Market Outlook: A Cooler, Yet Optimistic Autumn
After one of the hottest summers on record, markets feel cooler in mood — but there is still a quiet sense of optimism in the air. Investors are navigating a complicated mix of geopolitics, shifting monetary policies, and economic change. Yet, despite the noise, 2025 has so far been rewarding for many portfolios.
The April shock around the US President’s “Liberation Day” announcement has now faded, with global trade talks settling into a steadier rhythm. The deals struck since then may not be revolutionary, but they are better than what came before — giving global commerce a firmer footing.
Closer to home, inflation remains stubborn in both the UK and US. That keeps the spotlight firmly on the Bank of England and the Federal Reserve. Another cut in interest rates would be welcome news — easing pressure on households with mortgages, governments with rising debt costs, and investors looking for stability after years of turbulence.
Equity Markets: A Mixed Mid-Year Picture
After two stellar years of 20%-plus gains — a streak not seen since the late 1990s — the S&P 500 so far this year, has seen comparatively modest returns of 12%. What is striking, is that almost three-quarters of that growth still comes from the “Magnificent 7” — the US tech titans shaping how AI touches everything from healthcare to retail. Whether you view their valuations as justified or frothy, their influence on global markets is difficult to ignore.
Meanwhile, the FTSE 100 has quietly stolen the spotlight. Up more than 22% this year and pushing past 9,000 in July, it has, unusually, outpaced the S&P 500. This surge has less to do with a booming UK economy and more with investors seeking stability and hedging against a weaker US Dollar.
Looking ahead, all eyes are on the Labour Government’s second Autumn Budget, due on 26th November 2025. More tax rises look likely as the government tries to “fix the foundations” of the economy, while wrestling with £2.9 trillion of national debt. For UK investors, the domestic picture might feel subdued, but FTSE-listed global companies remain an anchor of resilience and diversification.
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. Our portfolios seek to primarily prepare for what may lay ahead, rather than try and predict the market’s next moves, a philosophy that has played out with above average results across the range.
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. 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 positive long-term outcomes for our clients.
