Investment review of 2025, what we lived through and learned

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Pension and tax rules can change, and benefits depend on personal circumstances. Investments can fall as well as rise in value, so you could get back less than you invest. Past performance isn't a guide to future returns.

Full podcast episode transcript

[0:11] Emma Wall: Hello and welcome to the Switch Your Money On podcast from Hargreaves Lansdown. I’m Emma Wall – Chief Investment Strategist.

[0:16] Sarah Coles: And I’m Sarah Coles – Head of Personal Finance.

So, this year has been lived at breakneck speed – but, as we’re getting into mid-December and the holidays are looming – thank goodness – there’s been time to take a breath and look back at what we’ve been through, and what it might mean for investors. So, that’s what we want to devote this episode to.

So, I guess, before we go anywhere else, the first thing I should ask is why, as an investor, is it important to take stock every so often?

[0:39] Emma Wall: Well, as markets move, it unbalances your portfolio – so, if a market does particularly well, it does mean that, over a 12-month period, you might have more exposure to that particular investment class, asset class, or even particular stock. So, periodically – at least once a year – it is important to sit down and have a look at how market moves have influenced your portfolio, and whether that’s taken you outside of your risk appetite – maybe you’re holding too much risk, maybe you’re not taking enough risk for the return that you’re after – and Christmas is as good a time as any.

[1:09] Sarah Coles: But also, I imagine there’s things that happen in people’s lives that mean they need to take stock as well?

[1:13] Emma Wall: Absolutely – and, of course, lest we forget how many seconds we’ve managed to get in before we mentioned...

[1:17] Sarah Coles: [Laughs]

[1:18] Emma Wall: ...’The Budget.’ Policy can change as well – and tax allowances. So, lots of things can happen in a year, which means it’s really important to check that your money is doing what it should for you.

[1:27] Sarah Coles: That’s great.

So, we should really start with the positives of what’s happened this year – I’m sure there have been some. So, there’s been lots of records set this year, haven’t there?

[1:35] Emma Wall: There have, indeed. The US market has hit record highs – not hugely surprising for the US market, which has hit quite a lot of record highs in the last five years, but the FTSE 100 – the UK market – has also hit a record high and so has the gold price. Really interesting to have equities in gold hitting all-time highs at the same time because, usually, they signify different kinds of invest appetite. And we’ve also had gilt yields hitting multi-decade highs. So, there have been opportunities for income and growth – almost regardless of your risk appetite.

[2:06] Sarah Coles: And so, within the markets, there’ve been some names that have had particularly striking years and become particularly massive. There’s one elephant in this particular room that I’ve now built... so it’s NVIDIA – how’s that faired this year?

[2:17] Emma Wall: You’re right. It’s really interesting ‘cause this has been a year where, actually, the US – and, indeed, the dollar – has waxed and waned in terms of investor appetite. There’ve been periods – and perhaps we’ll come on to those – because of things like tariffs, or politics, or just a move towards gold and away from dollar as a reserve currency – or store of currency. But, despite some of that changing sentiment towards the US, NVIDIA – which is a US company – does not seem to have fallen far from investor appetite all through the year – and it’s one of those stocks that’s, really interestingly, beat expectations again and again. However, this has meant that it’s now trading on very lofty valuations – and we do think this is an opportunity for clients – and investors, indeed – to take stock and think, ‘Actually, past performance is absolutely no guarantee of future returns.’ Although NVIDIA is a high-quality stock our analysts have a lot of conviction in, it is surrounded by an AI sector that is looking pretty toppy.

[3:16] Sarah Coles: Over this year, we’ve talked a lot about the US, but it’s not the only market that’s had a good term – you mentioned that the FTSE, in the UK, is actually having quite a positive year as well.

[3:24] Emma Wall: It is – you’d have to have been quite a patient investor to have the domestic market blaze in glory as it has done. But, yes – you’re right – the FTSE 100 has gone to all-time highs this year. It’s been driven, in particular, by two sectors – and that is Defence and Banking.

So, defence stocks have benefitted from tailwinds of GDP spending – or promises of GDP spending. This was linked to pressure from the US Government that European countries – and including the UK – put more GDP spend behind defence spending in the wake of the Ukraine War – and Russia invading Ukraine – and the US removing itself slightly from the support of that nation. That’s one sector that’s driven the FTSE 100 higher.

The other one is UK banks. If you can believe this, Sarah, UK banks have done better than Global Tech, year to date. You know, we spend a lot of time talking about Global Tech – and talking about US Tech – but UK banks have actually outperformed Global Tech – and that is to do with the high-interest-rate environment, greater profitability – and this has been a year when share prices have caught up to profitability.

That said – as you might expect with sectors that have done particularly well – this does mean that they’re very well-valued, and we don’t expect the trajectory that they have experienced this year to continue into next.

[4:39] Sarah Coles: So, it’s finally, the banks have had their moment in the sun.

So, obviously, we’ve seen a lot of these records, but it’s not been an easy ride, has it? – there’s been lots of things along the way.

[4:47] Emma Wall: Yeah – it’s been really interesting – because, on the face of it, if you just take a moment in time – which is never advisable when you’re investing – context is everything – and look at how stock markets have performed this year – and the number of different asset classes... you’d think, ‘Oh, that was a really positive year.’ But you’re right – we’ve been beset by a lot of challenges, and they’ve come, in particular, in the form of policies in politics – and, of course, we cannot talk about 2025 [laughs] without talking about the so-called ‘Liberation Day’ – the day that Donald Trump – the US President – unleashed tariffs on the global stock market – on the world, I should say – and wiped off (as estimated by Bloomberg) $9.5tn of value off the global stock market in just a couple of days.

Now, markets did rebound from there, but it meant that, actually, investors had a nervousness around the US stock market – and it’s how much uncertainty that market carried – and, indeed, the President’s policies and what that might mean for their lifetime savings – so it was a big one.

[5:49] Sarah Coles: When you look at the headlines of what’s coming out of the US – obviously, Liberation Day, and all the ongoing rumblings of all the negotiations and everything else... So, there was a lot of negative headlines – and, yet, the end result... there’s obviously been a lot of growth.

Can you explain why it is that markets weren’t completely floored by this – and just walked away for ages – and how they’ve been, obviously, volatile, but actually building?

[6:09] Emma Wall: Well, some of it is to do with the quality of the companies in these markets. We talk a lot about the FTSE 100 – for example – being UK-listed, but having global revenues... I mean, the FTSE has 75% of its revenues come from outside of the UK – and the US is similar. So, it is, obviously... US stocks are listed in the US, but often they’ll have global revenues, which will help cushion them in some ways from domestic issues.

What I’d also say is we’ve had a interest-rate environment that has been supportive of equities. So, there haven’t been as many cuts in 2025 as perhaps was predicted this time last year, but the Fed has been in a rate-cutting cycle, and lower interest rates do tend to be positive equities – although there are no guarantees – and, as we speak today, the Fed is cutting interest rates again – very much priced in to global markets, but that is expected to be positive. And what’ll be really interesting is the trajectory going into 2026.

Our house view is that there will only be a couple of cuts in 2026, but we can perhaps come onto our market outlook for 2026 in the next podcast.

[7:17] Sarah Coles: At risk of asking you what is, in fact, an exam question... You say that a lower-rate environment tends to be positive for equities – can you explain a little bit about why that might be?

[7:26] Emma Wall: Yeah. Well, companies – and, indeed, countries – are very like consumers. So, would you prefer to have a lower rate of interest on your mortgage or a higher rate of interest...

[7:35] Sarah Coles: [Laughs]

[7:35] Emma Wall: ...on your mortgage?

[7:36] Sarah Coles: Is it that straightforward?! [Laughs]

[7:37] Emma Wall: [Laughs] Well, it is – because corporates... not all of them, but a lot of them tend to have debt. It’s how they make expansions, acquisitions, new-product launches – going into new regions – and countries also have debt... it’s how they service ‘The nation,’ welfare bills, spending that’s necessary for infrastructure, etc.

So, lower interest rates does mean that the cost of debt for companies is lower – and so, therefore, they’ll have more cash in order to put into the things that will expand those companies.

Also – and this is particularly true for consumer-facing companies... they will benefit from consumers having more cash as well. So, if you think about things like discretionary spend, consumer spending... Companies that are selling products to individuals – if those individuals have less of a debt burden, they will be able to spend more money – and so, therefore, that, in theory, does increase the profitability of those companies.

[8:33] Sarah Coles: So, all round, it’s a positive.

Feels like we’ve been far too positive, and now we need to talk about something that’s really shaken markets up quite a lot this year – which was all the debate and concern around The Budget. It has really played a part, hasn’t it?

[8:46] Emma Wall: It has – so we’ve seen this particularly with our clients. What’s been really interesting is... although we’ve had moments of market euphoria, we actually have had some pretty low points in terms of investor confidence – by our own HL Investor Confidence Survey – and that is because the uncertainty around investment decisions – despite the fact that markets might have been rallying... that uncertainty has meant that our clients have chosen not to invest in times – or they’ve chosen to hold off decision-making – or, indeed, they’ve chosen to move out of markets in order to have a cash buffer because of the uncertainty that was coming in The Budget. And we’ve definitely seen, in particular – the last couple of months – not for every investor group – and not universally, in terms of the selections they’ve been making... but I would say we’ve been seeing tilting to risk-off from risk-on despite market euphoria over the last couple of months.

[9:36] Sarah Coles: And, of course, after all the debate and discussion, there were some real positives that came out of The Budget that were good for some sectors.

[9:42] Emma Wall: Yes, that’s true. We spoke about banks earlier – and, sometimes, it’s ‘No news is good news.’ So, there was much discussion around whether, actually, we’d have a windfall tax on the financial services sector in The Budget. When we didn’t have that windfall tax announced on Budget Day, we did actually see UK banks rally on the day – and so that was a positive.

[10:02] Sarah Coles: And, I suppose, there was the housebuilders’ impact as well – the fact that all the concerns about what might happen to taxes on houses. And, although we’re gonna have this tax on properties worth more than £2m – a bit further down the line – it’s nowhere near as damaging as something that was really widespread and quite hefty.

[10:16] Emma Wall: Absolutely. So, we saw Taylor Wimpey and Crest Nicholson have their results in the weeks coming up to The Budget – and they said, actually, demand had been very suppressed because of expectation there would be some changes of some nature in The Budget – and, when we didn’t see taxes, or policy changes, or allowance universally applied across the entire housing market, you did see housebuilders to do better.

And, as well as the banks and the housebuilders – which were very sector-specific – there was also some positive news for UK corporates, in general – or, at least, those that are newly-listed to the stock exchange. So, we saw the announcement that there will be a three-year stamp duty holiday for new IPOs – that is new listings on the London Stock Exchange in the UK – and, actually, that’s led to some people predicting that, actually, 2026 will be a bumper year for flotations in the UK.

[11:05] Sarah Coles: And flotations in the UK haven’t been quite so bumper for a little while, have they?

[11:08] Emma Wall: They haven’t. In the popularity race, we’ve been losing out to the US – both in terms of companies that are already listed in the UK choosing to delist from the UK and going across to the US – or, indeed, those that are private and looking to list, choosing New York over London. And this is for a number of reasons – we’ve heard from companies, themselves... cite funding availability, talent availability, but also regulation – and so it’s that third one that this new IPO-stamp-duty holiday speaks to.

[11:39] Sarah Coles: So, it’s gonna be really interesting to look ahead to next year and find out whether it is the year of the IPOs.

So, actually, in the next Investment episode, we’re gonna look ahead to all the things that 2026 might hold – and we’re gonna look at some of the stocks to watch, and some of the funds to watch as well, so there’s loads to look forward to there.

[11:53] Emma Wall: Yeah – my team has been hard at work... rigorous debate, hours and hours of analysis to identify some stocks and some funds for 2026 and beyond – and we’ll also be talking a little bit about the market outlook – so what we expect from politics, macroeconomics, even interest rates.

[12:09] Sarah Coles: Fantastic! Well, before we go, we do have time for a stat of the week, and I have gone for politics – and this ‘Liberation Day’ – that it was, apparently.

So, some of the tariffs announced at the time were surprising, so I wondered if you could guess the rate imposed on Madagascar – where, it’s worth bearing in mind, 80% of the population live in extreme poverty.

For context, it does export to the US... mainly clothes, titanium, cobalt, and vanilla – so, obviously, big vanilla business.

So, do you think the rate was around 30% – around 40% – or around 50%?

[12:38] Emma Wall: I’m gonna go with 50% punitive. If Switzerland warranted [laughs] 35%, I’m sure Madagascar – for reasons known to only Donald Trump, himself – were 50%.

[12:47] Sarah Coles: You’re absolutely bang on – yes. I think you’ve got to nip that vanilla industry in the bud – or pod.

Right... well, that’s all from us this week – but, before we go, we need to remind you that this was recorded on December 10^th 2025, and all information was correct at the time of recording.

[12:58] Emma Wall: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you. Investments rise and fall in value, so you could get back less than you invest – and past performance is not a reliable guide to future returns.

[13:10] Sarah Coles: Yes – this is not advice or a recommendation to buy, sell, or hold any investment. No view is given on the present, or future value, or price of any investment and investors should form their view on any proposed investment.

[13:19] Emma Wall: So, all that’s left for me to do is to thank our Producer, Elizabeth Hotson.

[13:22] Sarah Coles: And thank you, so much, for listening – we’ll be back again soon. Goodbye!

[13:25] Emma Wall: Goodbye!