Santa arrived early this year in the possibly unexpected form of Andrew Bailey and his elves on the Monetary Policy Committee at the Bank of England [Ed – you’re really not expecting a knighthood in the New Year’s honours list are you!] as they announced a 25 basic point (quarter percent in ‘old money’) reduction in interest rates.
It was a close 5-4 vote but brings the UK interest rates down to 3.75%. Early in the New Year interest rates might be as low as 3% reports the i newspaper.
European Central Bank left interest rates unchanged for a fourth straight meeting as inflation hovers around target and the euro zone weathers global shocks. The deposit rate was kept at 2% on Thursday — as predicted by all analysts in a Bloomberg survey. Fresh forecasts accompanied the decision, envisaging firmer economic expansion and inflation returning to 2% in 2028 after falling short of that level during the next two years, Reports Jamie Rush of Bloomberg Economics.
AI has clearly been the topic of the year and continues to be so. Andrew Bailey saying that he felt growth would come from the use of AI, but widespread adoption of artificial intelligence (AI) is likely to displace people from jobs in a similar way seen during the Industrial Revolution. Even the slightest hint of trouble around data centres continues to be enough to spook investors banking on the AI boom, and there was more than a hint this week according to Jordan Parker Erb at Bloomberg (does Bloomberg only employ people with great names?) AI canary Oracle coughed up some coal dust in the form of financing issues around a data centre in Michigan. It turns out that Blue Owl Capital, a longtime partner in the company’s AI infrastructure build-out, is not contributing equity. Oracle plunged about 5.4%.
Santa is starting to deliver, at least for UK stocks. Between the end of November and close on 18 December, the FTSE 100 gained 1.2%, so says MoneyWeek.
It took a slight wobble following the widely-expected twenty-five basis point rate cut – perhaps thanks to the narrow vote split and the hawkish tone from some of the MPC’s members – but recovered to close out the day 0.6% up.
As things stand the FTSE 100 is set to outperform the S&P 500 for 2025 for just the third year in the last decade, with the US index suffering under the weight of the artificial intelligence (AI) exuberance that has carried it to its current heights.
Official figures released this week revealed the UK unemployment rate rose to 5.1% in the three months to October, with younger workers particularly affected. That marked a rise from 5% for the three months to September. The number of people in the UK who are unemployed is now at its highest level since January 2021, just below the peak rate seen during the Covid-19 pandemic. The Office for National Statistics (ONS) said the data reflected a “subdued labour market”, and this no doubt helped the BoE’s decision to cut interest rates.
Now could be the time to consider investing in Venture Capital Trusts. Blackfinch Group suggest Rachel Reeves’ second Budget set out an ambition to unlock growth and strengthen the UK’s venture capital ecosystem alongside key tax rises.
Changes – including a reduction in the cash ISA allowance, extended income tax freezing, dividend tax increases, a new ‘mansion tax’, and limits to pension salary sacrifice, highlight the need to consider a wide range of tax-efficient investment solutions. It was encouraging to see the Chancellor recognise the importance of backing British businesses and the vital role that schemes like VCTs play in helping them start up, scale up, and stay in the UK.
For retail investors, access to ambitious UK scale-ups comes ahead of a planned reduction in income tax relief from 30% to 20% in April 2026. This presents a huge opportunity for the current tax year, allowing investors to use the higher tax relief now and potentially benefit from tax-free dividends.
They are considered high-risk investments so advice is required but will remain a valuable part of the plan for many despite the reduction in relief.
So, with a third ‘S’ already I’m wishing I had gone for ‘Merry Christmas!’ as a theme [Ed – or perhaps do us all a favour next year and just use ‘❤ Xmas’ !!] I’m once again helped by Rathbones with its reviews of what has been going on in the markets.
In the latest Weekly Digest, Head of Market Analysis at Rathbones, John Wyn-Evans, looks back at the major market trends we saw in 2025, led by US President Donald Trump’s aggressive tariff strategy and increased investment by companies in generative AI.
Gift Ideas from 7IM
It’s Christmas time. You know what that means. Carols. Tinsel. Reindeer. Mince pies. Elf on the tv. And of course …
The consideration of ancient commodity prices!
Seriously though, the three OG Christmas presents are worth thinking about.
Source: Popular Science/7IM
If I gave you an ounce of gold today, you’d be buzzing – an ounce is worth about £3,000.
Whereas if you unwrap an ounce of myrrh or frankincense, you’re looking at maybe £3 … and you have no idea what you’ve been given … ☹
So, did Caspar and Balthazar cheap out on their Secret Santa? Of course not. It’s just that things change in 2,000 years.
Two millennia ago, frankincense and myrrh weren’t confusing, low-value items. Used for religious rites, perfumes and medicines by cultures across the Ancient World, they were, quite literally, worth their weight in gold. The Nabatean civilisation which controlled the “Incense Route” from Yemen to the rest of the world had enough spare cash to build this:
Source: Ben Kumar’s holiday pictures (rolls eyes)
Over time though, religious rites changed, cultivation improved, and transportation became smoother. And so, demand for frankincense and myrrh fell as supply increased – making them a pretty poor gift today.
If you DID want to rival gold with something a bit left field this year, here are a few suggestions:
- Original “mother bush” Da Hong Pao tea: £25,000 per ounce. Only six trees left in the world, with harvesting now banned!
- Coral Snake Venom: £85,000 per ounce. Used in antivenom, but very hard to milk a snake.
- Californium-252: £500 million per ounce. Important for nuclear reactors. Highly radioactive.
Unlikely to be found on Amazon though …
Royal London Asset Management’ Paul Schofield, is looking forward to the new year when he said:
“I would hope that 2026 perhaps is the year that we start to move on from the AI dominating everything discussion and look at other areas of the market where we can see some really interesting stock picks.”
Equities Soar to Record Highs, is the headline from RBC Brewin Dolphin. Their Head of Market Analysis, Janet Mui, breaks down last week’s equity outperformance and outlines why recent economic data strengthened the case for a UK interest rate cut in the latest video edition of Markets in a Minute.
Even I’m running out of stories now, but FT Adviser has helped me by including that Baroness Maeve Sherlock presented the pensions schemes bill for its second reading in the House of Lords on Thursday (December 18). Sherlock said: “The pension schemes bill is a very bare skeleton with little flesh for parliamentarians to get their teeth into.
“Pensions law is highly complex so there will always be need for secondary legislation in this area, but the committee feel the government have not done enough in this bill to explain how they will use the powers they are asking parliament to approve.”
Presenting the bill in the House of Lords, Sherlock said the reforms outlined would make money invested in pensions work harder for investors. However, she set out that some default arrangements for workplace pensions result in poor outcomes for members.
Something we agree with.
Tatton Investment Management ever-present, Lothar Mentel and his team haven’t let me down again with their Tatton Weekly in which they talk about the return of US economic data showing a slowdown in the US economy, but like in the UK, it also meant a drop in inflation, allowing room for further interest rate cuts and an optimistic start to the New Year.
Hang on! Now you come to mention it Lothar and Sankt Nikolaus have never been seen together, so I wonder…..
Inheritance tax (IHT) receipts reached £5.8bn in the first eight months of the 2025/26 tax year, according to data released by HM Revenue & Customs (HMRC), reports FT Adviser. That figure is £84mn higher than the same period last year and continues an upward trend that has been in place for more than two decades. Earlier this year, the Office for Budget Responsibility forecast that IHT would raise £9.1bn this current 2025/26 tax year.
Shaun Moore, tax and financial planning expert at Quilter, said: “At the budget, there were no major additional changes to IHT, but the continuation of frozen thresholds will drag more people into paying it. “With the nil-rate band still fixed at £325,000, rising property values and accumulated savings mean more estates are being drawn into IHT, often among families who would not traditionally consider themselves wealthy.
“What was once viewed as a tax affecting a small minority is steadily becoming a broader concern.”
News received this week: the pending reintroduction of a 100% (no deposit mortgage) is on its way. I’ve no idea yet who its with or what the terms are but after some concerted work by a handful of advisers this is now on the cards again for anyone struggling to get on the housing ladder. Maybe it will help start the market moving.
We are not mortgage advisers so if you or anyone you know might welcome some more information about this or are thinking of remortgaging as interests are on the slide than please speak to your usual JB Wealth advisor and we can put you in touch with a good contact of ours, who is!
Good news for the US economy is that consumer sentiment rose in December. The bad news is it rose by less than expected, with Americans remaining depressed over affordability concerns (despite a certain someone’s claim it’s all a “hoax”). The University of Michigan’s final December sentiment index climbed 1.9 points to 52.9, while the median estimate in a Bloomberg survey of economists called for a reading of 53.5.
Then there’s the worse news: “Sentiment remains nearly 30% below December 2024, as pocketbook issues continue to dominate consumer views of the economy,” Joanne Hsu, director of the survey, said in a statement.
Markets however didn’t seem bothered, with stocks rising while traders faced the expiration of a record pile of options that threatened to trigger sudden price swings.
A rally in several tech names that have been under scrutiny over their artificial-intelligence spending lifted equities. The back-to-back advance in the S&P 500 wiped out its loss for the week. Nvidia led gains in megacaps and even Oracle surged 7%. All this is according to Bloomberg’s David E. Rovella
Salary sacrifice rules for pension contributions are changing from April 2029, so there is incentive to use the benefits this structure gives as much as possible over the remaining (just over) three years, by maximising your pension contributions.
If you have made it this far you deserve the festive break, do this is the last bulletin of the year! Thank you for all the comments, responses and input over the year. It’s certainly been another interesting one and despite the wobbles and fears we have had, markets and portfolios are up and hopefully providing yuletide cheer.
On behalf of everyone at JB Wealth I’d like to wish you a very Merry Christmas and a prosperous New Year. If I can emerge from the mountain of used wrapping paper, I hope to catch up with you in 2026.