Markets: Quarterly review Q3-2025:

Most global markets posted good gains through Q3-25 despite the volatility. Global Tech and AI-related sectors outperformed on the back of a weakening USD and 25bps Fed rate-cut. We saw gold and silver reach record highs on the back of Central Banks diversifying their capital and currency reserves. Emerging markets, digital assets and commodities also performed well as global investors rebalanced and diversified their risk profiles as uncertainty over US and ‘Western’ trade and fiscal policies persisted. Global corporate earnings remained stronger than otherwise anticipated as companies accelerated their reconfigurations of supply chains in their efforts to reduce their dependence on US consumer demand and China’s supply. Elevated stock valuations, persistent inflation and ongoing geopolitical tensions do continue to represent challenges for markets going into Q4-25.

US equity markets delivered strong gains for Q3-25 with both the S&P500 and Nasdaq hitting record highs on the back of a 0.25% rate cut in September; expectations for additional cuts before year end; robust corporate earnings; Q2-25’s revised +3.8% GDP; and steady consumer demand. These positive economic indicators helped drive investor optimism despite elevated inflation risks; the yet-to-be-felt tariff impacts; a weakening labour market; fiscal and monetary policy frictions; the accelerating debt-load; and the impending Government shutdown.

The Eurozone delivered a positive Q3-25 as healthcare and financials outperformed on the back of robust corporate earnings. Spain, Italy and Germany saw their service sectors expand through the quarter whereas France’s economy remained tepid as their political turmoil continued after another PM was forced to resign after failing to secure Parliamentary support for his proposed budget cuts and tax increases. We saw EU new export orders decline for the 28th consecutive month thereby underscoring the competitive challenges globally that the economic union continues to face. The EU’s trade deal with Trump also appears now to be under threat as Trump seeks to undermine and erode parts of that ‘deal’ with additional demands. Inflation across the Eurozone was declared by the ECB as manageable upon reaching the 2%pa target in August.

UK markets outperformed in Q3-25 on the back of a weaker GBP; led by tech, communications, precious metals, materials; and new IPO’s. UK inflation remained elevated at 3.8% in August. The BoE dropped rates by 0.25% to 4.0% in August, and in September announced that it would slow its QT programme, aimed at reducing bond yields and borrowing costs for the public debt-load which reached 96.4% of GDP in August.

Japanese equity markets had a strong Q3-25 with the TOPIX and Nikkei225 each delivering +11% on the back of expected US rate cuts, a weaker Yen (YTD -7%), and robust corporate earnings as ongoing governance reforms begin delivering improved performance. AI-related tech, energy and metals outperformed as investor sentiment and risk-appetite rose on the anticipation of domestic political leadership changes. The Yen continued to decline against the USD on the back of tariff threats despite increased USD inward investment, and assisting Japanese exporters.

We saw most Asian and Emerging Markets deliver strong gains through Q3-25 on the back of a weakening USD; the 0.25% Fed rate cut; some progress for US-China trade talks; and the accelerating global supply-chain diversification efforts. China outperformed on increased capital in-flows into domestic tech development as global investors rebalanced and diversified market positions despite geopolitical risks remaining front and center. South Africa outperformed on the back of precious metals strength. Egypt and Peru also delivered a strong quarter on the back of a weaker USD. Taiwan and South Korea were positive on the back of tech and AI-related demand despite risks from ongoing trade talks with the US. Brazil was positive despite political pressures from Trump. Poland, Malaysia and UAE also had a positive quarter whereas Indonesia and The Philippines were negative in USD terms as economic and political uncertainties persisted. Indian equity markets continued to suffer from Trumps’ trade-war impact along with declining sentiment after the imposition of 100% tariffs on Pharmaceuticals exported to the US.

We saw a mixed quarter for global bond markets with US Treasury yields moving lower whereas UK, German and Japanese yields moved higher. US bond investors moved toward shorter-dated debt on the back of expected Fed rate cuts and concerns over Fed independence as Trump expanded his attacks on certain FOMC members. September data pointing to a weakening labour market, inflation risks, and the as-yet unknown tariff impacts helped to broaden investor appetite toward medium term dated bonds thereby reversing the yield trend seen in July and August. EU bond market yields broadly moved higher after the US-EU trade deal was made (15% baseline tariff on most EU imports by the US), and Germany announced its intention to increase infrastructure and defence spending while indicating that much of those expenditures would benefit domestic and Eurozone economies. Markets do not expect the ECB to lower rates any further unless negative economic data accelerates in the near-term. France saw its Sovereign rating downgraded to A+ from AA- as political fragmentation and its weak fiscal record became more evident, thereby increasing its debt servicing costs. UK Gilt yields rose to reflect added risks as its fiscal position continued to deteriorate with net public borrowing YTD already 11.4B GBP higher than projected in March by the OBR. The BoJ continued to hold rates at 0.5% despite political pressure to increase public spending and with inflation well above the 2%pa target. US, EU, and UK corporate and HY debt performed well through Q3-25 on the back of robust corporate earnings and consumption, recent central bank rate cuts, and expectations for further Fed rate cuts into 2026.

Global commodities generally were positive for the quarter. Gold and silver delivered significant gains on the back of market risks and central bank buying. Energy markets were flat for the quarter.

Digital assets generally posted modest gains for the quarter on the back of improved institutional adoption and positive investor risk appetite. Ethereum surged +67% on the back of innovative product offerings for stablecoin and tokenization once the US Genius Act was passed in August. Bitcoin +7% reached a record high in August.

Andy Blandford