I think its fair to say portfolio managers are positive heading into next year

Whilst writing this blog, watching Australia bat getting over 300, let’s hope the English batsmen can keep the series alive. Santa’s reliable stock market rally appears to be fizzling out, maybe saving something for next year. Yesterday, we had the employment, or should I say unemployment, data from the UK and the US. Both reported that the unemployment rate had risen. First, in the UK, the unemployment rate rose to 5.1% a four-year high in the three months to October. The latest UK inflation data, out this morning, provided some better news, with the headline rate falling to 3.2% in November. Not sure it will take the Bank of England too long to decide to cut rates by at least 25 basis points tomorrow; 50 is still unlikely.

Not sure if any of that comes as a great surprise. What is a surprise, considering the mixed economic data at present, is sterling’s recent resilience against not only the USD but also the euro. The pound is trading at 1.34 to the dollar, close to its highs earlier this year.

There was some other good news for the UK economy this week. December’s Flash PMI indicated faster economic growth, as the Composite PMI rose to 52.1 (up from 51.2 in Nov), driven by a rebound in orders and services activity.

As for the US, the unemployment rate climbed to 4.6%, the data indicating one of the weakest American labour markets in years. One analyst pointed out that the weak jobs report was mainly due to a big drop in government jobs, not the federal shutdown, but to the Trump Administration’s efforts to trim government jobs, which resulted in “deferred resignations” that finalised in October, which may have been why there was little reaction from capital markets.

I think that’s where I will leave it for 2025, as we look forward to another eventful year ahead. What I might leave you with is the latest findings from the Merrill Lynch Fund Manager Survey, to give you some idea of where sentiment lies as we head into 2026. Cash levels are at multi-year lows, inflation expectations have been falling, large-cap stocks will likely outperform small-cap stocks, and only a small percentage believes value will outpace growth.  Apparently, global growth expectations are the most optimistic since 2021, and liquidity conditions are favourable. The survey’s broadest measure of sentiment is at its highest level in 4 years. Allocation to cyclical assets, stocks and commodities is highest in 3 years, and equity allocation is highest in a year. Big underweights are energy and consumer staples. December’s sector allocation saw a rotation away from value to growth. I think it’s fair to say that fund managers participating in the final survey of the year are bullish coming into 2026. Happy Christmas and all the best for 2026.