As we reach the halfway point of 2025, the global mood in markets feels cautiously optimistic. Investors are navigating a complex environment shaped by geopolitical tensions, shifting monetary policies, and evolving economic conditions.
Markets have steadied somewhat since the intense volatility sparked by the US President’s “Liberation Day” announcement in April. However, it remains difficult to predict the next ‘bombshell’ from the Oval Office — keeping Asset Managers keenly focussed.
Inflation is gradually retreating in both the UK and the US, leading analysts to expect rate cuts from the Bank of England and the Federal Reserve. This would offer welcome relief to markets, consumers and governments alike, as we transition from the post-COVID years of high inflation and elevated rates into a more stable, measured monetary environment.
Year to date, the S&P 500 has pulled back slightly after two consecutive years of over 20% gains — performance not seen since the late 1990s. Notably, nearly 75% of this growth was driven by the “Magnificent 7” — a small group of tech-focused giants. While debate continues over whether their valuations are justified, their dominance underscores the increasing role of big tech and the rapid adoption of AI across sectors such as commerce, healthcare, and education.
Closer to home, the FTSE 100 is up over 9% this year, following a solid 2024 return of nearly 10%. The UK Government’s focus on “fixing the foundations” has introduced a more decisive policy tone. As we look ahead over this term, the question remains whether Labour’s fiscal restraint and focus on stability will deliver long-term growth. While the UK’s domestic outlook remains modest, global-facing FTSE firms continue to provide valuable diversification for local investors.
With so many variables in play, 2025 is shaping up to be a year of transition rather than boom or bust. For UK investors, the key is not to let domestic noise drown out the global picture. Diversification — across geographies, sectors, and investment styles — remains your most powerful tool.
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, seeking to protect against downside risk and capturing any upside potential.
Long-term investing continues to reward patience. Historical data from the MSCI World Index (1999–2024) shows an average annual return of just over 7% — but these returns come with inevitable market swings. Volatility is part of the journey, and staying invested through cycles is key to compounding success.
At Aquila, our Investment Committee meets regularly to assess global developments and make considered adjustments when necessary. As non-discretionary managers, we focus on fund selection that is agile, flexible, and risk aware.
We favour best-of-breed, actively managed funds blended with more passive market tracking structures with diverse holdings and strong processes. Our approach is built around selling overvalued assets, buying undervalued opportunities, and delivering 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 are here to help.
