Market Update – June 2025
June has been heavily defined by geopolitics, with the Israel-Iran conflict fuelling volatility in the commodity markets. Closer to home, interest rates have been shifting in developed countries, and the UK Chancellor delivered an important spending review, which could signal tax rises later in the year. In China, stock markets demonstrated higher resilience and growth, buoyed by policy support.
UK policy
June surprised many people with a key Spending Review, delivered by Chancellor Reeves on 11 June 2025. It revealed important information about the government’s priorities over daily expenditure, with big investments also announced in transport, energy and net zero.
Core public services, including justice, education, local government and health, all received real-term increases to day-to-day spending.
However, cuts were announced for agriculture, aid, asylum spending and Whitehall admin budgets.
The government appears to be focusing on “national renewal” initiatives such as nuclear power, social housing and travel infrastructure.
However, concerns have been raised about how these spending commitments will be funded.
Tax hikes are now widely expected in the Autumn, although where these might arrive (and their extent) is widely debated.
The UK economy
In 2025, there have been some more encouraging signs in the UK economy. GDP grew by 0.7% in the first quarter (Q1) – the highest growth in a year. This follows zero growth in January, 0.5% expansion in February, and 0.2% in March.
Whilst this may suggest acceleration, there was a 0.3% contraction in April. In June 2025, UK growth was weak and debt was costly despite cuts to the base rate by the Bank of England over the last 12 months, eroding the Treasury’s headroom. Hence, the June Spending Review to try and right the ship.
Nonetheless, the rising consensus about the UK economy is this: there is not enough money to go around. The Chancellor has refused to rule out tax rises later in 2025, and fiscal headroom could be eroded further if the OBR (Office for Budget Responsibility) makes downgrades to UK trend productivity growth projections.
The Monetary Policy Committee (MPC) met on 18 June 2025, voting to hold the base rate at 4.25% by a majority of 6-3. The minority members want to cut to 4%, remarking on disinflation that has occurred over the last 2 years. However, the majority stressed taking a “gradual and careful approach to the further withdrawal of monetary policy restraint”.
The UK market
The day after the Spending Review, the FTSE rose to a record high of 8884.92 on 12 June as British stocks enjoyed an energy boost. However, the UK stock market exhibited a mixed performance overall in June, amidst global economic uncertainties and domestic challenges.
The FTSE 250 underperformed in June, despite the index’s overall positive performance this year. Here, the weather has played a key role in trading activity, with companies like Greggs taking a hit (who wants a sausage roll in extremely hot temperatures?).
Trade uncertainties and declining business confidence have also taken a toll on performance. Domestic investors are remaining largely cautious, with many choosing to sell rather than buy. By contrast, foreign investors are eyeing up the British market, attracted by low valuations.
A case in point is in the private equity market, where KKR recently acquired Spectris (maker of precision instruments and testing equipment) for £4.1 billion – a 96% premium. Indeed, so far this year, there have been numerous bids of over £100m for UK-listed companies.
The Global Outlook
The big item in the news for June was the escalating air-based conflict involving Iran, Israel and the US. Markets (particularly commodities) were jittery over what was happening and what may happen next. Following the preventive strike on Iran’s nuclear capabilities, many analysts were worried about a military response on US bases in the region.
So far, Iran’s retaliation has taken the form of 14 missiles fired upon a US airbase in Qatar. All were shot down except one (which missed). US President Trump has now called for peace. Oil prices rose, but not as high as some feared.
There were concerns that Iran might block the Strait of Hormuz (where 20% of global oil trade passes), but this has not transpired. Given the US’s high energy independence and China’s reliance on the Strait (one of Iran’s few “allies”), this move seems unlikely.
Global equity markets were remarkably resilient throughout these events. A steady recovery is underway in the US as investors settle in following the fallout of Trump’s tariff announcement. In late June, the S&P 500 even finished a $9.8 trillion round trip, closing just inches away from a record high.
China experienced a stronger June as its stock markets showed resilience and growth, buoyed by policy support, increased investor confidence, and a rebound in Hong Kong’s equity markets. The Shanghai Composite Index rose to 3,458 points by 1 July, marking a 2.85% increase over the month and a 15.37% gain year-on-year.
Please note:
The value of investments can go down as well as up, and you may not get back the amount originally invested. Past performance is not a reliable indicator of future results. Tax treatment depends on individual circumstances and may be subject to change. This content is provided for informational purposes only and does not constitute investment advice. Readers should seek independent financial advice before making any investment decisions.
