David Wheildon / November 2025
She must find a way to pay down our debt levels however she has “promised” not to raise the major taxes, is unable to cut Public Spending due to the recent revolt by the Labour back benchers and she “cannot” dramatically widen the scope of the country’s borrowings. About the only positive outcome from Liz Truss and her time in power was the experience learned from the markets’ reaction to dubious borrowing proposals, Rachel will be wary of repeating the same mistakes. She therefore finds herself caught between a rock and a hard place with the financial winds blowing as cold as those on brokeback mountain! The outcome is likely to be a combination of minor alterations to all three areas – we are likely to see some taxes rise, there will be some (small) spending cuts or at least no increase in some areas and the borrowing rules will be altered and/or pushed to the absolute limit that the markets will accept. The bulk of the justification for all of these will be based on an expectation of economic growth and the higher tax take that will arise from this-only time will tell if this comes good.
An overall anticipated rise in market values
Despite the best efforts of the global politicians the investment returns through 2025 have, on the whole been pleasing, with higher risk portfolios producing double digit returns and lower risk portfolios’ returns comfortably exceeding the rate of inflation. As we move towards the end of the year and into 2026 we do anticipate an overall continued rise in market values but the increases will become patchier. In 2024 we had political uncertainty as over half of the world’s population voted for new Governments and this year we have seen a raft of economic policy changes. The dust is really settling on these changes and businesses are looking to “get on with their day jobs” in the new environment of tariffs etc.
The impact of AI
The current talking point is Artificial Intelligence (AI) and the impact it is having, and will have further, on all our lives. Looking commercially, AI has 3 levels of impact: task automation, enhancement of data processing and the generation of new areas of
commerce. This feels very like the late 1990s when the internet was just beginning to have an impact on our lives. At the time the internet
was seen as a disrupter which was going to save businesses money e.g. less paper usage, emails instead of letters, increased communication
etc but there was a question mark as to how the internet was going to help businesses make money. Twenty five years later we see businesses trading through the internet, selling advertising space and generally using it to generate growth and therefore profit as well as continued cost cutting. AI is likely to do the same even if we cannot yet predict precisely how. In the immediate term the rate of investment in AI is phenomenal with billions of dollars being allocated to this-not just to the super intelligent computer chips but also to
the infrastructure required in which to house the computers. One company’s investment in AI is another company’s source of revenue and we are already seeing the money flow through other areas such as construction and manufacturing.
Talk of the AI bubble bursting
Inevitably, with a good run of performance through 2025 and the presence of a “gold rush” scenario in AI there is talk of the “bubble bursting”. We certainly see more volatility in the coming months as Central Governments continue to balance the desire to bring inflation down against ensuring that their economies do actually grow. However even if there is a correction (fund manager speak for fall) in markets we do not see this being long lived and with strong returns already in the bank this year we should be able to ride out any correction without too much concern. With any talk of a potential drop in markets there is sometimes a thought to come out completely, wait for the drop, then buy back in again. As there has never been an obvious and specific warning of either the drop or the bounce back, time has proven again and again that the best solution is to maintain a broadly based and diversified portfolio, take strategic decisions for the medium term and ride out the bumps along the way.
I cannot finish without wishing you a good end to the year and without wanting to tempt fate, one I believe we will look back in with contentment when the year’s final performance figures are available.
This article is the opinion of David Wheildon