The third quarter of 2025 delivered robust returns across global markets, underpinned by strong corporate earnings, growing optimism around artificial intelligence (AI), and the long awaited interest rate cut by the US Federal Reserve. Emerging markets also gained momentum, buoyed by a softer US dollar and renewed investor appetite for risk assets. Commodities rallied, with gold and silver both reaching record highs.
Global Equities
Equity markets worldwide posted notable advances through Q3, with both developed and emerging markets benefiting from improving sentiment and steady macroeconomic fundamentals. The technology and communication services sectors continued to lead gains as AI driven growth reshaped investor confidence. However, elevated valuations, persistent inflationary pressure, and ongoing geopolitical uncertainty remain key risks.
Corporates are continuing to diversify supply chains to reduce reliance on major economic blocs, particularly the US and China, as trade policy uncertainty persists. Despite these challenges, overall market resilience was a defining feature of the quarter.
Regional Highlights
United States
US markets performed strongly, with the S&P 500 and Nasdaq Composite reaching new highs. Optimism surrounding the Fed’s September rate cut, coupled with resilient GDP growth and solid consumer spending, fuelled investor confidence. Technology stocks led gains, while healthcare and energy lagged due to weaker oil prices. GDP growth for Q2 was revised up to an annualised 3.8%, reinforcing the strength of the economy despite concerns around government spending and potential political gridlock.
Eurozone
European equities advanced, led by the financial and healthcare sectors. Inflation moderated close to the European Central Bank’s 2% target, and economic sentiment improved as tariff concerns eased. Germany’s fiscal expansion and stable inflation supported growth, though political turbulence in France weighed on investor sentiment. The ECB is now widely expected to maintain rates, signalling the end of its easing cycle.
United Kingdom
The UK’s FTSE 100 had its strongest quarter since 2022, supported by a weaker pound, global growth, and renewed interest in technology and basic materials. Inflation stabilised around 3.8%, prompting the Bank of England to make its first rate cut since 2020, lowering the Bank Rate to 4.0%. The London Stock Exchange also witnessed a resurgence in IPO activity, a sign of returning market confidence.
Source: Dimensional Fund Advisers
Japan
Japanese equities posted double digit gains, driven by cyclical sectors and strong corporate earnings. Governance reforms, increased share buybacks, and dividend growth boosted investor confidence. Despite bouts of currency volatility and political uncertainty, Japan’s structural reforms and ongoing exposure to global AI trends continue to support equity performance.
Emerging Markets and Asia ex-Japan
Emerging markets outperformed developed peers, with the MSCI EM Index delivering double-digit returns. China, Taiwan, and Korea benefited from AI linked demand and easing US-China trade tensions. Markets such as Egypt and South Africa also performed strongly, supported by higher precious metal prices. Meanwhile, India and parts of ASEAN underperformed, constrained by tariff headwinds and softer domestic demand. Across Asia ex Japan, technology focused economies such as Korea and Taiwan dominated gains, supported by robust capital inflows and resilient export activity.
Fixed Income Markets
Global bond markets produced mixed results. US Treasury yields declined following the Fed’s rate cut, while yields in the UK, Germany, and Japan rose modestly. In the eurozone, investor optimism improved as tariff disputes eased and fiscal spending picked up, although French bonds underperformed amid political uncertainty.
Corporate credit markets strengthened globally, with investment-grade spreads tightening to multi-year lows. Demand for yield remained strong, supported by steady corporate earnings and healthy liquidity conditions. High yield markets also performed well, particularly in Europe and the US, reflecting growing confidence in corporate balance sheets.
Commodities and Digital Assets
Commodity markets saw divergent performance. Precious metals rallied, with gold and silver reaching new record highs, reflecting both safe haven demand and central bank accumulation. Energy markets were subdued, with oil prices moderating due to stable supply levels.
Digital assets staged a significant recovery. Bitcoin gained 7%, while Ethereum surged by 67% amid increasing institutional adoption and the passage of the GENIUS Act, which provided long-awaited regulatory clarity for stablecoins. The quarter marked a further step in the maturation of the digital asset space, positioning blockchain technology for broader institutional integration.
Conclusion:
Q3 2025 underscored the resilience of global financial markets despite geopolitical and economic headwinds. Investor sentiment improved as inflation moderated, AI driven innovation accelerated, and central banks adopted more accommodative stances. Looking ahead, markets may remain volatile as attention shifts to the pace of policy easing, corporate earnings sustainability, and the evolving global trade landscape.
For investors, a diversified and disciplined approach remains essential to capture opportunities while managing risks in an increasingly interconnected global economy.
As always, if you’d like to discuss how recent market developments affect your specific situation or financial goals, please do get in touch with your Abacus adviser.
Kind regards
The Abacus Investment Committee
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