It’s been a rollercoaster ride but 2025 turned out to be a good year for investors and savers.
Stock markets have suffered a correction along the way and interest rates have been cut but returns have proved good on both shares and cash.
The global stock market, as measured by the MSCI World index, was up 18.8 per cent this year on 8 December.
The leading US stock market, the S&P 500, was up 16.7 per cent year to date and the UK’s top index, the FTSE 100, was up 16.8 per cent.
A Plum spokesman says: While it’s been a volatile year, especially in the first half of the year, many investors will be happy with their returns. It has been a textbook example of the importance of time-in the market, not timing in the market as well as pound-cost averaging to try to smooth the peaks and troughs of the market.
‘The biggest gains came after stocks hit their low following the introduction of US tariffs by President Trump, with the S&P 500 rising by over 38 per cent after its low on 7 April.
‘The most popular fund among our customers is the Legal & General Global Technology Index, commonly known to Plum customers as ‘Global Tech’, has seen an annual return of around 20 per cent so well above what they may have earned by keeping all their money in cash.’
Meanwhile, although cash savers saw the Bank of England cut its base rate from 4.75 per cent at the start of the year to 4 per cent, they can still pick up cash Isas paying considerably more than that. Plum’s cash Isa pays 4.28 per cent, for example .
But while returns have turned out well, the past year hasn’t been plain sailing. We look at the major events and what could happen next year.
> Find out more about investing for 2026 with Plum
Capital at risk. You may get back less than you invest. Past performance is not an indicator of future results.
The past year has turned out to be a good one for investors but it has been a rollercoaster ride
The AI wobble
The stock market year had barely begun when January’s market confidence was knocked firmly off track by Chinese artificial intelligence app DeepSeek spooking investors.
The release of the DeepSeek R-1 chatbot saw a rush to download the app, which shook up technologists and investors as the large language model AI had been trained and built for less than $6million.
That compared to the US leader, OpenAI, which produces the ChatGPT app, having spent $5billion in 2024.
The sudden arrival on the scene of high-performing, cheap Chinese AI, led investors to sell off high-flying US tech stocks.
With Nvidia shares notably plunging 17 per cent in a day amid fears mounting that the AI boom was over. That turned out not to be the case.
Trump’s tariffs
The US stock market regained its poise after the DeepSeek AI wobble until mid-February but then began to slide as rumours swirled over what Donald Trump’s tariffs would mean.
The US President ramped up pressure and revealed some tariff measures through February and March but was building up to his so-called Liberation Day announcement on 2 April.
In an unusual White House performance even by his standards, Trump brandished a board titled Reciprocal Tariffs, which he claimed showed the tariffs other countries charged America and then the lower rates he would charge them.
The UK was hit with the standard 10 per cent tariff, the EU got 20 per cent, some countries got hammered, such as Cambodia with 49 per cent, and China initially got 34 per cent.
The initial announcement rattled markets and sent shares tumbling. A tit for tat tariff war then broke out between the US and China and President Trump’s apparent refusal to back down even as stock markets collapsed led to a major correction.
The S&P 500 tumbled 12 per cent in the week after 2 April, while the FTSE 100 fell 11 per cent. Many shares nosedived by far more.
Donald Trump’s tariff announcement rocked markets in early April
The Taco Trade
Investors were so alarmed in the days after the tariff announcement because Trump showed no indication of backing down, despite markets freefalling.
Meanwhile, with the President also ramping up his attacks on the US Federal Reserve’s independence, bond markets were rattled too, and US Treasury yields soared.
But then all of a sudden President Trump blinked. On 9 April, he announced a 90-day tariff pause. Markets rebounded strongly on the announcement, with big gains made that day around the world.
The tariff battle with China continued for a while after that – it was exempted from the pause and had tariffs raised to 125 per cent – but a subsequent softening of the narrative around China, along with Trump saying that he had no intention of sacking US Federal Reserve chief Jerome Powell, paved the way for markets to continue to climb.
As markets stormed ahead in May, with the odd wobble driven by Trump pronouncements, a new phrase was coined in the investment world: the Taco Trade, which stood for Trump Always Chickens Out.
The phrase was first used by a Financial Times journalist Robert Armstrong and swiftly became the talk of the investment world. Traders bought the dips after markets suffered from a wild Trump decision, on the basis that he would soon reverse it.
The AI bubble
By early May, the US stock market had regained all its Liberation Day losses and then went on a remarkable run driven by AI hype, as big tech firms revealed their ‘hyperscaling’ plans to build out immense data centre computing infrastructure.
The S&P 500 hit a series of record highs and reached a closing high 6890.9 points on 28 October – an astonishing 38 per cent higher than its tariff correction low. Something not many investors would have predicted in early April.
The UK stock market also performed well and reached 9,911 in mid-November – up 29 per cent on its post-tariff low – leading investors to question whether it could break the 10,000 point benchmark level this year.
But the adage that ‘stock markets climb a wall of worry’ was never truer than this year. While investors chased shares up to record levels, they also fretted that the AI boom had turned to a bubble that was about to burst.
Bubble warnings spread from the fringes in early summer to the mainstream in autumn, with voices including JP Morgan boss Jamie Dimon, the IMF and the Bank of England chipping in.
Chip designer Nvidia, which had become the world’s largest listed company with a $4.5trillion market cap, settled nerves slightly with blockbuster results in November, but its shares have still slid since then.
Rachel Reeves’ late November Budget and concerns over what may in it dominated the second half of the year for UK investors
The UK Budget
British investors had big worries over autumn that were closer to home. Rachel Reeves delaying the Budget delivered a long lead-up and with talk that she would need to fill a ‘black hole’ to meet her fiscal rules there were fears almost every tax under the sun could go up.
As well as an expected income tax hike that never materialised, there were worries over a raid on pension tax-free lump sums, further rises in capital gains tax, another attack on inheritances and pension wealth, and the cash Isa limit being cut.
In the end, it turned out that the UK’s finances were somewhat better than thought and Reeves did not stage many of her rumoured raids.
However, she did add 2p extra to tax on savings interest and dividends and cut the cash Isa allowance to £12,000 for under-65s, leaving those who want to use their full £20,000 annual tax-free allowance needing to put the remaining £8,000 in a stocks and shares Isa.
The rise in dividend tax and savings interest income tax rates makes it even more important to invest and save in a tax-friendly way and make the most of Isa and pension allowances, if they suit your circumstances (This is not financial advice).
Will 2026 bring losses or gains? Investors are worried about some market factors
What could 2026 look like?
The next year looks as if it will bring more uncertainty. Investors are hoping for more rate cuts on both sides of the Atlantic, but savers worry this will lead to a decline in rates on accounts for them.
Meanwhile, inflation is forecast to subside, but economists remain concerned it could prove stickier than expected.
Worries over the AI bubble will remain and there have already been signs of investors shifting focus away from US tech and towards Europe, Japan and the UK.
A Plum spokesman, says: ‘2026 is shaping up to be a key year for the major AI stocks. The capital expenditure of these hyperscalers has been incredible, and have played a key role in supporting US economic growth.
‘However, it’s already apparent that investors’ patience is beginning to wear thin as they look for clear evidence that the huge investments made in infrastructure will pay off, as shown by the recent vertiginous drop in Oracle’s share price.
‘Investors seem fairly comfortable when a dominant company’s cash flow is used for AI infrastructure investments, but concerned where it is financed by debt outside of the Magnificent Seven.
‘AI is also beginning to grow in awareness among the public, and could become the next major socio-political dividing line after ESG and net-zero.
‘There is growing recognition about its impacts on the workplace and energy prices as the data centres that power AI tools require unimaginable levels of energy. How that plays out could have a significant impact on particular stocks.
‘Investors have seen 2025 be a particularly strong year for gold, silver and copper. While the importance of these metals to the energy transition and chip manufacturing has helped drive higher prices, the price growth of gold and silver has been on a different level.
‘Central banks have driven high demand for gold in particular, along with reportedly strong levels of imports to China.
‘This ‘debasement trade’ as it has been known is a recognition of high levels of Government debt, expansionary fiscal policies and concerns about the independence of institutions that helped support the US dollar as the reserve currency.
‘Whether these metals can continue to outperform having reached such peaks will be a key question for 2026.
‘In fact, with the likes of Germany and Japan set to pursue higher public spending and President Trump picking a new Federal Reserve Chair who is minded to cut interest rates more aggressively and expand its balance sheet as necessary, the bond market will continue to be a feature of discussion and 2026 might be the year when the breaking point for a developed market is hit.
‘The global market will need to adjust to higher interest rates in Japan, unwinding certain trades that have been reliable money makers, for example we could Japanese holders of US Treasuries swap for local government bonds.
‘So doing the right things by diversifying your portfolio and making sure your defences are robust, especially in such a volatile, uncertain environment, will be key.
‘For example, as demographics continue to balance further towards older people in need of care, healthcare spending will remain robust irrespective of the economic conditions.’
