Issue link: https://info.seic.com/i/1543185
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. Is All That Glitters Gold? Shifting global demand, geopolitical uncertainty, and the rollout of tariffs c o m b i n e d t o s h a p e a t u r b u l e n t commodity landscape in 2025. Why does it matter? Commodity markets saw pronounced volatility throughout the year. The introduction of President Trump's tariffs in April triggered ripple effects across supply chains, prompting widespread stockpiling, most notably in copper. Gold surged to successive record highs, reaffirming its role as a safe-haven asset amid persistent g e o p o l i t i c a l s h o c k s a n d m a r k e t uncertainty. Other precious metals, including silver, mirrored this upward trajectory. In contrast, oil prices declined as increased global output weighed on supply. What are SEI doing? W e m a i n t a i n c o m m o d i t i e s a s a strategic diversifier, recognising their role in hedging inflation and enhancing resilience during periods of market volatility. Our exposure is broad-based across various commodity segments, with allocations geared towards long- term risk and return objectives rather than short-term price swings. These are the views and opinions of SEI which are subject to change. They should not be construed as investment advice. 9