Equity Markets
U.S. Equities
U.S. stocks extended their rally in Q3, led by technology and rebounding from prior trade-policy turbulence. Despite ongoing uncertainty from Washington, corporate earnings remained broadly upbeat. The S&P 500 (+8.1%), Nasdaq (+11.4%), and Dow (+5.7%) all finished higher as investors looked past policy noise. In September, the Federal Reserve delivered its first rate cut of the year, citing labor softness and moderating growth. The Bureau of Labor Statistics also revised U.S. job creation between April 2024 and March 2025 down by 911,000 positions, about 76,000 fewer per month, prompting the Fed to focus more on employment data. Going forward, monetary policy will hinge on whether labor weakness or sticky inflation dominates, making each jobs and inflation release a key market catalyst into year-end.
Foreign Equities
Eurozone equities (+4.4%) rose, led by financials and services, though they trailed the U.S. Spain, Italy, and Germany expanded, while France lagged amid political unrest. The ECB noted inflation pressures have eased, with risks now balanced. In the UK (+5.9%), equities had their best quarter in nearly two years, aided by a weaker pound and global resilience. After cutting rates by 25 bps in August, the Bank of England held steady in September and slowed quantitative tightening. Japan (+10.6%) hit record highs on strong corporate earnings and optimism. Emerging markets gained broadly, with the MSCI EM Index (+10.9%) outperforming the MSCI World (+7.4%). China (+19.7%) led on stimulus, while Taiwan and Korea benefited from AI momentum; Brazil lagged amid political uncertainty.
Fixed Income
US Treasuries
The bond market swung with shifting Fed expectations. After major downward revisions to job data, the Fed cut rates by 0.25% in September, pushing yields lower, especially at the short end, and driving Treasury gains. However, inflation data showing little improvement capped further yield declines. Political interference concerns added to volatility. Yields ultimately fell across the curve, with short-term rates dropping most, steepening the curve. The U.S. Treasury Bond Index rose +1.5% for the quarter.
Global Bonds
Performance was mixed. In Europe, optimism over growth pushed yields higher and suggested the ECB’s easing cycle may be over. UK yields also rose despite rate cuts due to fiscal worries. Japan’s yields climbed on inflation and pressure for fiscal spending. The Global Aggregate Bond Index fell -0.2%.
Corporate Credit
Corporate spreads tightened as tariff worries eased and earnings strengthened. Confidence in corporate balance sheets supported gains, with High Yield (+2.5%) outperforming Investment Grade (+2.0%).
Private Markets
Private equity deployment remained moderate amid valuation uncertainty, with subdued realizations. Credit spreads tightened, but refinancing risk and macro volatility kept sentiment cautious. Crypto benefited from investors seeking uncorrelated assets amid government shutdown fears. Looking to Q4, opportunities may arise in distressed credit and special situations, while sponsors pursue creative deal structures.