Global markets posted mixed performance in December, with divergence between regions as central bank policy paths separated and a broadening rally extended beyond US mega-cap technology stocks. The month saw European and UK markets advancing strongly while US equities declined, reflecting sterling’s 1.8% appreciation against the dollar.
Regional equity performance reflected the shifting leadership within markets. European markets gained 2.6% in sterling terms, driven by strong performance in sectors such as financials (6.3%) and industrials (2.4%), amid signs of resilient growth. UK equities (2.2%) benefited from lower-than-expected inflation data. Emerging markets posted modest gains of 0.1%, with China (-2.4%) weighing on performance as investors balanced stimulus expectations against mixed economic activity data. US equities declined by 1.5% in sterling terms, reflecting a rotation away from mega-cap technology stocks, with the Russell 1000 Value Index outperforming its Growth counterpart by 1.3% during the month. Japan (-0.9%) underperformed amid investor concerns over the Bank of Japan’s continued policy-tightening trajectory contributing to declines in the yen.
The economic environment was marked by central bank policy divergence and mixed US economic signals following delayed data releases (a result of the recent government shutdown). The US Federal Reserve delivered a widely expected 25 basis-point (bp) cut to leave the policy rate at 3.50–3.75%, though the split 9–3 vote underscored differing views on the path for policy. US economic data presented conflicting signals, with delayed Q3 GDP showing surprisingly strong 4.3% annualised growth while employment data revealed continued labour market softening, creating uncertainty about the Fed’s future policy trajectory. In contrast, the European Central Bank held rates steady and signalled no urgency for near-term policy changes. The Bank of England cut rates by 25 bps in a narrow 5–4 vote, while the Bank of Japan raised rates to 0.75% – the highest level in 30 years.
The overweight position in Carnival (16.7%), a cruise line operator, was the top contributor to excess returns in the Trust. Carnival announced fourth-quarter earnings that exceeded expectations, and a robust outlook for bookings. The company also announced a resumption of its dividend, which had been suspended since March 2020. The overweight position in Insmed (-17.5%) detracted from performance. Shares in the drugmaker declined following the company’s announcement that it was discontinuing its experimental therapy programme for inflammation of nasal passages and sinuses.
We ended the month at a discount of 6.7%, narrowing from 7.8% in November. Net gearing continued to be conservative at 4.7% (with debt at fair value) for month-end.
As at 31 December 2025
