Here are five reasons why UK investors can feel a bit more jolly this Christmas.
- The Budget didn’t rock the boat
After weeks of warnings and guesswork, the Budget arrived… and nothing broke.
That’s good news.
The government didn’t tackle some of the big long-term challenges facing the UK economy, but equally, it avoided any shock measures that might have unsettled markets or pushed inflation back up.
For investors, this sense of stability is valuable. Markets prefer a quiet backdrop to a noisy one, especially going into year-end.
- Bond markets are calm and that supports UK equities
You may not follow gilt yields (UK government bond rates), but they matter.
Why? Because when they move sharply, they can cause turbulence across the entire stock market.
Since the Budget, gilt yields have actually fallen. That’s a strong sign that investors are comfortable with the UK’s financial position.
A calmer bond market makes it easier for stock markets to perform well, and it can help rekindle interest from overseas investors who have been sitting on the sidelines for some time. If this trend continues, it could be a turning point for the UK market.
- Lower inflation ahead and possible rate cuts in 2025
The Budget wasn’t designed to heat up the economy, which means it shouldn’t add to inflation.
In fact, one measure – the removal of certain energy bill levies – should help bring inflation down in the short term.
Markets currently expect the Bank of England (BoE) to cut interest rates gradually over the next year or so. Nothing in the Budget changes that direction of travel. Lower inflation and gently falling interest rates would both be positive for consumers and businesses.
It’s not a Christmas miracle, but it’s progress.
- A positive market reaction
Financial markets tend to vote with their feet, and their immediate reaction to the Budget was, surprisingly, upbeat:
- Major UK stock indices rose
- The pound strengthened slightly
- UK government bond yields fell
This tells us one thing: investors were relieved.
Even on the high street, signs of improved sentiment are emerging. One major pub operator reported that Christmas bookings jumped the weekend after the Budget. As they put it, “The consumer is relieved and now just want to have a nice Christmas.”
We’ll happily toast to that.
- Fewer surprises for UK companies
From the perspective of The Henderson Smaller Companies Investment Trust, the Budget didn’t deliver many windfalls. But it also avoided the big risks that could’ve hurt company earnings.
A few examples:
Some tax changes won’t kick in until 2029, giving savers and providers time to adjust.
Increased defence spending was confirmed – good news for companies supplying the sector.
Large UK employers, such as pub chains, will face higher wage costs. But this increase was widely expected.
In short, the Budget provided clarity without disruption, which companies and investors tend to appreciate.
In summary: A good dose of festive stability
A month on from the Budget, our view is simple: while it didn’t solve the UK’s biggest economic challenges, it did bring a calmer backdrop for investors.
With gilt markets steady, inflation easing, and interest rate cuts still on the horizon, there’s a sense that 2026 may offer more reasons to be hopeful – especially for UK smaller companies, where many valuations remain compelling.
For now, though, we’re embracing the mood of the nation: relieved, cautiously optimistic, and ready for a well-earned Christmas break.
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