(Download the full report HERE)

• Economy – Overall, GDP growth remains robust despite some signs of inflation risk and slower job growth
  • The Fed cut rates by 25 basis points in September, citing a clear negative trend in non-farm payrolls and signs that the job market is in a low-hire, low-fire stalemate.
  • Inflation has subsided from the pandemic induced spike but remains stubbornly above the Fed’s 2-3% target.
  • An accelerating economy coupled with the possibility for a reacceleration of inflation makes the path for further rate cuts unclear, while increased political pressure for lower rates adds to the uncertainty.

• Equity – A risk-on quarter drove stocks higher on the backs of solid earnings, AI, and expectations for lower rates
  • The S&P 500 was up +8.12% in Q3 as earnings growth amongst the Mag 7 helped power the index higher.
  • U.S. Small Cap stocks measured by the Russell 2000 surged +12.39% during the quarter, although much of the rally can be attributed to lower quality and non-profitable tech companies that benefitted from a speculative mood in markets.
  • International and Emerging Market stocks enjoyed another strong quarter, benefitted by a weaker U.S. Dollar. The MSCI EM Index was up +10.64% in Q3, helped by a strong quarter from Chinese equities.

• Fixed Income – Bonds benefit from lower rates and historically tight credit spreads
  • Investment grade credit spreads hit a multi-decade low, helping boost bond prices alongside lower rates.
  • The Bloomberg U.S. Agg Index rose +2.03% in Q3, while High Yield and longer-term credit outperformed.

• Risks/Other Considerations
  • A second surge in inflation would rhyme with history and could become a real risk as trade policy, strong economic growth, negative net immigration, and an easing Fed all provide tailwinds for higher prices. 
  • U.S. equity market valuations, especially related to Large Cap technology companies, remain at historical highs. Earnings have helped support the valuations, but a catalyst or reversal of the AI hype could mean a quick downturn in equity markets.

Download the full report HERE to see index returns and more:

• Market Index Review
• Q3 2025: Earnings & Rate Cut Hopes Drive Continued Upside
• Declining Volatility & Resurgent Earnings Power Market Rally  
• Current U.S. Equity Market Rally Rhymes With History  
• Revisions and Growth Estimates Provide Strong Backdrop  
• Magnificent Earnings, But Higher Capex & R&D  
• The Economic Impact of Artificial Intelligence  
• Small Caps Rally to New Highs, But Driven by Lower Quality 
• International: What Drove U.S. Outperformance Cycle  
• Federal Reserve Focus Shifting from Price Stability… 
• …to Focus on Slowing Growth 
• Federal Reserve Path Still Far From Clear  
• Credit Spreads Hit 27-Year Lows 
• Potential Risks 
• Appendix: Equity Market Valuations 
• Appendix: More on High vs. Low Quality 
• Appendix: Gold Prices Hit New All-Time Highs 

Sources:

• Morningstar
• ACG
• Federal Reserve
• Factset
• Hedgeye
• Google
• Bloomberg
• CBOE
• Standard & Poor’s
• Fidelity
• Haver Analytics
• Citigroup
• LPL Financial
• JP Morgan
• Society Generale
• Bureau of Economic Analysis
• Census Bureau
• Bridgewater
• Compustat
• Worldscope
• MSCI
• S&P Global
• GMO
• Bureau of Labor Statistics
• Atlanta Fed
• Federal Reserve
• Bank of America
• Kalshi
• Wall Street Journal
• IBES
• Goldman Sachs
• Carson Investment Research
• Robert Shiller
• Refinitiv 
• Jeff Weniger
• Goldprice.org
• Bianco Research