As of early May 2025, the global investment landscape reflects a complex interplay of geopolitical tensions, monetary policy shifts, and evolving market dynamics. Much of the uncertainty can be pinned on one event, the inauguration of one of the most unorthodox U.S. Presidents in history, Donald Trump. His rapid signing of numerous Executive Orders and aggressive trade tariffs, most notably a 145% levy on Chinese imports, has prompted retaliatory measures and disrupted trade flows, increasing market volatility.
Some analysts warn of a “geopolitical recession,” characterised by increased polarisation and fragmentation. Despite these challenges, global economic growth is projected to hit 2.8%, provided no new crises emerge. The year ahead is expected to be tumultuous, with ongoing conflicts, geopolitical instability, and technological advancements shaping international relations.
Closer to home, Chancellor Rachel Reeves delivered her Spring Statement, revealing that the UK’s growth forecast has been halved for the year amid oversupply concerns and inflationary pressures. Despite this, both business and retailer confidence remain relatively optimistic, bolstered by stronger-than-expected retail sales in the first quarter. An historic trade deal with India also adds some confidence in our economy.
Reflecting on 2025 so far, in the U.S., the S&P 500 is down 10% so far after last year delivering its second consecutive year of over 20% growth, with an impressive 2024 return exceeding 26%. This level of performance had not been seen since the late 1990s. Remarkably, nearly 75% of these gains came from the top seven tech-focused stocks, now famously dubbed the “Magnificent 7.” The debate continues over whether these stocks are in bubble territory. However, their dominance reflects how integral big tech has become to daily life, particularly with Artificial Intelligence (AI) making significant strides in commerce, education, and healthcare.
The UK’s FTSE 100 is up over 5% despite the volatility this year, the index also defied gloomy economic forecasts last year with a 2024 return of just under 10%. The Government has prioritised “fixing the foundations” and shown a willingness to make bold decisions. While long-term growth prospects for the UK remain modest, only time will tell if Labour’s plans to curb borrowing and stabilise public finances will succeed.
As 2025 unfolds, we advise that investors should maintain a diversified approach while remaining vigilant to macroeconomic and geopolitical developments. Staying informed and adaptable will be key to navigating the evolving market landscape, and our Flagship Investment Portfolios are designed to be vigilant, whilst balancing risk and opportunity, attempting to protect in the downside but capture any upside.
Investing in the stock market has consistently rewarded those who stay the course. Historical data from the MSCI World Index (1999-2024) shows an average annual return of just over 7%. However, achieving these returns is rarely a smooth ride. Market volatility is part of the journey, but disciplined investing often pays off in the long run.
At Aquila, the Investment Committee meets regularly to evaluate whether adjustments to portfolios and strategies are needed. As non-discretionary managers, our goal is to provide you with a positive investment experience through effective fund selection. We recommend agile, flexible funds that can adapt to evolving market conditions. Our strategy involves selecting “best-of-breed” risk-managed funds with diverse styles and holdings. This active approach allows us to navigate the unpredictable economic and political landscape, aiming to deliver long-term benefits to our investors.
Our professionals focus on selling overvalued assets and buying undervalued ones to generate long-term returns. We are proud to report that the Aquila Flagship Portfolios have consistently delivered above-average returns. Please refer to the factsheet provided with your latest valuation for detailed insights into your selected portfolio.
If you have any questions or would like to discuss your investment strategy, we are here to help.
