Reflections of the CIO...

As we closed out the final quarter of 2025, markets delivered another strong finish to what has been an extraordinary year. Albeit at a more measured pace than the turbo-charged gains of the summer and autumn. December was also a quieter month compared to October and November, but  the underlying trends of resilient economic growth and subdued inflation, which have underpinned investor confidence and supported risk assets globally throughout the second half of 2025, were still firmly in evidence.[1]

The major events in December revolved around interest rate decisions. Both the US Federal Reserve and the Bank of England announced further rate cuts, decisions which were finely balanced we think, given that neither economy was in recession and in obvious need of assistance.[2] [3]The rationale for these cuts mainly lies in the desire to sustain economic momentum and prevent a slowdown, as inflation had fallen back towards target and growth indicators were beginning to soften. Whilst there may be scope for one or two additional reductions over the coming months, we believe the global rate-cutting cycle has probably peaked in 2025, marking an important inflection point for markets as the interest rate environment stabilises around historical norms.

By the end of 2025, the US administration’s tariff programme, arguably the headline event of the year, had also proven to be much less disruptive than initially feared. After an initial sharp sell-off in April , risk assets rebounded strongly right through to year end, as negotiated tariff levels came in well below worst-case expectations. In the eyes of many investors, the Trump administrations ‘bark’ turned out to be worse than its actual ‘bite’. Coupled with the positive influence of lower interest rates, this realisation helped sustain global growth and calm inflationary concerns, both key factors in maintaining market momentum and turning 2025 into a year of overall good performance.

Also in December, the rising tide of optimism which had lifted nearly all AI-related stocks together since the early summer, continued to ebb. The market is now being much more circumspect in choosing winners and losers, rewarding companies with strong cashflows and penalising those overextending their balance sheet. In our opinion, this is a welcome return to rationality and, over time, should help reduce the risk of a broader, abrupt AI-driven stock market correction.

Safe-haven assets also performed well in December. Gold ended up posting its best annual performance since 1979, buoyed by persistent talk of bubbles and geopolitical uncertainty earlier in the year.[4] Meanwhile, cryptocurrencies experienced notable reversals with the market reaching $4T before cooling to $3T, reinforcing the theme of selective risk-taking as the year drew to a close.[5]

Despite ongoing conflicts in the Middle East and Ukraine, markets largely looked through these events. The key geopolitical axis, the US-China relationship, settled into what we would describe as an uneasy stasis after an initial confrontational stance from Washington softened. For now, this détente suggests a lower level of geopolitical risk going forward than we endured over the past twelve months.

Looking ahead to 2026, our base case remains that positives should outweigh negatives. Solid economic growth, manageable inflation, and supportive fiscal and monetary conditions provide a constructive backdrop, even as longer term vulnerabilities, such as government debt burdens, AI valuation risks, and policy surprises, linger in the wings.

In this environment, we continue to believe that a well-constructed portfolio of reasonably priced assets remains the best defence against the inevitable setbacks and surprises that markets can bring.

With thanks for your continued support and best wishes for the New Year,

The Saltus Asset Management Team
January 2026