We generally recommend that you hold investments for the medium to long-term, which we would view as being for five years or more. The monthly market commentary provides an insight into the current factors that are affecting short-term global returns, but should not be viewed as a basis for making long-term investment decisions. You should consider your own investment goals and timeframes before making any such investment decisions. If you do have any concerns about where your money is invested, please contact your Origen adviser.
Introduction
Global equity markets broadly ended 2025 on a positive note, with December seeing gains across most indices. Investor sentiment was supported by stable inflation and modest interest rate cuts, whilst in Asia there were gains for tech-driven markets. Fixed income markets also provided gains, with lower interest rates and tightening yield spreads supporting performance.
Economic Overview
UK
Bank of England and Interest Rates
The Bank of England cut its interest rate by 0.25% to 3.75% after a close 5-4 vote, but signalled that future pace of cuts may slow further. Four members opposed the change due to inflation concerns. Governor Andrew Bailey shifted his stance, tipping the committee toward a reduction, yet cautioned that each cut makes further reductions less certain. The BoE expects inflation to fall back toward target more quickly, with the risk of persistent high inflation now seen as less significant.
Economic Growth
The Office for National Statistics (ONS) confirmed the UK economy grew 0.1% in Q3, while Q2 growth was revised down to 0.2% from 0.3%. The slowdown partly stemmed from a cyberattack on Jaguar Land Rover, resulting in a 0.8% manufacturing decline and a 0.3% drop in production. Services and construction each rose 0.2%. Household consumption rebounded by 0.3%, government spending increased 0.4%, and business investment grew 1.5%. Year-on-year, GDP was up 1.3%.
In October, GDP fell 0.1%, contrary to expectations of growth, marking four months without expansion. Services dropped 0.3%, construction fell 0.6%, but production rebounded 1.1% after September’s decline. Over the three months to October, the economy contracted by 0.1%.
Unemployment & Labour Market Statistics
Labour market figures indicate a continued slowdown, with unemployment rising from 5% to 5.1%—the highest since early 2021—and wage growth losing momentum. The ONS advised caution in interpreting these results as survey methods are refined. Job vacancies remained stable over the period.
Regular pay increased by 4.6% annually, or 0.9% after inflation. Private sector wages (excluding bonuses) fell to 3.9%, their lowest since 2020, while public sector wages jumped to 7.6%, a record high since 2001. Total pay including bonuses grew by 4.7%, up 1% in real terms.
Inflation
UK inflation, measured by the Consumer Price Index, dropped from 3.6% in October to 3.2% in November, below the forecasted smaller fall to 3.5%. The decline was led by a slower pace in food and non-alcoholic beverage inflation, along with slower price growth in alcohol, tobacco, transport, and housing. Clothing and footwear costs fell 0.6%, but recreation and culture rose 2.9%. Core inflation eased from 3.4% to 3.2%, services inflation dipped slightly to 4.4%, and goods inflation fell to 2.1% from 2.6%.
US
Federal Reserve and Interest Rates
The Federal Reserve cut its interest rate by 0.25% to the 3.5%-3.75% range in a split decision: two members wanted no change, one preferred a 0.5% cut. The Fed signalled it is unlikely to reduce rates further soon, citing uncertain incoming data and a softening labour market, while inflation remains elevated and the economy is expected to accelerate in 2026. Policymakers project only one 0.25% cut in 2026, with varied expectations for inflation, unemployment, and growth.
Economic Growth
The Commerce Department reported that the US economy grew at an annualised rate of 4.3% in the third quarter of 2025, the fastest pace in two years and ahead of both the forecasted 3.3% and the 3.8% rate in the previous period. Consumer spending was a key driver, rising by 3.5%, the strongest pace since the fourth quarter of 2024 and above the 2.5% rate in the second quarter. Fixed investment also rose, albeit at a slower pace than in the previous period. Government spending rose 2.2% as it recovered from its small decline in Q2. A strong rebound in exports combined with a decline in imports added nearly 1.6% to growth. Finally, the drag from private inventories on GDP was smaller versus the second quarter.
Inflation
US consumer prices increased less than expected in November. The Consumer Price Index (CPI) rose 0.2% over two months to November, as October data was not collected due to the federal government shutdown, which was also likely responsible for part of the moderation in inflation. For the 12 months ending in November, CPI increased 2.7%, down from 3% in September and below the forecasted 3.1%. Core CPI, excluding food and energy, rose 2.6% year-over-year—its lowest since March 2021—compared to 3% in September and below the projected 3%. Monthly rates were unavailable due to the shutdown.
Europe
European Central Bank and Interest Rates
As expected, the European Central Bank (ECB) left its interest rate unchanged at 2%. The ECB President Christine Lagarde said “It was a unanimous view around the table”, whilst adding “With the degree of uncertainty we are facing, we simply cannot offer forward guidance”. Ms Lagarde reiterated that borrowing costs would be set on meeting-by-meeting basis and dependent on the income data with no pre-commitment to a particular rate path. The ECB’s updated projections still show inflation falling below 2% in 2026 and 2027, mostly on lower energy costs, but returning to target in 2028. The ECB also now projects slightly quicker output growth in 2025.
Economic Growth
In its third estimate, Eurostat said the Eurozone economy grew by 0.3% quarter-on-quarter in the third quarter of 2025, above the previous readings of 0.2% as well as improving on the 0.1% rate in the last period. On a year-on-year basis, the economy expanded by 1.4%, matching the previous estimate although below the 1.6% rate in the preceding two quarters.
Inflation
Annual inflation in the Eurozone was unchanged at 2.1% in November. The pace of increase in prices for food, alcohol and tobacco slowed from 2.5% to 2.4%, whilst non-energy industrial goods inflation eased lower from 0.6% to 0.5%. However, energy prices declined at a slower rate of-0.5% versus -0.9% in October. Annual core inflation, which excludes prices for energy, food, alcohol and tobacco, remained at 2.4% for the third consecutive month. Services inflation rose from 3.4% to 3.5%.
Asia and Emerging Markets
Japan
The Bank of Japan raised interest rates by 0.25% to 0.75%, the highest level since 1995 and the first increase since January. The BOJ indicated it may continue tightening, citing ongoing wage and inflation growth, but provided no specifics on future rate hikes. The BOJ Governor reiterated this message, stating that the pace and timing of further increases will be dependent on how the economy reacts to each policy announcement.
Japan’s economy shrank more than expected in last year’s third quarter, with the annualised contraction revised lower from 1.8% to 2.3%. Private consumption rose slightly, but external demand lowered growth by 0.2%, capital expenditure declined, and government spending slowed notably. On a quarterly basis, GDP fell 0.6%, a steeper drop than initially estimated.
Market Overview
CR = Capital return; LC = Local currency
Source: Lipper for Investment Management
Past performance is not a reliable indicator of future performance
UK equities rose in December, with the FTSE 100 slightly outperforming the mid cap FTSE 250 as it ended the year close to multi-year highs. Performance was led by large internationally-focused companies, notably precious metal miners that benefited from the high gold and silver prices, whilst sectors such as aerospace & defence and financials were also supportive. The more domestically focussed FTSE 250 also benefited from the cut in UK interest rates.
US equities, as shown by the S&P 500, ended December modestly higher as they underperformed other developed markets despite the Federal Reserve reducing its interest rate, with investors rotating from the US towards perceived cheaper markets. There was mixed sector performance, with financials and materials among the better performers, but utilities and real estate lagged. European markets, as demonstrated by the FTSE World Europe ex UK Index, performed well with financials among the strongest performers, whilst industrials and consumer discretionary stocks also rose. The Japanese Nikkei 225 Index rose despite an increase in the interest rate, with positive corporate earnings supporting performance across a broad range of sectors.
Asian markets rose, as shown by the gain in the MSCI Asia ex Japan Index. Performance was led by Taiwan and South Korea, where there tech-dominated markets benefited from AI-related optimism. However, China and Hong Kong underperformed amid weak economic data and limited policy support. The broad MSCI Emerging Markets Index also rose, despite China’s underperformance with again the tech-related Asian indices supporting returns. Latin America also recorded positive returns, with Brazil recovering from political uncertainty, whilst there were also gains for Middle Eastern equities.
UK government bonds (FTSE Actuaries UK Conventional Gilts Index) delivered a small gain as they marginally outperformed investment grade corporate bonds. Gilts benefited from the Bank of England reducing its interest rate, as well as easing inflation. However, there was underperformance from US treasuries and German bunds, which suffered small losses.
This update is intended to be for information only and should not be taken as financial advice.
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