How did the AJ Bell funds perform in the first quarter of 2025?

Despite starting with significant political and geopolitical challenges, the first quarter turned out to be a strong period for parts of the market.

We caught up with James Flintoft, Head of Investment Solutions at AJ Bell, to discuss the outlook, key events that affected markets, and how the AJ Bell funds performed in the period.

How did markets perform in Q1, 2025?

There was a lot going on, particularly in the US with the new Trump administration coming in and lots of policy decisions including trade deals and tariffs.

While US markets had a difficult quarter, other parts of the world did well. For example, Chinese markets moved higher thanks to the emergence of AI competitors to challenge the US dominance. That took investors by surprise and led to a sell-off in the big tech stocks in US, including those that make up the Magnificent Seven collective.

Europe was in favour, particularly in Germany where fiscal spending came onto the agenda after the election. That was unthinkable just a couple of months earlier.

Fiscal spending in Germany is centred around infrastructure and defence spending, and many stocks in related sectors saw strong share price gains during the quarter. This positivity lifted European equities more broadly, because it's expected that a lot of that spending move will take place within the EU.

The UK had another good quarter as well, including a strong run by banking shares. In total, we saw unfashionable sectors come to the fore while the US fell by the wayside.

How did bond markets perform in Q1, 2025?

Bond markets started the year off thinking about inflation primarily as a driver. We then had data suggesting US economic conditions were weakening, which changed the narrative.

This might have been related to announcements coming out of the new administration, the uncertainty that has created for businesses, and how that has impacted sentiment. The potential weakness for growth this year impacted bond markets later in the quarter.

How did AJ Bell funds perform in the quarter?

We’re relatively pleased with how the AJ Bell funds have performed in what’s been a challenging market environment. We are diversified and not reliant on returns coming from particular names in the US.

AJ Bell income funds have done relatively well because they are biased away from some of the big tech names. Our exposure to the FTSE 100 has been positive as the UK index did well in the quarter.

On the flip side, the AJ Bell Responsible Screened Growth fund had a tricky quarter, because of some of its bias away from energy names in the UK which did well, for example.

What was the impact of portfolio changes in January?

We rotated into European equities, because we thought they looked cheap on valuation grounds. That proved successful and started to play out much quicker than we expected. It has been good for the portfolios. Aside from that, some of our positioning in bond markets has been good and bad.

Find the latest quarterly reports for each of the AJ Bell funds

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