Global Markets
Note: All quoted equity performance figures are in GBP terms.
Global financial markets delivered strong overall performance in Q3 2025, supported by ongoing enthusiasm for Artificial Intelligence (AI) and technology, robust corporate earnings, anticipated Federal Reserve rate cuts and easing trade tensions. The MSCI World Index concluded the quarter with a gain of 9.2%, while gold and silver also surged to record highs.
US equities delivered strong gains in Q3, with the S&P 500 advancing 10.1% over the quarter and reaching new highs. As seen in the first half of the year, sector leadership was concentrated in technology and communication services, where firms such as Nvidia and AMD saw substantial capital inflows and valuation expansion amid growing enthusiasm for AI. In contrast, the energy sector underperformed the broader market as oil prices declined, following downward revisions to global demand forecasts. Towards the end of the quarter, the prospect of a government shutdown introduced some uncertainty, which weighed slightly on investor sentiment heading into Q4.
In the UK, the FTSE All-Share had a strong quarter with a return of 6.9%. Gains were supported by strength in the healthcare and defence sectors, with leading firms such as AstraZeneca and GSK contributing notably to performance. Basic materials were also among the top performing sectors, supported by rising gold prices. Sentiment towards the UK economy was mixed over the quarter as investors continued to highlight the challenges policymakers face in stimulating further growth and addressing fiscal pressures ahead of the November Budget.
Japanese equities outshone many developed markets in Q3, with the TOPIX Index rising 10.6%. Performance was underpinned by a depreciating yen, which bolstered export competitiveness, and a favourable trade agreement with the United States that reduced tariffs on Japanese goods to 15.0%.
Emerging markets led global equity performance, with China at the forefront, supported by a weaker US dollar and improving trade relations with the US. Taiwan and Korea also posted strong gains, driven by similar tailwinds and rising investment in AI and technology. Egypt, Peru, and South Africa added to the momentum, helping the MSCI EM Index outperform the MSCI World with a return of 12.6% over Q3.
Equity Styles
Growth stocks continued to outperform with the AI-driven tailwind, generating a return of 8.6% at the close of the quarter. Meanwhile, value stocks staged a meaningful recovery with a 6.0% positive return. Small cap equities performed well, but due to the strength of mega-cap technology names, large-cap growth equities remained dominant.
Inflation
In the UK, inflation held steady at 3.8% in August, prompting the Bank of England to implement a 25-basis point rate reduction. Similarly, the US Federal Reserve enacted its first rate cut of the year in September, reducing the federal funds rate by 25 basis points in response to lower-than expected inflation and signs of a weakening labour market. Eurozone inflation remained anchored at the European Central Bank’s (ECB) 2.0% target in August, and further easing is unlikely unless external shocks emerge.
Fixed Income
Note: All quoted fixed income performance figures are in GBP-hedged terms.
Fixed income markets delivered mixed results over the quarter. In the US, Treasuries delivered positive returns as yields declined (as a reminder, yields move inversely to price), particularly at the short end of the curve. Softer labour market data and unexpectedly mild inflation contributed to the Fed’s rate cut in September. Market pricing reflected expectations of further easing, with just under two additional rate cuts anticipated by year end.
The UK government bond market faced headwinds from persistent inflation, political uncertainty, and concerns over fiscal credibility. Yields on 30-year gilts briefly reached their highest level since 1998. Similarly, in Europe, yields ended the quarter higher as French government bonds came under pressure amid rising debt concerns. There was positive performance across eurozone and US investment grade bond markets, while global high yield bonds finished with a 4.3% return over Q3.
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