Q4 2025 Investment Markets Review with Rory McPherson

Rory McPherson, Chief Investment Officer at Magnus, Wren Sterling’s sister company, reflects on Q4 last year and looks ahead to 2026.

“Equity markets closed 2025 at record highs, despite a quarter marked by political dysfunction, the longest US government shutdown on record, and a UK economy that stalled ahead of November’s budget. Once again, markets looked through the noise and focused on profits, innovation and the direction of interest rates.

UK equities delivered a standout quarter, rising 6.4% and posting their strongest annual return since 2009 — a timely reminder that the stock market is not the economy. Global equities rose more modestly, with the US still delivering positive returns but no longer doing all the heavy lifting.

Corporate earnings remained the anchor for markets. US companies delivered a fourth consecutive quarter of double-digit profit growth, while UK banks continued to post robust results. Profits, not politics, once again drove returns.

Artificial intelligence remained a powerful theme. Competition intensified as Google’s Gemini emerged as a credible challenger to Nvidia’s dominance, reinforcing that AI is real and transformative. However, US equity indices are now highly concentrated, with a small number of stocks accounting for a disproportionate share of returns — strengthening the case for diversification.

Interest rates moved lower, with both the Federal Reserve and the Bank of England cutting rates during the quarter. While inflation has eased, it remains above target, creating a more challenging environment for savers even as governments benefit from lower borrowing costs.

Political ruckus — particularly in the US — returned to the fore, but markets have learned to live with it. Experience suggests such noise creates volatility rather than lasting damage.

Looking ahead, lower interest rates should continue to support growth, particularly in the US. Inflation may yet prove stickier, reinforcing the importance of staying invested through the inevitable ups and downs in order to protect and grow real wealth.”