Portfolios enjoyed a solid end to 2025 as equity indices explored new highs, interest rates and bond yields were steady amidst cuts from the US Fed and the Bank of England, with the ECB remaining on hold. The FTSE 100, dominated by the global, London-listed banking, pharmaceutical, oil and mining sectors, also joined in and has finally breached the psychological 10,000 level.

At this time of year, the wires bristle with broker forecasts for the coming year. TS Lombard, an independent house whose research we subscribe to, condensed more than 65 of them into a consensus that 2026 will most likely be a re-run of 2025: +10% for US equities, inflation falling back to target, growth remaining steady and interest rates reaching neutral. In short, what is often referred to as a ‘Goldilocks scenario’ with inflation and growth not too hot and not too cold. We shall see. Our fears are for a Trump-dominated Fed leading to a policy mistake over the direction of interest rates in the USA - which affects us all. 

Reports from many brokers talk about how the AI trade that dominated markets last year needs to broaden out and this is the year for it to start to ‘deliver’ in terms of measurable increases in productivity rather than continue purely as an arms race among the big players.

Geopolitical risk has come sharply back into focus with Trump kicking off the year with a startling piece of gunboat diplomacy against neighbouring Venezuela. Framed as dealing with ‘narco-terrorists’, it is more about their huge heavy oil reserves, which the US, despite being a net oil exporter, does not have. China is the biggest consumer of Venezuelan oil and has lent the country more than $70bn in oil-backed loans.

One wonders whether Greenland or Colombia is next. What is sure is that the West’s argument for Chinese restraint over Taiwan is considerably weakened. 

With all this to concern, portfolios and the investment funds that we manage within them remain cautiously positioned within risk mandates and investment objectives. As we head into another year, the balance between optimising returns and preservation of capital is as finely balanced as ever.

Important Information

The contents of this article are for information purposes only and do not constitute advice or a personal recommendation. Investors are advised to seek professional advice before entering into any investment arrangements. Please note that we are not tax experts, and you should seek professional advice concerning your personal tax affairs from qualified advisers, such as tax accountants.

Please also note that the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.