Markets in 2025 have been unpredictable, much like British weather, one minute it’s cloudy, the next there’s a sudden burst of sunshine. If you’ve been keeping an eye on your portfolio, you’ve probably felt that shift firsthand. And just like the weather, the key is to stay prepared and flexible.
Please remember that the value of investments will fluctuate and returns may be less than the amount originally invested. Tax treatment depends on your individual circumstances and tax rules can change. Chelsea does not offer advice and so if you are unsure of anything please contact an expert adviser.
Volatility isn’t a dirty word
Take early April as an example. The announcement of new US tariffs rattled global markets, sparking a brief sell-off. Yet just a few months later, markets had bounced back. Volatility isn’t a sign that things are broken, it’s actually a natural part of investing.
In fact, history shows these moments can create opportunities:
- Investors in the FTSE 100 12 months after Brexit saw returns of around 25%*.
- Global equities jumped nearly 50% in the 12 months following the peak of the Covid-19 pandemic**.
- Already this year, the MSCI World Index is up 26% since early April***.
Remember, selling on bad news often locks in losses. Staying invested allows you to benefit when markets recover.
Confusion and opportunity coexist
Markets today can feel contradictory. Equities are hitting record highs, while corporate and high-yield bond spreads over government bonds look narrow – painting a picture of stability. Yet gold is at record levels, and long-term bond yields are rising, signalling caution.
Consider NVIDIA as an example – despite being a leader in AI its share price fell to $94 following Liberation Day, but has since rebounded to almost $182, despite uncertainties around tariff implementation and just how much it will impact customers. What we do know is the first and second quarter earnings for leading US technology firms have been strong and they remain market leaders.
Some investors worry about markets at all-time highs, but history tells a different story:
- Since 1926, the US market has been at a record high 31% of the time^.
- 12-month returns after a record high are often better than average^.
High valuations don’t mean markets can’t keep moving forward. They’ve done it countless times before.
Diversification is key
Diversification is always an important tool in any market, but particularly now. The spread above government bonds may not look particularly attractive, given the extra risk you are taking investing in corporate and high yield bonds – but the all-in yield is still attractive.
AI-fuelled US tech continues to be the leader in equity markets, but others like Europe and Japan have also had strong years thus far. There are pockets of value to be found in the equities market, notably healthcare as a theme, as well as the UK mid and small-cap sectors. China has also had a strong recovery in the past 12 months – albeit from a very low level.
The lesson from 2025?
Staying invested matters. Markets are unpredictable but resilient. If you had held £100 in cash from 2014 to 2024, inflation would have eroded over 25% of your purchasing power^^. Meanwhile, investors who stayed in the market saw their portfolios recover and grow.
Markets, like weather, can change quickly. Dark clouds may gather, but the sun often returns. The trick is patience, diversification, and a focus on long-term goals. As 2025 progresses, focus on balance. Maintain diversified portfolios across regions and sectors. And stay invested, even when headlines are scary.
Tariffs, politics, and global uncertainty will continue to create noise, but it’s important to remember that markets have a long track record of adapting and bouncing back. Investors who embrace volatility with patience are likely to be well-positioned for the years ahead.
Markets may surprise us, but history shows they also recover – often stronger than we expect.
