December 2025

December 2025 brought the year to a close as markets navigated a broad mix of political power, policy recalibration, and late-cycle behaviour. Geopolitics remained dominated by Trump, Xi and Putin. US policy volatility, China’s strategic restraint and Russia’s entrenched confrontation with the West kept global alliances fluid and risk premia elevated. Against this backdrop, a slowing but still resilient global economy and cautious central banks shaped markets that rewarded selectivity over exuberance. Equities broadly held their ground.

Geopolitically, December underscored how little margin for error exists in a world defined by overlapping great-power tensions. Russia intensified drone and missile strikes on Ukraine’s Black Sea ports late in the month. These attacks damaged civilian grain shipments and energy infrastructure, reviving concerns over global food security as markets were already thin. Parallel diplomatic activity involved Ukrainian engagement with Trump’s envoys and European leaders. Talks explored potential ceasefire frameworks and territorial compromises, but progress remained limited. This reinforced the sense of a frozen conflict rather than an imminent resolution. In Asia, Xi’s year-end address reinforced China’s objectives for Taiwan reunification and national resilience. The speech signalled continuity, not moderation, in Beijing’s long-term posture.

Overlaying these regional flashpoints was a broader recalibration of US foreign policy under Trump. The release of a revised National Security Strategy marked a clear departure from post-Cold War orthodoxy, emphasising transactional alliances and domestic prioritisation. The document was cautiously welcomed in Moscow and closely scrutinised by European and Asian allies, many of whom spent December reassessing their own strategic autonomy. Within Europe, debates in Brussels intensified around defence spending, fiscal coordination and the continent’s role in an increasingly fragmented global order.

Growth moderated across developed markets as restrictive financial conditions weighed on investment and consumption. Labour markets remained broadly intact. Services inflation cooled unevenly rather than collapsing. The US economy slowed without stalling, supported by healthy household balance sheets and resilient corporate earnings. Europe continued to muddle through. Fiscal support and easing financial conditions partially offset private-sector weakness. China prioritised stability over stimulus, relying on targeted property-sector measures and industrial policy. The country avoided aggressive demand-side intervention. The result was a macro environment defined by an uncomfortable balance: enough disinflation to justify limited policy easing, but not enough weakness to price a clean recession or a rapid return to ultra-loose monetary conditions.

Central bank activity in December showed a delicate balance. The US Federal Reserve cut rates by 25 basis points at its December meeting, bringing the fed funds target range to 3.50–3.75%. This was the third cut of 2025. The Fed’s communications were cautious. Minutes showed deep committee divisions over when and how much to ease further. This revealed uncertainty about the balance between inflation and growth in 2026. Meanwhile, the Fed resumed modest Treasury bill purchases to manage year-end liquidity and short-term rate control. This technical action showed operational pragmatism, not a return to quantitative easing. In the UK, the Bank of England narrowly cut the Bank Rate by 25 basis points to 3.75%, reflecting lower inflation and softer demand. The bank said any further cuts would be slow and data-driven. The European Central Bank kept rates steady, saying inflation was near target and warranted patience. Policy divergence—a more hawkish Japan and ongoing central bank innovation in China—became a key driver of FX and asset flows.

Global equity markets lost momentum as the year drew to a close. Early in the month, optimism driven by central bank easing expectations and resilient earnings faded. Late in the month, caution returned as valuations looked stretched and geopolitical headlines once again drew attention. US equities saw a split month. The S&P 500 reached fresh record highs around Christmas Eve before sliding in thin post-holiday trading. December performance was muted despite strong full-year gains of about 16% for the index and over 20% for the Nasdaq. European equities outperformed on a relative basis. The Dax and FTSE 100 closed the year near record levels, up 2.7% and 2.1%. Investors rotated into banks, industrials, and defence stocks, helped by easing rate expectations and fiscal tailwinds. In Asia, the Nikkei 225 was up 0.2% and the Shanghai Composite Index 2.1%. Across regions, leadership broadened late in the year as value and defensive strategies outperformed high-growth names. This signalled more mature cycle behaviour rather than outright risk aversion.

Commodity markets in December were dominated by precious metals. Silver stood out as one of the strongest assets of 2025, briefly trading above $80 per ounce late in the month, driven by supply constraints, strong industrial demand linked to electrification and solar, and declining real yields. That rally, however, ended abruptly. Year-end profit-taking, increased margin requirements, and thin liquidity triggered one of silver’s sharpest multi-day sell-offs in years, with futures falling sharply in the final sessions of December, but it still closed up 23.5% for the month. Gold followed a similar, though far less dramatic, pattern: strong through most of the month and the year as a whole, before pulling back as leveraged positions were reduced, leaving the month up 2.0%. Industrial metals such as copper remained supported by structural demand from the energy transition and AI-related investment, while energy markets struggled to gain traction amid ample supply and softer demand expectations. By the end of the month, WTI and Brent were down 2.0% and 2.4%, respectively.

In currency markets, December continued trends seen through much of 2025. The US dollar weakened modestly against both the euro and sterling. This reflected Fed easing expectations, narrowing rate differentials, and rising sensitivity to US fiscal and political uncertainty. EUR/USD traded in the 1.17–1.18 range by month-end, supported by relative eurozone stability and expectations that ECB easing would lag the Fed's. Sterling also strengthened. GBP/USD moved towards 1.33–1.35 as markets judged the Bank of England would cut rates more cautiously than its US counterpart. The dollar’s decline was a modest tailwind for European assets and some emerging markets, but scarce global liquidity limited capital inflows and kept FX moves orderly.

Crypto markets closed the year on a notably subdued note. December marked a clear break from the strong seasonal patterns investors had come to expect, with Bitcoin and Ethereum both declining and ending roughly 20–30% below their late-year peaks. Bitcoin was down 3.8% for the month, a figure that masks intramonth volatility. The anticipated “Santa rally” failed to materialise, as macro headwinds, tighter liquidity and a cautious Fed narrative increased crypto’s correlation with broader risk assets. Altcoins underperformed, retail participation faded, and sentiment indicators remained elevated despite falling prices, reinforcing a “sell-the-rallies” mentality.