The upheaval of the last few years – including a global pandemic, war in Ukraine, war in the Middle East and unprecedented inflation – is undoubtedly continuing with the unfolding drama of Donald Trump’s second term as President of the United States.

A fruitful 2024

The twelve-month period began, however, on a positive note. Indeed, 2024 as a whole proved to be a fruitful year for investors, with equities providing another year of strong returns.

Initial fears of a recession driven by interest rate policies dissipated as economic growth slowed but remained positive throughout last year. Large technology companies continued to generate robust returns, with artificial intelligence emerging as a dominant theme. In the latter half of the year, attention shifted towards the trajectory of further interest rate reductions as inflation stabilised.

Japanese equities also captured attention, with the Nikkei 225 index surpassing its previous all-time high, last reached in 1990. Inflation and wage increases finally appeared to gain traction following years of deflationary pressures. Japan ended the year as the top-performing market in December, rising 3.9%, and securing the position of the second-best performer overall.

UK equities saw gains, albeit more modest in comparison, as economic growth continued at a subdued pace and as inflation proved more persistent than in other major economies. European and emerging markets experienced similar trends, with stock markets advancing, albeit without the benefit of high-growth technology stocks to propel returns.

Political change at the Forefront

Politics played a crucial role in shaping the investment landscape throughout 2024 and into 2025. The United Kingdom, Japan, France, Germany, Canada and Australia all saw significant elections and/or changes of leadership. However, the most consequential political development was undoubtedly the return of Donald Trump to the White House.

Although the American stock market rallied following the presidential election result in November, since President Trump assumed office in January, investor sentiment has been negatively hit by his administration’s policies.

Trump’s tariffs

Trump’s announcement of sweeping tariffs on America’s trading partners has unsettled markets. Share and bond markets have seen huge swings, reminiscent of the early stages of the Covid pandemic. The 90-day pause which he subsequently announced served to placate investors in the short-term – as did the court ruling that Trump did not have the power to impose such tariffs – but overhanging markets is an enormous level of uncertainty.

Fiscal worries

Uncertainty over the future of France’s government once again has turned the spotlight on the sustainability of the country’s fiscal deficit, with knock-on effects for other highly indebted countries including the UK. Here, 30-year bond yields have hit their highest level since 1998, piling more pressure on Chancellor Rachel Reeves who so far has failed to deliver a meaningful uptick in economic growth.

Amidst all the uncertainty gold prices have surged, recently vaulting past $3,500 - reflecting increased demand for “safe-haven” assets. Cryptocurrency markets have also seen substantial gains, with Bitcoin appreciating by over 120%, buoyed by the Trump administration’s commitment to introducing regulations aimed at integrating digital assets into the mainstream financial system. Meanwhile, confidence in the creditworthiness of America has fallen: a major ratings agency has downgraded the country’s debt, yields on Treasury bonds have risen, and the dollar has fallen markedly against most major currencies, including the pound.

Private Equity Boom Raises Alarm Over Leverage and Market Fragility

Paul Freeman

Financial Adviser

9th September 2025