The first two months of 2025 have been far from quiet, with two named storms here in the UK, devastating wildfires in the US, the inauguration of the most unorthodox US president and his rapid signing of a raft of Executive Orders.    

The geopolitical landscape is keeping the Asset Managers focussed; the Trump administration seems to be turning away from its support of Ukraine and the European states are now looking to fill some of the vacuum that this leaves behind.  Whilst peace talks are being scheduled it is difficult to know how far these can progress, but Ukraine’s position does seem to have been weakened.  In the Middle East the planned second stage of the ceasefire has stalled and, again, keeps the region under the microscope.

The start of a new year offers a perfect opportunity to reflect on the past and look forward to what lies ahead. This time last year, we highlighted several unknowns that would shape 2024. With three-quarters of the world going to the polls, speculation was rife. Would the Conservatives hold power in the UK? Could Trump make a comeback in the US? Markets were predicting a slowdown in inflation and potential interest rate cuts to stimulate economies.

How did 2024 shape up? In the US, the S&P 500 delivered its second consecutive year of over 20% growth, with an impressive 2024 return of over 26%. This level of performance has 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 our lives, especially with Artificial Intelligence (AI) making strides in commerce, education, and healthcare.

Closer to home, the UK’s FTSE 100 defied gloomy economic forecasts with a 2024 return of just under 10%. The new government has prioritized “fixing the foundations” and shown 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.

Globally, stock markets displayed resilience despite uncertainties in major economies. Strong economic growth, particularly in the US, alongside improved sentiment in Europe and Japan, fuelled robust equity performance in the first three quarters of 2024.

While 2024 was strong, risks such as geopolitical tensions, the newly inaugurated US Presidents’ love of tariffs and inflationary pressures could still introduce volatility, particularly if the Federal Reserve or other central banks shift policy unexpectedly. Most analysts anticipate a “soft landing” scenario for the US economy, which could further boost equities if realised.

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.