GSB Quarterly Market Update – Q3 2025
Written by GSB
In Q3 2025, global equities advanced strongly as moderating inflation, resilient growth, and the Federal Reserve’s first rate cut since 2020 reinforced the soft-landing narrative. The S&P 500 and Nasdaq hit record highs, driven by AI-related optimism and firm consumer demand, while market breadth improved across mid-caps and value names.
Europe and the UK also posted gains, supported by solid financial earnings, easing policy from the BoE, and stable inflation expectations. Japan delivered double-digit returns amid governance reforms and export strength, while emerging markets outperformed developed peers, led by rebounds in China, South Korea, and South Africa.
Value and small-cap equities participated in the upturn, supported by tighter credit spreads and renewed cyclical exposure. In fixed income, short-term bonds rallied as the Fed’s rate cut and moderating inflation lifted sentiment, though UK and German yields edged higher.
Overall, the quarter reflected a constructive backdrop for risk assets, supported by improving global liquidity, resilient earnings, and broadening participation across regions and sectors.
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- United States: S&P 500 and Nasdaq reached record highs, rising approximately 8% and 11%, driven by AI-related investment, resilient consumer spending, and the Fed’s first rate cut since 2020.
- Europe & UK: European and UK markets gained, with the FTSE 100 posting its strongest quarter since 2022. The BoE cut rates to 4.0%, while financials led the rally.
- Japan: TOPIX and Nikkei 225 both rose over 11% as governance reforms and export momentum strengthened.
- Emerging Markets: EM equities outperformed developed peers, led by China (+17%), South Korea (+38% YTD), and South Africa (+20% USD).
- Value & Small-Cap Equities: Global value and small caps rebounded as market leadership broadened beyond mega-cap names.
- Short-Term Bonds: U.S. Treasuries rallied following the Fed’s rate cut, while credit spreads tightened to multi-decade lows.
In this quarterly market update, the financial events of the first quarter are discussed as insights into what investors experienced.
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