03 Dec 2025
A year ago, our investment predictions for 2025 were that it would be dominated by a combination of Donald Trump on the one hand and global governments’ debt on the other. And so it proved.
Peering into the crystal ball towards 2026, we foresee that Donald Trump will still play a large role. Trump 2.0 is no longer a shock; however, in the first week of November 2026 the Congressional mid-term elections will be contested. All 435 seats in the House are up for grabs, as well as a third of those in the Senate by rotation. As 2025 closes, the Democrats are averaging a five-point lead in the polls and have just secured big mayoral wins in Virginia, New Jersey and most notably though a properly socialist candidate in New York. While Trump currently ‘enjoys’ a clean sweep of the White House, the House and the Senate, the Congressional margins are already narrow; if he loses either the House or the Senate or both, he will immediately be labelled a “lame duck” president. The likelihood is that his reaction will be more that of a bull being baited with a red rag; he will resort even more to rule by Presidential Decree for the remainder of his term, the outcome of which will lead to more testing of his legislative programme in the courts. Constitutionally, he cannot bypass Congress on anything that relates to the budget, government spending and taxation: he will therefore continue to push hard to ensure that his economic and fiscal reform package (his “One Big Beautiful Bill”) is fully completed in the next 12 months.
Government debt is no longer the elephant in the room; it is now the centre of attention. It is dominating the fiscal programme in the UK as Rachel Reeves struggles to balance her books while swearing to the sanctity of the fiscal rules she pledged to maintain on assuming office as Chancellor. It completely dominates French politics. It caused the US government to close down for 43 days, the longest period in federal history. If the symptoms are financial (reflected by volatile bond yields and government borrowing costs), the challenge is political.
Using the analogy of addiction, mounting debt fuelled by persistent deficits has been the financial narcotic; to be successfully weaned off it, first it is necessary for the addict to recognise there is a problem. We’re almost there. Coming up with a successful drying-out strategy is much more difficult when the thought of fiscal cold-turkey (tax rises and spending cuts) holds the prospect of political nightmares and the sweats. We are only just starting that part of the weaning-off stage. Investors’ reactions, particularly in fixed income, are likely to reflect the continuing tensions between the fiscal course being charted by governments, the monetary policy outlook of the central banks, and the need for investors to make money (which comes from a combination of the rate of interest, or yield, on the bond, and changes in the bond price; yields and prices move in opposite directions).
Our summary of past years is enduring. We might have seen elements of today’s conditions before, but none of us has ever seen them in their totality in our investment careers, however long they span. Opportunities are there to be taken, but new risks present themselves and must be managed or mitigated against. From an investment perspective, we believe it pays to be open-minded and adaptable rather than prescriptive and dogmatic. Aiming to keep up in the good times, trying to lose less in more challenging conditions, this is what we believe goes to the heart of compounding long-term wealth.
The value of active minds: independent thinking
A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
Fund specific risks
The NURS Key Investor Information Document, Supplementary Information Document and Scheme Particulars are available from Jupiter on request. The Jupiter Merlin Conservative Portfolio can invest more than 35% of its value in securities issued or guaranteed by an EEA state. The Jupiter Merlin Income, Jupiter Merlin Balanced and Jupiter Merlin Conservative Portfolios’ expenses are charged to capital, which can reduce the potential for capital growth.
Important information
This document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with a financial adviser, particularly if you are unsure whether an investment is suitable. Jupiter is unable to provide investment advice. Past performance is no guide to the future. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the authors at the time of writing are not necessarily those of Jupiter as a whole and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. For definitions please see the glossary at jupiteram.com. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given. Company examples are for illustrative purposes only and not a recommendation to buy or sell. Jupiter Unit Trust Managers Limited (JUTM) and Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ are authorised and regulated by the Financial Conduct Authority. No part of this document may be reproduced in any manner without the prior permission of JUTM or JAM.