US and UK stock markets have defied predictions of decline in the first half of the year, with the S&P 500 index rising 9% and the FTSE 100 index increasing by 7%, according to recent financial analyses. This performance stands in contrast to expectations that geopolitical tensions, including a Middle East conflict and concerns over oil prices, would negatively impact investor portfolios.
Government bonds, often considered a safer investment, have yielded disappointing returns. US ten-year Treasury notes saw their yield increase from 4.2% to 4.5% in January, while UK ten-year gilts rose from 4.5% to 4.8%. These yield increases translate to investment losses of approximately 1-2%, accounting for received interest, as bond prices move inversely to yields.
The resilience of equity markets is attributed to a combination of factors. For the US, the market benefits from the potential for technology-driven growth and the solid profits reported by established corporations. The UK market, while also showing profit growth from its quoted companies, is characterized by its status as a relative bargain.
Financial professionals in New York maintain a bullish outlook for the second half of the year, with major institutions like Morgan Stanley and Goldman Sachs forecasting the S&P 500 to reach 8,000 by year-end, up from its current level of approximately 7,500. In London, the outlook is more cautious, with UBS predicting the FTSE 100 to reach 11,000, a modest increase from its current position and near its February peak.
Overall, investment managers do not appear to assign a high probability to a significant market crash this year. The prevailing sentiment suggests that while the equity bull market is mature, the catalysts for its end have not yet materialized. The recent annual Global Wealth Report from UBS highlighted that stock market gains in 2025 contributed to the creation of nearly a million new dollar millionaires and an 11% rise in global personal wealth. However, the report also noted a significant decline in wealth for the United Kingdom when adjusted for inflation, largely due to housing assets not keeping pace with rising prices since 2020.
Inflation remains a primary concern for individuals seeking to build wealth. While market crashes are an inevitable part of investing, the long-term prospect for global equities is positive real returns. Compounding interest, sustained saving, and reinvestment are key strategies for building wealth over time. Additionally, the report touches on the impact of taxation on investment gains, particularly when those gains merely compensate for inflation rather than representing real increases in wealth.