Monthly Review and Outlook December 2025

Global share markets ended the year on a steadier note, even though December brought more ups and downs than previous months. Some investors took the opportunity to lock in gains after a strong year, which added to the late‑month volatility. Even so, confidence that central banks would continue supporting economic activity helped markets hold their ground.

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Below is a review of key developments across global markets and our outlook for the months ahead, highlighting opportunities and potential risks.

Company shares

Share markets overall showed a mixture of resilience and rotation in December. Investors were balancing a supportive economic backdrop with end‑of‑year uncertainty, leading to some shifts in which areas of the market were favoured. While headline market movements were generally steady, the underlying picture varied by region and sector.

United States: Share prices in the US didn’t move dramatically in one direction, but there was noticeable rotation beneath the surface. Investors moved away from some of the highly valued technology companies and showed greater interest in financial firms and other more economically sensitive areas. The overall market remained broadly steady as the year closed, with mixed signals on policy and profit‑taking balancing out generally supportive economic conditions.
Europe: European markets held up well towards year‑end despite a quieter December. Service‑related parts of the economy remained a bright spot, while manufacturing continued to face challenges, particularly in Germany. More cyclical sectors, such as industrial businesses and materials‑related companies, tended to perform better than those more dependent on interest‑rate conditions. With interest rates on hold, attention turned to what the European Central Bank may do in 2026.
United Kingdom: UK shares performed comparatively well in December. A softer pound helped large global companies based in the UK, and areas linked to commodities and finance were particularly supportive. In contrast, parts of the market more tied to the domestic economy had a more subdued month.
Japan: Japanese shares continued their positive run into the end of the year. Confidence was supported by signs of improving conditions at home and ongoing expectations that inflation would gradually pick up. Investors shifted some attention away from the year’s biggest winners—especially companies linked to artificial intelligence—towards more traditional sectors. However, government bonds in Japan struggled, reflecting ongoing concerns over the country’s high levels of debt and possible changes to monetary policy.
Emerging Markets: Emerging markets were among the strongest performers in December. A weaker US dollar helped, as did continued strength in technology‑focused countries such as Korea and Taiwan. These gains offset more mixed results from larger economies such as China and India. Markets across the rest of Asia outside Japan also benefited from similar technology‑focused trends.

Bonds

Bond markets had a more challenging month. Government bond prices generally fell as long‑term borrowing costs moved higher in several major markets. One exception was the US, where government bonds held up better than many others. Japanese government bonds saw more pronounced weakness due to worries about future policy changes and public finances.

Corporate bonds, however, fared relatively well, helped by improving investor confidence.

Commodities

Commodity markets delivered a mixed picture. Companies linked to industrial metals benefited from ongoing demand related to the energy transition, infrastructure investment and data‑centre expansion. Precious metals saw some fluctuations after strong gains earlier in the year. Oil‑related areas of the market struggled slightly, held back by concerns about the balance between global supply and demand.

Outlook

Schroders continue to expect steady global economic growth supported by ongoing monetary and fiscal measures. Recent progress in US–China discussions has reduced some uncertainty, and inflation continues to ease gradually in many regions.

However, we remain watchful of two key risks. The first is the high concentration of returns coming from certain parts of the US share market, particularly technology. The second relates to rising long‑term government borrowing costs worldwide, driven by larger government debt levels.

Overall, we continue to view shares positively across regions such as Europe, the US, Japan and parts of the emerging world, where valuations and underlying economic trends remain encouraging. We remain cautious on government bonds, where expectations for future interest‑rate cuts may be overly optimistic. Corporate bonds and commodities, including gold and energy, continue to serve as important sources of diversification.

Asset overview

Our general view of assets in the coming months is summarised as follows. These are our in-house views as at the end of December 2025.

Asset	RAG Status	Details
Equities	Green	We have retained our positive view on equities, as the economic backdrop remains supportive, company profits are generally heading in the right direction, and governments around the world are still providing a boost through various spending measures. We continue to invest in the US, Japan and China, and added a new position in European companies that look good value, especially as prices in parts of the US market have risen quite strongly.
Government Bonds	Red	We retain a negative view on government bonds and as we believe that too many US interest rate cuts have been priced in by the market and inflation remains sticky.
Corporate Bonds	Amber	We maintain a neutral stance on corporate bonds.
Commodities	Green	We retain a positive stance adding more exposure to areas such as energy and industrial metals because we have a more positive outlook for these markets. We continue to hold gold as it remains a good diversifier in view of ongoing uncertainty and sticky inflation.

Source: Schroder Investment Management and Schroders Personal Wealth, 7 January 2026.

RAG status legend:

Green - Positive outlook
Red - Negative outlook
Amber - Neutral outlook

Important information

Forecasts of future performance are not a reliable guide to actual results, neither is past performance a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and are not guaranteed, and the investor might not get back their initial investment.

Any views expressed are our in-house views as at end-December 2025. Investment markets and conditions can change rapidly, and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.

Schroders Investment Management (SIM) provides investment management and advice services for SPW funds and portfolios respectively.

Schroders Personal Wealth (ACD) is a trading name of Scottish Widows Schroder Personal Wealth (ACD) Limited. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 11722973. Authorised and regulated by the Financial Conduct Authority number 834833.   

Claims may be protected by the Financial Services Compensation Scheme. We are covered by the Financial Ombudsman Service.  

Last Updated on 15th January 2026