Issue link: https://info.seic.com/i/1543183
Hot Topics. Markets That Have a Mind of Their Own The start of 2025 was clouded by uncertainty - renewed trade tensions, policy divergence, and stubborn inflation, geopolitical conflicts. Yet, resilience became the defining theme. Why does it matter? Despite all the noise, global equities delivered their third consecutive year of gains, with the S&P 500 posting positive returns across all sectors for the first time since the pandemic. While the uncertain backdrop in 2025 caused short-term swings, markets proved resilient, supported by strong earnings and easing policy measures. President Trump's tariff announcements caused volatility early in the year, but equities rebounded swiftly. The rally broadened beyond the "Magnificent Seven", with healthcare, financials, and emerging markets posting gains. What are SEI doing? We maintain a strong commitment to diversification across regions and market capitalisations, aiming for consistency through varied market conditions. Our approach blends strategic exposure to value, quality, and momentum factors, with a current tactical tilt towards value. Active management remains central, particularly given elevated concentration risks in U.S. markets. We continue to monitor key macro drivers such as trade policy and inflation trends, ensuring our long-term positioning is built for resilience across multiple scenarios. UK Markets Finding Their Footing UK investor sentiment strengthened into year-end, supported by easing inflation, Bank of England rate cuts, and a conservative Autumn Budget. Why does it matter? Multiple Bank of England rate cuts in 2025 marked a clear shift toward easier monetary conditions as inflation cooled during the year. The Autumn Budget's fiscally cautious rhetoric reinforced this stability, reassuring markets on economic outlook. This predictability supported UK assets: gilt yields eased, sterling stabilised, and the FTSE 100 reached record highs. Gains were led by defence stocks, and UK banks, which outpaced even US technology stocks over 2025. What are SEI doing? Diversification across geographies remains a cornerstone of our approach, with neutral UK exposure. This strategy mitigates the risk of adverse movements in any single market while allowing us to capture upside where conditions are favourable. In addition, inflation-linked instruments provide an effective hedge against Michael Allen Senior Portfolio Strategist at SEI shares his views on the topics that investors should look out for in the year to come. unexpected price pressures. We continually review regional allocations to ensure portfolios are positioned to deliver resilient outcomes across a variety of market scenarios. A dimmer dollar Shifting economic momentum, rising fiscal strains and changing interest rate expectations combined to push t h e U . S . d o l l a r l o w e r i n 2 0 2 5 , reshaping global market dynamics. Why does it matter? This year has been shaped by a noticeably weaker U.S. dollar. Slower U.S. growth, rising government debt, and growing expectations of future rate cuts have all put pressure on the currency. As a result, safe-haven assets like gold pushed to successive record highs, as global investors looked for stability during a period of ongoing geopolitical tension and uncertainty. What are SEI doing? We maintain a half-hedged approach across our equity portfolios, meaning we keep roughly half the currency exposure protected while the other half remains unhedged. This helps us take part in market gains but reduces the impact of sharp currency swings, especially a weakening dollar. These are the views and opinions of SEI which are subject to change. They should not be construed as investment advice. 9