Here’s our December 2025 market commentary as the month closes with familiar ingredients. 

Political noise.
Uneven growth.
Markets trying to look past short-term disruption.

What mattered was not the headlines themselves, but how little damage they ultimately did.

That tells us something useful going into 2026.

The UK: more tax certainty, less economic momentum

The Autumn Statement dominated domestic focus.

After months of expectation-setting, the Chancellor delivered a package that was politically cautious and economically constrained. Growth forecasts were downgraded again, but by less than feared. That alone steadied sentiment.

The real signal was elsewhere.

Personal tax thresholds remain frozen until 2030–31. Income tax rates did not rise, but fiscal drag did the work quietly. The OBR estimates this alone raises around £8bn.

That matters more for households than any single headline tax change.

The structure of tax rises also shifted. Some pressure has been pushed further into the parliamentary term. That is unusual. It suggests flexibility later – but strain now.

Markets noticed the restraint.

Equities and gilts showed no lasting negative reaction. The FTSE 100 dipped before the Statement and recovered afterwards. Bond markets remained orderly.

Concern remains around employment and property prices, but there was no sense of panic.

The message was simple: the UK economy is slower, but not unstable.

The US: disruption contained, volatility absorbed

The US government shutdown finally ended after 43 days.

It created political theatre, not lasting market damage.

Some economic data may never be published for that period, which is a reminder that statistics are not infallible. Markets adapted quickly.

US equities were volatile mid-month, particularly in technology, as AI spending plans and earnings were digested. Expectations of a Federal Reserve rate cut in December helped stabilise sentiment.

Trade tensions with China eased. Diplomatic efforts around Ukraine raised cautious optimism.

None of this solved structural problems.
But it reduced immediate risk.

Europe: services strong, manufacturing still struggling

Europe continued its now-familiar split.

Services activity is carrying growth. Manufacturing is not.

PMI data reflected this clearly, with services expansion offsetting factory weakness. France surprised positively in Q3. Spain remained resilient. Germany and Italy lagged.

Inflation remains uneven across member states but broadly under control. Core inflation came in lower than expected.

Europe looks set to end 2025 more strongly than many feared – not because growth is exciting, but because it is proving persistent.

China and the Far East: stimulus versus structural drag

China hit its headline growth target for much of 2025, but momentum softened into Q3.

Manufacturing remains under pressure. The housing market is weak. PMI readings stayed in contraction.

Optimism now rests on two factors: easing US trade tensions and fiscal support aimed at stabilising demand and injecting liquidity.

Japan moved decisively.

A large stimulus package under the new Prime Minister signals willingness to support growth directly, even at the cost of higher bond issuance. Services activity remains the backbone of its recovery.

Emerging markets: divergence, not a single story

Emerging markets did not move together.

India outperformed again, posting strong growth and hitting equity highs before profit-taking set in. Korea and Taiwan struggled due to technology exposure.

What links them is sensitivity to US interest rates.

Further Fed cuts would support currencies, capital flows and valuations. That is why emerging markets remain relevant for diversified portfolios – but only selectively.

What this means for investors

December reinforced a familiar lesson.

Markets can absorb political disruption far better than most investors expect. What they struggle with is uncertainty around policy direction, inflation and rates.

None of those disappeared in 2025.
But none deteriorated sharply either.

That is why sticking to a plan worked better than reacting to noise.

Seasonal optimism – the so-called Santa rally – may or may not repeat. It never matters as much as discipline does.

The investors who finish years like this best are rarely the most reactive.

They are the most consistent.

A sensible mindset for 2026

Do not mistake calm markets for easy markets.

Growth is slower. Tax drag is real. Diversification still matters. Timing still hurts more than it helps.

The objective remains unchanged:

Clear strategy.
Realistic expectations.
Patience through discomfort.

That approach has survived far worse years than this one.