Market summary – Review of Q3 2025

US equities delivered strong returns and finished the quarter up by 10.1%. However, there were some wobbles over the quarter, particularly after the release of July's non-farm payrolls data. The main market drivers were technology and communication services, while healthcare and energy lagged. Overall, the US economy remained resilient, with solid GDP growth and steady consumer spending, though a late-quarter government shutdown created some uncertainty.

Europe was the weakest developed equity market over the quarter but still posted gains of 4.9%. Financials and healthcare led the way, while telecoms and communication services underperformed. German equities were weak due to subdued exports and political uncertainty, while France faced its own political and fiscal challenges. Elsewhere, while a major US-EU trade agreement averted a tariff war, corporate earnings remained weak.

UK equities performed well delivering a return of 6.9% over the quarter. Internationally-focused companies benefited from a weaker pound and resilient global demand. Technology and communication services led gains, while basic materials rallied on higher gold prices. Despite inflation remaining elevated, the Bank of England narrowly voted to cut rates. This, along with their announcement that they would slow quantitative tightening, supported market sentiment.

Emerging markets outperformed developed markets and delivered a return of 12.9%. China, with a return of 22.9% in the third quarter alone, Taiwan, and Korea led the way, driven by AI optimism, trade progress, and strong tech demand. Egypt, Peru, and South Africa also excelled, while Brazil lagged due to political uncertainty. India underperformed as it was impacted by US tariffs including the 100% tariff on drugs exported to the US, and weaker non-tech sectors.

Fixed income markets were mixed. US Treasuries were up 1.5% as the Fed cut rates and labour market data softened, while gilts fell by 0.8% on fiscal concerns and sticky inflation. Meanwhile, corporate bond markets performed well with global corporate bonds up 2.1% and sterling corporate bonds up 0.7%.