November 2025
Market Commentary
Diversification Delivers
(4 min read)
5th November 2025
Markets have delivered positive returns so far this year despite numerous uncertainties. Big UK and US companies have led most of the gains, while alternatives have added steady support and gold has been the star performer. We explore how clients’ portfolios have fared.
Observations on Year-to-Date 2025 Returns
Financial markets have had a positive outturn so far this year and, one could argue, in the face of numerous uncertainties. The chart below plots the return for UK equities, global equities, global bonds, and a proxy for alternative investments. All asset classes have produced a positive return.
Equities, particularly in the UK, have enjoyed strong performance although accompanied with some significant volatility earlier in the year while alternatives and bonds have produced cash and inflation plus returns with a smoother trajectory offsetting some that equity volatility.
Chart: UK equities, global equities, global bonds, and proxy for alternative investments
January - November 2025
Source: fefundinfo.com
Our client portfolios have produced on average low double digit returns reflecting the chart above, adjusted for our asset allocation and client risk tolerance. To see our Montgomery Portfolio Service returns visit our Investor Information page to download the latest Factsheet.
However, digging below the surface it has been interesting to see the dispersion of returns within the different asset classes. The returns in the UK have been dominated by large companies, particularly financials, industrials, and defence. The small and mid-cap area of the market has lagged as policy uncertainty has steered investors away from exposure to the domestic economy.
Our portfolios have been overweight the UK and, while this has been a positive, we have had exposure to the lagging smaller and medium sized companies. Similar dispersion of returns can be seen in global equities which have been focused on US mega cap technology stocks particularly those involved in AI - for context our US exposure is currently 25% for a Moderate risk portfolio. We have benefited from this sector but equally our exposure to global small cap, insurance (which was the top performer in 2024) and our weighting to value and income has lagged during a very narrow performance of the overall market.
Away from equities, our alternatives exposure to long/short equity funds which have a neutral directional risk to the market, have performed as we would have expected producing smooth “cash plus” returns with low volatility. The star performer has been gold which we have held to plug the uncertainty hole against a background of potential policy errors by governments and central banks. In addition, while slightly underweight fixed income, our exposure has been focused on shorter dated corporate bonds, where balance sheets are strong, and have outperformed UK gilts by some margin as fiscal and monetary policy uncertainties prevail.
What does this mean for client portfolios?
While we have not captured all the upside of the magnificent 7 – the US mega cap stocks – diversification across and within asset classes has produced positive risk adjusted returns. Talk of market bubbles may well be justified in the technology and AI space (time will tell although the long-term theme remains very much in place in our view) but there are plenty of areas of the market not covered in the headlines which are not overstretched on a historical basis.
Diversification remains key in an investment environment that faces multiple macro and policy challenges, while also presenting numerous sector-specific opportunities.
Peter Geikie-Cobb | Head of Investment Research
Montgomery Associates
Glossary
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Risk warning
This article and other articles on www.MontgomeryAssociates.co.uk does not constitute an offer or invitation in respect of investments described, nor should it be interpreted as advice or a recommendation. You should contact your financial adviser or accountant for advice relating to your circumstances. The opinions and information in this article have been prepared from sources believed to be reliable at the time and are given in good faith. The information and opinions expressed in this document represent our views at the time of preparation and may be subject to change. The value of an investment and any income from it can fall as well as rise and you may not get back the amount you originally invested.
Past performance is not a guide to future performance.
