Market Outlook: A Cooler, Yet Optimistic Autumn
As we leave behind one of the hottest summers on record, markets feel cooler in mood but remain quietly optimistic. Investors are still navigating a complex landscape shaped by geopolitical tensions, shifting monetary policies, and evolving economic trends. Yet, despite the challenges, 2025 has so far been a rewarding year.
The volatility sparked by the US President’s “Liberation Day” announcement in April has now eased. Trade negotiations have progressed since then, with many countries securing agreements that, while falling short of initial ambitions, still mark significant improvements compared with pre-Trump levels.
Meanwhile, inflation continues to rise in the UK and the US, creating speculation on whether there will be further interest rate cuts from the Bank of England and the Federal Reserve. Any shift lower would be welcome news for markets, households, and governments alike, helping us move from the post-COVID era of high inflation and interest rates into a steadier, more predictable monetary environment.
Equity Markets: A Mixed Mid-Year Picture
After two straight years of gains above 20% — something last seen in the late 1990s — the S&P 500 has taken a breather, posting a modest 2% return for the year to date. Strikingly, almost three-quarters of that performance has come from the “Magnificent 7”, the tech giants whose scale and influence continue to grow as artificial intelligence reshapes industries from healthcare to retail. Valuations remain hotly debated, but their weight on global markets is undeniable.
In contrast, the FTSE 100 has had a standout year, climbing more than 15% and breaking through the 9,000 mark in July. For the first time in years, it has outperformed the S&P 500 — a divergence driven more by investor demand for stability and a weaker US dollar, than by any fundamental shift in the UK’s economic strength.
Looking ahead, attention turns to the Labour Government’s second Autumn Budget, announced to take place on 26th November. Investors and taxpayers alike are bracing for further tax rises, as the government seeks to “fix the foundations” of the economy. The big test will be whether a focus on fiscal discipline and stability can lay the groundwork for long-term growth, even as national debt hovers around £2.9 trillion. While the domestic outlook remains subdued, global-facing FTSE companies continue to offer UK investors valuable diversification and resilience.
Navigating a Year of Transition
With many variables still in play, 2025 looks to be a transitional year rather than one of boom or bust. For UK investors, it is important not to let domestic noise drown out the broader global picture. Diversification — across geographies, sectors, and investment styles — remains your most powerful tool.
Staying informed and adaptable will be key to navigating this evolving market landscape. Our Flagship Investment Portfolios are designed with this in mind: vigilant, balanced, and built to manage risk while seeking out opportunity. The goal is always to protect on the downside while remaining positioned to capture upside potential.
A Long-Term Perspective
Long-term investing continues to reward patience. Historical data from the MSCI World Index (1999–2024) shows average annual returns of just over 7% — but achieving those returns requires staying invested through inevitable market swings. Volatility is part of the journey, and riding out cycles is key to compounding success.
At Aquila, our Investment Committee meets regularly to assess global developments and make thoughtful adjustments when appropriate. As non-discretionary managers, we prioritise agile, risk-aware fund selection.
We favour a blend of best-in-class, actively managed funds alongside passive structures that provide low-cost market exposure. This approach allows us to identify undervalued opportunities, avoid overpriced assets, and pursue consistent long-term outcomes for our clients.
We are pleased to report that the Aquila Flagship Portfolios have continued to deliver above-average returns. Please refer to your latest valuation pack for detailed insights into your individual portfolio.
If you have any questions or would like to discuss your investment strategy, we’re here to help.
