Weekly Market Update 10/01/2025
On Wednesday, the 10-year gilt yield rose 0.13 percentage points to 4.82%, the highest level since the 2008 financial crisis, as investors worried about the Labour government’s borrowing requirements and the looming threat of stagflation. Sterling hit its weakest level against the dollar since April 2024 at $1.234, and the FTSE250 fell 2%. However, it wasn’t just the UK experiencing a sell-off, government bond yields jumped in the US off the back of strong jobs and services data, indicating to investors that the Federal Reserve may only lower rates once this year. The 10-year Treasury yield reached 4.69%, the highest since April 2024.
The strong US dollar and rising bond yields have also impacted investor appetite for emerging market equities this week. EM suffered headwinds in the final quarter of last year off the back of Donald Trump’s election win, as investors contemplated how proposed tariffs and other policies would affect trade. The MSCI EM index, a measure of emerging market equities, dropped to a four-month low of 1,066.47, an over 10% drop from its near 20-month high seen in October.
In contrast to last week’s positive figures from Nationwide, this week Halifax has reported house prices dropped 0.2% in December, the first month on month contraction since March 2024. Despite the contraction, prices were still 3.3% higher than a year ago. Despite the divergence of short-term trends, the long-term picture has been similar, as both lenders reported a surge in prices during the pandemic, and a reduction over the last two years as borrowing costs have increased.
Andrea Wood, Chartered MCSI
Investment Manager
