Castlebay Monthly: July 2025

Callum Dunbar
5 days ago
5 min read

As we settle into what promises to be a sweltering summer across the UK and Europe, it's a perfect time to pause and reflect on the first half of the year. Just as this week's record temperatures caught many by surprise, the financial markets have served up their own share of unexpected twists and turns over the last six months.

In this month's newsletter, we've included our mid-year review to help you make sense of recent market events and the timeless lessons they reinforce. We have also included an interesting article from Simon Evan Cook of Downing Fund Managers, exploring the use of Global Tracker funds. Whether you're reading this in your garden with a cold drink or taking a break from the heat indoors, we hope you find these insights valuable as we head into the second half of what continues to be an eventful year.

Enjoy this month's edition of the Castlebay Monthly. As always, it is packed with interesting links. If you would like to add your children or other family members to this email distribution list, please drop us a line.

The Stock Markets

2025 Midyear Review

The halfway point of any year is a good time to pause, reflect and learn from what we’ve experienced. As we’ve often reminded you, studying the lessons from market history is essential preparation for future challenges.

The first half of 2025 reminded us of the timeless patterns of investing. The more we can internalise these patterns, the more confidently we can say when the next crisis arrives: “It’s never different this time.”

What’s Happened

The first half of 2025 demonstrated a return to normal market volatility. Following exceptional returns in 2023 and 2024, which were accompanied by unusually low volatility, markets reminded us that calm periods never last.

Adding to the generally positive backdrop at the start of the year, inflation (which had been a persistent concern over the last few years) started approaching target levels in most major economies. This removed one major source of uncertainty that had weighed on markets and investor sentiment.

However, geopolitical tensions continued to simmer, with new tensions between Israel and Iran adding to other ongoing conflicts. As history shows us, such geopolitical concerns are a constant feature of the investment landscape.

After reaching new highs in February, markets began to decline due to concerns about the valuations of technology companies. This decline accelerated on April 2nd, when President Trump announced sweeping tariff measures targeting virtually all trading partners. The market’s response was swift and severe. Some markets fell more than 20% from their previous highs, officially entering bear market territory. If you felt unsettled watching the daily news during those weeks, you weren’t alone.

Yet markets began recovering in late April as tariff policies were scaled back. Most global markets are now positive for the year, with many reaching new all-time highs. This is a remarkable turnaround, considering the negative sentiment just 10 weeks ago.

What We’ve Learned

What happened in 2025 was unique, but it reminded us of timeless investment truths. Three lessons stand out:

Markets often overreact to headlines.
The tariff announcement on “Liberation Day” sent markets into a tailspin, only for much of the policy to be scaled back within weeks. This reminded us that markets are composed of people, and people tend to react emotionally to alarming headlines. The initial panic, followed by swift recovery, showed how sentiment can swing wildly while the underlying fundamentals remain largely unchanged.
Market timing remains impossible.
The first half of 2025 demonstrated once again that the only way to earn the market’s full return has been to remain invested at all times. During the depths of the decline, many experts predicted further falls and advised caution. Yet the recovery began precisely when fear was at its peak. Did you feel tempted to make portfolio changes during those uncertain weeks? Those who tried to avoid the volatility not only locked in losses but also missed the subsequent recovery. It’s about ‘time in’ the markets not 'timing' the markets!
Volatility is a normal part of the investment journey. Make it your friend, not foe.
The correction, followed by a strong recovery, reminded us that volatility isn’t a bug in the system; it’s a feature. These temporary declines are precisely what allow long-term investors to earn superior returns. Instead of fearing volatility, mature investors understand it’s the price of admission for owning the great companies of the world.

Looking Ahead

As we enter the second half of 2025, we anticipate new challenges ahead. History shows us that the future remains a chain of constant surprises and we expect this pattern to continue.

The volatility of the first half reminds us that market corrections occur roughly once a year and investors should not be surprised when markets do what they have always done.

Whether it’s trade tensions, geopolitical problems, or something completely unexpected, we will face them with the same core beliefs that guided us through the first half: patience, discipline and focus on the long term. Remember, lifetime investment success comes from acting continuously on your plan, not from reacting to current events.

We understand that staying disciplined during volatile periods can be challenging. However, it’s a privilege to support you through these unavoidable challenges, knowing that every cycle you navigate successfully brings you closer to your long-term financial objectives..

Life is for Living

While we always encourage smart saving and financial prudence, enjoying the life you're working hard to build is just as important. That means making space for experiences, community and a little fun now and then!

Here’s a roundup of upcoming events that might pique your interest. Treat yourself because balance is key, and life is meant to be lived.

Last-minute weekend plans: Marti Pellow at Edinburgh Castle

A date for the diary: Women's Rugby World Cup 2025

Something for the coffee lovers: Bristol Coffee Festival

Read

End of Perpetual Motion? by Simon Evan-Cook [5 minutes]. Are we witnessing the demise of the everyone-does-nothing investment model?

The Real Currency Of Life [4 minutes]. How are you spending your attention?

The Joneses Aren't That Happy [3 minutes]. Finding contentment is probably a better goal than finding happiness.

The One Realisation That Can Change Everything About Your Finances [8 minutes]. The future we all want begins not with a raise or a windfall but with a decision.

A Picture is Worth a Thousand Words

The Castlebay Corner

Summer is in full swing, and the schools are breaking up for the holidays. We hope you enjoy some well-earned time off and safe travels for those heading for warmer climates, even with the heatwave we're currently experiencing. The Castlebay team is making the most of the holidays with upcoming trips from Norfolk to Biarritz and Corfu to Australia.

In other news, Castlebay has exciting things on the horizon. We are redesigning our website and refreshing the Castlebay image. You will be happy to know that we know our limits, with website design not being one of them, and have partnered with a local Glasgow-based creative agency.

We will keep you updated with our progress and hope to be going live within the next couple of months.

We hope that you enjoyed this month’s newsletter. Please let us know what you enjoyed, or write back with any of your own news.

As always, we're here for you.

See you next month,