George Square Financial Management Market Commentary in Conjunction with Albemarle Street Partners

Swings and roundabouts

It has been a volatile yet fruitful year for investors. November encapsulated both qualities in a single month. What began as an orderly reassessment of artificial intelligence valuations briefly threatened to become something uglier. Bargain hunters and rate-cut optimism then combined to rescue markets from their mid-month lows.

The Federal Reserve's next move consumed much of November's attention. Chair Powell initially dampened expectations for a December cut, triggering volatility in risk assets. But dovish whispers from his colleagues soon restored confidence, and by month's end, traders were pricing near certainty of another quarter-point reduction. The longest government shutdown in American history had complicated matters, starving investors of data. When September's employment figures finally surfaced, they painted a picture of an economy cooling gently rather than cracking, precisely the outcome the Fed needed to justify continued easing.

The technology selloff in November was less about deteriorating fundamentals than a reassessment of risks. Nvidia reported another record quarter, yet even stellar numbers could not prevent profit-taking after two years of extraordinary gains. The Magnificent Seven showed signs of fracturing as Alphabet surged on enthusiasm for its new AI model while Microsoft and Oracle fell. Markets are finally learning to discriminate between AI winners and those merely riding the positive narrative.

Healthcare emerged as the unlikely beneficiary of technology's wobble. It posted its strongest month in years. The rotation was a reminder that bull markets need not rely on a single theme. Investors who maintained diversified exposures were rewarded for their patience. European equities quietly outperformed their American counterparts, extending a trend that has characterised much of 2025.

The pound rallied after Chancellor Reeves delivered an Autumn Budget with more fiscal headroom than expected, and gilt yields retreated modestly. Currency strength clipped returns from dollar-denominated assets. Markets remained somewhat sceptical of the budget's backend-loaded consolidation, but the immediate verdict was favourable enough to support UK assets.

As December begins, the fundamental case for equities remains intact. Corporate balance sheets are healthy, monetary policy is turning accommodative, and the earnings backdrop continues to broaden beyond technology. November's turbulence was uncomfortable, but it served as a reminder that diversification earns its place in portfolios not during the easy months, but precisely when conditions turn difficult.

Digesting the data – Budget Recap

£26 billion in new taxes. Chancellor Rachel Reeves unveiled one of the largest tax-raising packages in over a decade, with measures targeting workers, savers and investors. The tax burden is forecast to hit 38.3 percent of GDP — a post-war high.

£22 billion fiscal buffer. The Office for Budget Responsibility said the government now has more than double its previous headroom for meeting deficit-reduction targets, giving Reeves greater flexibility under her self-imposed fiscal rules.

Income tax thresholds frozen until 2031. By holding thresholds steady while wages rise, the government will drag millions more workers into higher tax bands — a so-called stealth tax expected to raise roughly £8 billion annually by decade's end.

Pension National Insurance (NI) relief curtailed. From 2029, salary-sacrifice pension contributions above £2,000 per year will lose their NI tax advantages. The OBR estimates this will raise £4.7 billion in its first full year, hitting higher earners and their employers hardest.

ISA allowance slashed by 40 percent. The annual tax-free limit for cash savings accounts will fall from £20,000 to £12,000 for under-65s starting in 2027 — part of a push to redirect savings toward British equities.

Council tax surcharge on expensive homes. Properties valued above £2 million will face an annual levy of £2,500, rising to £7,500 for homes worth more than £5 million. The measure affects fewer than 1 percent of properties.

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