Global equities rally strongly
Global equities delivered strong gains through Q3 2025 overlooking earlier uncertainty and volatility. The strong performance was particularly noticeable amongst the global technology companies associated with artificial intelligence (AI); Nvidia’s valuation exceeded $4 trillion. In addition to strong progress in US equities, Japan and many emerging markets also registered impressive gains.
The strong progress in global equities may be attributed in part to the ongoing excitement with regard to the potential for AI to transform our lives, as well as in many cases buoyant company earnings and relief following agreements by many countries regarding US trade tariffs. In addition, there has been a downward trend in respect of interest rates which provides upward support for equity valuations.
The US dollar which weakened significantly against many global currencies in the first half of the year stabilised during the third quarter of 2025 despite pressure from President Trump to accelerate the pace of US interest rate cuts.
Resilient global growth
The International Monetary Fund upgraded its global growth forecast to 3% for 2025 from 2.8% over the summer on the basis of an uptick in demand and improved financial conditions, as well as fiscal support in some economies.
Encouragingly, the weaker US dollar has enabled many emerging economies to rebound strongly. This is most welcome to see after emerging market weakness in general over the last decade.
Persistent uncertainty
The third-quarter 2025 has been characterised with ongoing worries about downside risks. Most notably concerns have centred around trade tensions sparked by US tariffs, geopolitical risks, policy uncertainty in many areas and some fragility with consumer and business confidence, as well as inflation appearing to be stubborn in some parts of the world.
This means that although global equity performance has overall been excellent over the last three months, many investors have found it difficult to have confidence in equity investments especially with regard to taking a longer term view.
Regional trends
Japanese equities continued their strong run with favourable valuations and increased focus from international investors. European equities were more of a mixed bag during the third quarter with sectors such as defence and infrastructure performing strongly with significant government spending, whilst other sectors saw more pedestrian growth reflecting weak economic growth across much of the Eurozone, especially France where the government collapsed amid budgetary uncertainty.
Asian and emerging markets generally performed very well during the third quarter lead by China which rebounded registering impressive gains. The Indian equity market was a notable laggard as a consequence of US trade tariffs and tighter restrictions on visas which impact Indian IT workers.
Bonds were volatile for much of the third quarter 2025, especially long dated bonds which are more sensitive to inflation and interest rate expectations, as well as supply and demand factors. The interest rate on longer dated bonds rose significantly reflecting concerns about future inflation and governments’ indebtedness and in some cases unwillingness to address budgetary imbalances. Yields on shorter dated bonds generally declined as Base rates trended lower.
Market Outlook – further progress anticipated whilst risks remain
There are reasons to be optimistic for the last three months of 2025 on the basis of improving economic momentum around the world, impressive corporate earnings in many sectors and supportive monetary policy changes with a downward trend in interest rates, especially in the US. Indeed, this week, Goldman Sachs has upgraded its view on global equities to overweight.
Lower volatility in US bond markets suggests that markets may be learning to live with a trade war. Of course, such optimism needs to be tempered with an acknowledgement that the geopolitical situation in the world remains unstable both in Europe and the Middle East.
In addition, the melt up in the valuation of many AI associated companies raises the risk of a bubble; just 10 companies now make up approximately 40% of the US S&P 500’s entire value and US stocks now trade on high price earnings ratios relative to history.
Finally, the level of government indebtedness in the US, much of Europe including the UK and Japan looks increasingly unsustainable in the future which has led to a record run for the gold price notching up its largest annual gain since 1979.
Portfolio positioning
As I wrote last quarter, we live in uncertain times. This means that maintaining a broadly diversified portfolio both geographically and by business sector is vital. To this end, whilst we continue to favour significant exposure to US equities on the basis of strong earnings and US exceptionalism, we believe it is important to avoid overexposure to the mega-caps which are currently priced to perfection.
Accordingly, we have significant exposure now to other parts of the world outside the US, particularly continental Europe, the UK as well as Asian and emerging markets. We see continued value in companies benefiting from government spending in continental Europe and the UK, such as in the defence and infrastructure sectors.
Continuing weakness in the US dollar is likely to act as a fillip for emerging markets, especially now some of the uncertainty with regard to US trade tariffs has reduced. In addition, the Chinese market offers many interesting opportunities, albeit a high level of volatility is anticipated with the risk of political interference as well as geopolitical factors.
In terms of bonds, our preference remains for short, dated bonds for security especially with uncertainty with regard to the future path of inflation and issuance, as well as changes by central banks in respect of quantitative tightening.
Overall, we are keeping an active watchful brief on markets, so as to continue benefiting from growth, whilst being ready to react quickly to any potential turning points, such as central-bank pivots, rebound in inflation, credit stress or other geopolitical developments.
Please note that the content on this page is based on our understanding and the available information; we cannot be held responsible for any errors, and you should not act on the basis of the information in these articles, nor do they constitute investment advice. Past performance is not necessarily an indication of future returns; the value of investments and any income from them is not guaranteed and can fall as well as rise. Overseas investments are affected by currency movements and exchange rates. If you would like investment advice on your individual circumstances, please do not hesitate to get in touch via telephone at 01392 875500 or email at info@SeabrookClark.co.uk.
Market Overview Quarter 3 2025 1 July – 30 September 2025 and Outlook
Matthew Clark
Global equities rally strongly
Global equities delivered strong gains through Q3 2025 overlooking earlier uncertainty and volatility. The strong performance was particularly noticeable amongst the global technology companies associated with artificial intelligence (AI); Nvidia’s valuation exceeded $4 trillion. In addition to strong progress in US equities, Japan and many emerging markets also registered impressive gains.
The strong progress in global equities may be attributed in part to the ongoing excitement with regard to the potential for AI to transform our lives, as well as in many cases buoyant company earnings and relief following agreements by many countries regarding US trade tariffs. In addition, there has been a downward trend in respect of interest rates which provides upward support for equity valuations.
The US dollar which weakened significantly against many global currencies in the first half of the year stabilised during the third quarter of 2025 despite pressure from President Trump to accelerate the pace of US interest rate cuts.
Resilient global growth
The International Monetary Fund upgraded its global growth forecast to 3% for 2025 from 2.8% over the summer on the basis of an uptick in demand and improved financial conditions, as well as fiscal support in some economies.
Encouragingly, the weaker US dollar has enabled many emerging economies to rebound strongly. This is most welcome to see after emerging market weakness in general over the last decade.
Persistent uncertainty
The third-quarter 2025 has been characterised with ongoing worries about downside risks. Most notably concerns have centred around trade tensions sparked by US tariffs, geopolitical risks, policy uncertainty in many areas and some fragility with consumer and business confidence, as well as inflation appearing to be stubborn in some parts of the world.
This means that although global equity performance has overall been excellent over the last three months, many investors have found it difficult to have confidence in equity investments especially with regard to taking a longer term view.
Regional trends
Japanese equities continued their strong run with favourable valuations and increased focus from international investors. European equities were more of a mixed bag during the third quarter with sectors such as defence and infrastructure performing strongly with significant government spending, whilst other sectors saw more pedestrian growth reflecting weak economic growth across much of the Eurozone, especially France where the government collapsed amid budgetary uncertainty.
Asian and emerging markets generally performed very well during the third quarter lead by China which rebounded registering impressive gains. The Indian equity market was a notable laggard as a consequence of US trade tariffs and tighter restrictions on visas which impact Indian IT workers.
Bonds were volatile for much of the third quarter 2025, especially long dated bonds which are more sensitive to inflation and interest rate expectations, as well as supply and demand factors. The interest rate on longer dated bonds rose significantly reflecting concerns about future inflation and governments’ indebtedness and in some cases unwillingness to address budgetary imbalances. Yields on shorter dated bonds generally declined as Base rates trended lower.
Market Outlook – further progress anticipated whilst risks remain
There are reasons to be optimistic for the last three months of 2025 on the basis of improving economic momentum around the world, impressive corporate earnings in many sectors and supportive monetary policy changes with a downward trend in interest rates, especially in the US. Indeed, this week, Goldman Sachs has upgraded its view on global equities to overweight.
Lower volatility in US bond markets suggests that markets may be learning to live with a trade war. Of course, such optimism needs to be tempered with an acknowledgement that the geopolitical situation in the world remains unstable both in Europe and the Middle East.
In addition, the melt up in the valuation of many AI associated companies raises the risk of a bubble; just 10 companies now make up approximately 40% of the US S&P 500’s entire value and US stocks now trade on high price earnings ratios relative to history.
Finally, the level of government indebtedness in the US, much of Europe including the UK and Japan looks increasingly unsustainable in the future which has led to a record run for the gold price notching up its largest annual gain since 1979.
Portfolio positioning
As I wrote last quarter, we live in uncertain times. This means that maintaining a broadly diversified portfolio both geographically and by business sector is vital. To this end, whilst we continue to favour significant exposure to US equities on the basis of strong earnings and US exceptionalism, we believe it is important to avoid overexposure to the mega-caps which are currently priced to perfection.
Accordingly, we have significant exposure now to other parts of the world outside the US, particularly continental Europe, the UK as well as Asian and emerging markets. We see continued value in companies benefiting from government spending in continental Europe and the UK, such as in the defence and infrastructure sectors.
Continuing weakness in the US dollar is likely to act as a fillip for emerging markets, especially now some of the uncertainty with regard to US trade tariffs has reduced. In addition, the Chinese market offers many interesting opportunities, albeit a high level of volatility is anticipated with the risk of political interference as well as geopolitical factors.
In terms of bonds, our preference remains for short, dated bonds for security especially with uncertainty with regard to the future path of inflation and issuance, as well as changes by central banks in respect of quantitative tightening.
Overall, we are keeping an active watchful brief on markets, so as to continue benefiting from growth, whilst being ready to react quickly to any potential turning points, such as central-bank pivots, rebound in inflation, credit stress or other geopolitical developments.
Please note that the content on this page is based on our understanding and the available information; we cannot be held responsible for any errors, and you should not act on the basis of the information in these articles, nor do they constitute investment advice. Past performance is not necessarily an indication of future returns; the value of investments and any income from them is not guaranteed and can fall as well as rise. Overseas investments are affected by currency movements and exchange rates. If you would like investment advice on your individual circumstances, please do not hesitate to get in touch via telephone at 01392 875500 or email at info@SeabrookClark.co.uk.
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