Q3 2025 Market Commentary
The following market commentary provides context for the investment performance of your charitable assets.
From Cambridge Associates, investment advisor
Global stocks (7.6% for the MSCI All Country World Index) advanced as investors looked past peak tariff uncertainty, focusing on resilient economic activity and earnings growth, ongoing artificial intelligence (AI) developments, and a resumption of Federal Reserve rate cuts. These factors contributed to outperformance by emerging markets (EM)—particularly within the Asia region—and small caps. US Treasury yields declined, as softening in the US labor market catalyzed the Fed to ease policy. Globally, corporate credit spreads tightened further to near historical lows. The US dollar appreciated but lost momentum as the quarter progressed due to expectations for Fed rate cuts, escalating pressure to Fed independence, and a looming US government shutdown.
US equities (8.0% for the MSCI US Index) topped developed markets (DM) ex US peers (5.3% for the MSCI World ex US Index). Tech-heavy sectors, including information technology (13.2%), communication services (12.4%), and consumer discretionary (9.0%) led performance, propelled by optimism over AI. As such, growth topped value by nearly 600 basis points (bps). Strong earnings results and resilient economic data, underpinned by strong consumer spending, also fueled US equity performance.
Stock performance outside the US was mixed. Canada (9.7%) and Japan (8.0%) stood out, helped by strong company earnings, rising gold prices, and positive trade developments. Europe lagged (3.0%) due to political uncertainty in France and weaker economic data in Germany and Switzerland. The UK (5.9%) and the Pacific region outside Japan (5.3%) also underperformed, with gains in Hong Kong and Singapore offset by weaker results in Australia and New Zealand.
Emerging markets delivered strong returns (10.6%), led by China, Taiwan, and Korea, which benefited from improved US relations and increased investment in artificial intelligence. India was the main exception, declining due to new US tariffs and less foreign investment. Latin America also performed well, with Mexico and Brazil posting solid gains.
US fixed income performance (2.0% for the Bloomberg US Aggregate Bond Index) was supported by a decline in US Treasury yields as the Fed cut rates due to signs of softness in the labor market. Yields fell the most for shorter-term maturities, whereas the long end of the curve remained relatively anchored. US corporate bond spreads narrowed further, supporting strong returns for investment-grade (2.6%) and high-yield (2.1%) bonds. Investment-grade spreads reached their lowest levels since 1998, reflecting solid company fundamentals and stable economic growth.
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