Market Update: Third Quarter 2025 - Global Markets Find Their Footing Amid Signs of Recovery
The third quarter of 2025 delivered encouraging results for investors, with most major markets and asset classes showing positive performance. Confidence returned as trade tensions eased, the artificial intelligence (AI) sector continued to thrive, and expectations grew for interest rate cuts in the US.
A Strong September to End the Quarter
September rounded off the quarter on a high note, with all major asset classes posting gains. Emerging markets led the way, particularly China, while the US, Japan, UK and wider Europe also delivered healthy returns.
What’s Been Driving Markets
- UK equities: Value stocks (companies trading below their perceived worth) outperformed growth stocks, and smaller UK companies enjoyed a rebound, something not mirrored elsewhere. The materials sector, which includes mining and industrial firms, also showed strength.
- US and Europe: Technology remained the key driver, with the Information Technology sector continuing to lead the pack.
- Bonds and fixed income: Every major bond category delivered positive results. Emerging Market Debt and Global High Yield bonds were top performers, while in the UK, Index-Linked Bonds (those that rise with inflation) outpaced other bond types.
Economic Picture by Region
United States:
The US economy is shifting from concerns about inflation toward slower growth. Job creation has eased, and in September the Federal Reserve cut interest rates by 0.25%, aiming to support growth even as inflation pressures linger.
United Kingdom:
Despite ongoing domestic uncertainty, UK markets performed well. Large-cap companies benefited from overseas revenues, while small-cap and materials sectors began to recover from undervalued levels, helped by supportive government policies.
Europe:
Continental Europe lagged behind somewhat. Germany’s DAX index under-performed, pulling overall returns lower, but France’s CAC index gained ground thanks to improved political stability and business confidence.
Japan:
Japanese markets were buoyed by a weaker Yen, which boosted exports, and a new trade deal with the US reducing tariffs on Japanese goods, both supporting growth prospects.
The Standout: Emerging Markets
Emerging Markets were the clear winners this quarter, helped by strong demand in the AI and technology sectors and a weaker US dollar, which improved corporate earnings. Analysts are forecasting earnings growth of around 17% for 2025, highlighting the potential for ongoing strength in these regions.
In Summary
Overall, the third quarter of 2025 was a positive period for investors, showing that markets remain resilient despite mixed economic data. With central banks shifting towards a more supportive stance and AI-driven innovation continuing to fuel growth, investors who stay focused on long-term objectives, rather than reacting to short-term headlines, are well-placed to benefit from the opportunities ahead.
As ever, this article is intended to inform you of market movements and factors effecting the portfolio. We have already factored this in to our long term assumptions in your financial plans, however should you have any questions, please contact your adviser.
About
Aled Phillips
: Aled is a Fellow of the PFS, a Chartered Financial Planner, and a Chartered Fellow of the CISI.
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The contents of this article do not constitute financial advice in any way; if you have any concerns about your finances you should talk to your financial adviser. The value of your investments can go down as well as up.
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