pinch. Consumer confidence fell as worries about food, energy, and housing costs weighed heavily. The Autumn Budget, delivered on 26 November, struck a cautious tone.
Markets, however, told a more upbeat story. The FTSE 100 closed nearly 19% up year-to-date by the end of November, with total returns including dividends reaching almost 23%. That performance outpaced the S&P 500 and marked one of the strongest years in recent memory. Large-cap names like Lloyds Banking Group, NatWest, and AstraZeneca helped drive gains, while Rolls-Royce and BAE Systems struggled. Mid-cap stocks in the FTSE 250 rose more modestly, reflecting weaker domestic demand compared to the global exposure of blue-chip firms.
For clients, the key message is that UK equities remain resilient even as the domestic economy faces headwinds. Fiscal caution and targeted infrastructure spending could provide some stability, though new taxes might dampen demand in certain industries. Despite the challenges, opportunities remain for those who position wisely, and recent performance is a reminder that opportunities for investors still exist during uncertain times.
United States
President Trump signed legislation on 12th November which ended the longest government shutdown in history. It lasted 43 days. Public opinion remains divided on who was to blame and there is no clear winner. Democrats have been unable so far to negotiate concessions on healthcare subsidies and Republicans know that the situation may well be repeated come 30th January if the remaining nine 2026 appropriations bills cannot be passed by then.
It should mean that the flow of economic data will start again, but it appears their may be some permanent gaps left behind. The White House have said that employment and Consumer Price Index reports covering the month of October might never be released.
US equity markets were choppy mid November but recovered late in the month as expectations of a further Fed interest rate cut in December increased. Some of this volatility came from the technology sector, as AI spending plans and financial results were published.
Trade tensions between China and the US eased in November, following the trade deal agreed between the two superpowers. There was also some hope that an end to the war in Ukraine was possible, as the US stepped up diplomatic efforts to negotiate a peace deal.
Europe
The overall economy across EU member states continues to show some modest growth with some divergence across different countries. Despite the constant political turmoil, France defied expectations in quarter three, with quarter-on-quarter growth of 0.5%. Spain also continued to perform well, with Italy and Germany stalling.
The pattern in Europe is becoming a familiar one. Services are driving growth. The S&P Global Purchasing Managers’ Index (PMI) rose to 52.3 in October, its highest since May 2023, and the Eurozone Services PMI hit 53.6. Manufacturing is lagging, with jobs cuts announced across a number of manufacturing firms. However there is reason to believe that Europe will end 2025 relatively strongly.
Eurozone inflation nudged up slightly to 2.2%, but core inflation (which excludes energy and food) held at 2.4%, beating the forecast of 2.5%. There is some inconsistency across member states. France and Italy’s inflation was low at 0.8% and 1.1% respectively, whilst Germany’s rate hit 2.6%, the highest since February.
The election in the Netherlands have been inconclusive but the coalition party to be formed is likely to be pro-EU, with the centrist Democrats 66 (D66) party winning the most votes. The far right Freedom Party had led the polls in 2023, but lost traction when it came to the vote.
GDP growth is forecast as 1.3% for 2025 and 1.6% for 2026.
Far East
Whilst China’s real GDP grew in line with it’s 5% target for the first three quarters of 2025, there were signs it softened in the third quarter. GDP growth slowed to 4.8% in Q3, down 0.4% from Q2, and the seasonally adjusted quarter-on-quarter pace had dropped to one of the lowest on record.
The Chinese factory production slump reached the longest stretch on record. The official Purchasing Managers Index (PMI) sat at 49.2 for November, the eighth consecutive month it has been in contraction. The housing market also remains weak.
There are two major reasons China can be optimistic about a Q4 improvement. Firstly, trade tensions with the US have eased and this should support exports and businesses. Secondly, fiscal policy measures in Q4 are focused on stabilising demand, supporting project construction and debt resolution as well as bond purchasing operations which should inject more liquidity into the market. Strengthening domestic demand may put China back on course for its 5% growth target.
Japan’s PMI data shows a strong services sector supporting underperforming manufacturers.
The government under new Prime Minister Sanae Takaichi finalised a supplementary budget of 18.3 trillion yen (US$117 billion) to fund a broader stimulus package totalling 21.3 trillion yen (US$137 billion). The stimulus includes a mix of tax cuts, utility subsidies, cash handouts and strategic investments in key industries (e.g. technology, infrastructure), aimed at boosting growth and cushioning households from inflationary pressure.
This will partly be funded through tax receipts with the shortfall covered by 11.7 trillion yen in new government bonds. The previous year’s additional bond issuance was around 6.7 trillion yen.
Emerging Markets
Many emerging market businesses and economies are closely tied to US fiscal policy so a Fed interest rate cut will be pivotal to how they finish 2025.
Technology heavy equity markets in Korea and Taiwan took a bashing in November. India’s equity markets rallied and hit highs in November before profit taking at the start of December dampened down performance. India will hope that its turbulent equity market will settle down in 2026 and attract the foreign institutional investment which deserted the Indian stockmarket this year. A trade deal with the US seems key to making that happen. There is no doubting the ability of the Indian economy to grow. It beat all predictions and grew at a very healthy 8.2% in the second quarter of this year and is the fastest growing major economy in the world.
Whilst emerging markets economies are divergent, and difficult to group together, emerging markets remain of interest to investors with a desire for global diversification. They also appeal in an environment where emerging markets currencies are strengthening against the dollar, and where further Fed cuts to interest rates look likely.
Conclusion
Analysis from Fidelity suggests that equity markets tend to perform especially well in December. Dubbed ‘the Santa rally’, UK markets have gone up by 2.1% on average in December, comfortably beating the 0.3% monthly average. US equity markets show a similar pattern.
Whether this is nothing more than coincidence or a bump from Christmas consumerism, it’s an optimistic note to lead us into the end of a turbulent, but so far strong year for investors. From Trump’s trade tariffs to Rachel Reeves’ budget, 2025 has had its fair share of strange and difficult moments for investors to work through and sit tight.
It’s worth remembering that past performance is no guarantee of what might happen next when it comes to investments, but those of us who can borrow from past events, will know that sticking to the plan and ignoring market noise are behaviours which are consistently rewarded.
And finally…
The very first cash machine was installed in London.
John Shepherd-Barron was credited with the invention of the Automated Teller Machine (ATM). The first model was installed in 1967 in Enfield, London. British engineer James Goodfellow created the concept of the personal identification number (PIN) just three years later.
