2025 wasn’t without its turbulence, but it was a strong year for financial markets, though other economic readings were more varied.
In Q4, global markets continued to grow, rounding off a standout year for returns. Inflation eased back toward target levels in several regions, though it remains elevated in many.
Here’s a closer look at how key markets performed in the fourth quarter of 2025.
UK
The UK experienced a mixed end to the year. Economic growth slowed, but markets performed well and inflation eased.
Data from Trading Economics shows that the UK economy expanded by just 0.1% in Q3 2025, slowing from 0.3% growth in the previous quarter. This marked the weakest growth since the end of 2023 and was driven largely by a slowdown in the production sector.
Meanwhile, the latest figures from the Office for National Statistics indicate that inflation rose by 3.2% in the year to November 2025, down from 3.6% in October and its lowest level in eight months. Food, drink, and tobacco made the largest downward contributions.
With inflation gradually easing, the Bank of England cut the base rate to 3.75% at its December meeting and signalled the possibility of further cuts in 2026, provided inflation continues to fall.
JP Morgan’s market review shows that UK equities performed strongly in Q4 2025, with the FTSE All-Share rising 6.4%. Overall, it was a standout year for the index, which gained 24% across 2025 and saw its strongest annual performance on record.
Europe
Europe saw a relatively stable performance at the close of 2025, though the markets lagged behind most other peers across the year.
Figures from Trading Economics show that the Eurozone inflation rate stood at 2.1% in November 2025, unchanged from October. Among the major economies, inflation was lowest in France and Italy, with readings of 0.8% and 1.1%, respectively. Higher rates were recorded in Germany and Spain, where inflation reached 2.6% and 3.2%.
Further data indicates that GDP growth in the Eurozone for Q3 2025 was 0.3%, above the previous quarter’s 0.1%.
JP Morgan’s review shows that the MSCI Europe ex-UK Index rose 5.9% in Q4 2025. While it was the second-weakest-performing index over the year, it still delivered a solid annual gain of 20.1%.
US
The US had a varied end to the year. The economy posted strong growth, while financial markets underperformed in Q4 and over the year, though they still delivered solid returns.
Data from Trading Economics shows that the annual inflation rate in the US fell to 2.7% in December 2025, its lowest level since July and below the 3% reading recorded in September.
Despite inflation remaining above target, the Federal Reserve cut its policy rate to a range of 3.5% – 3.75% at its December meeting, the lowest level since 2022.
Quarterly data indicates that the US economy grew by 4.3% in Q3 2025, marking its strongest growth in two years and up from 3.8% in Q2. The increase was driven primarily by stronger consumer spending, higher exports, and increased government expenditure.
JP Morgan reports that the S&P 500 rose 2.7% in Q4 and was the weakest-performing index in 2025, with returns of 17.9%.
Asia
Asian markets were the year’s standout performers and the latest inflation readings were also positive for the region.
JP Morgan’s quarterly review shows that Japan’s TOPIX index was the best-performing major market in Q4 2025, rising 8.8%. It also delivered a strong annual return of 25.5%.
The MSCI Asia ex-Japan Index also performed well over the year, gaining 33%, with a further 4.3% increase in Q4.
Meanwhile, Trading Economics reports that Japan’s inflation rate edged down to 2.9% in November 2025 from October’s three-month high of 3%.
Further data shows that China’s inflation rate rose to 0.7% in November 2025 from 0.2% in the previous month, marking the highest level since February 2024.
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