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After a strong start to the year, global markets continued to deliver positive returns in the third quarter of 2025, with many indices reaching new highs. This performance came despite persistent political uncertainty, trade tensions, and uneven economic data across regions. While inflationary pressures have eased in many developed economies, questions remain over fiscal sustainability and the pace of monetary policy easing. Against this backdrop, equity markets have largely shrugged off volatility, supported by resilient corporate earnings and investor optimism about rate cuts ahead.
UK
UK equities posted strong gains, with the FTSE 100 hitting record highs and outperforming more domestically focused stocks. However, the domestic outlook remains subdued amid political turbulence and fiscal uncertainty. Markets are now watching closely for the Autumn Budget, where significant tax changes could reshape the policy landscape.
US
US markets led global performance, buoyed by solid earnings, robust GDP growth, and the Federal Reserve’s first rate cut of the cycle. Despite political friction and occasional bond market jitters, investor confidence remained strong, helping the S&P 500 reach new highs.
Europe
European equities delivered modest gains, lagging other developed regions. Germany’s industrial weakness and France’s political gridlock weighed on sentiment, widening sovereign yield spreads. The region continues to grapple with structural and fiscal challenges.
Asia Pacific & Emerging Markets
The standout performer of the quarter, Asia Pacific benefited from strong momentum in technology and trade optimism. Japan and China led the way, supported by AI-driven demand and policy support, while India lagged due to earnings disappointments and valuation concerns.
Alternatives
Gold and silver surged, providing diversification as investors sought safe-haven assets amid market and policy uncertainty. The precious metals’ rally underscored their enduring role in portfolios during times of volatility.
Sustainability
Despite policy setbacks from the Trump administration, the US renewable energy sector continues to grow rapidly. Advances in wind, solar, and battery storage – particularly in states like Texas – highlight the unstoppable momentum of the energy transition. Meanwhile, Japan’s renewed embrace of nuclear power signals a pragmatic shift toward energy independence.
Performance
Holden & Partners’ portfolios delivered broadly positive results, with many outperforming benchmarks. Sustainable portfolios trailed slightly but narrowed the performance gap with conventional models. The investment team is now reviewing market developments to position portfolios effectively for 2026.
UK
It was a positive quarter for UK equities, with the FTSE 100 hitting new highs and returning 7.5% over the period.1 This came against a trickier domestic environment, serving as another reminder that the performance of the UK’s main index is not always representative of the economic backdrop in the region. A weakening pound and a resilient global economy supported companies with significant overseas revenues. This was highlighted by the relative underperformance of the FTSE 250 – an index of more domestically focused mid-sized companies – which returned 2.7% over the period.2
Beyond this, fiscal uncertainty and political tensions persist. Deputy Prime Minister Angela Rayner resigned after failing to pay the appropriate tax on her flat, breaching the ministerial code and further eroding public trust in politicians. While the UK is not the only country facing questions over the sustainability of its public finances, a lack of policy clarity continues to dampen sentiment.
In Q4, all eyes will be on Chancellor Rachel Reeves as she delivers the Autumn Budget. While this remains speculative, it is widely expected that she will announce substantial tax increases, potentially in the form of higher inheritance and property taxes. Despite Labour’s pledge not to raise headline rates of income tax, a continued freeze on income tax thresholds – often referred to as a “stealth tax” – may be how they navigate this area.
US
The S&P 500 returned just over 10% for sterling investors over the quarter,3 reaching a new all-time high, driven by a strong earnings season and a US economy which remains resilient. Inflation rose from 2.7% to 2.9% in August,4 but so far, the worst-case scenario tariff-induced price pressures have yet to materialise. This allowed the Federal Reserve – the subject of much external pressure over its measured pace of rate cuts – to cut the base rate 25 basis points to the 4.00-4.25% range, and signal that further cuts may be on the way – a cause for optimism in the market. GDP growth was strong, with figures showing that the economy grew at an annual rate of 3.8% in Q2.5
There was a wobble in the treasuries market – particularly at the long end – driven by concerns over the independence of the Federal Reserve, as the Trump administration unleashed a volley of media attacks over a perceived overly cautious approach from Chair Powell and his fellow board members.6 Government bonds bounced back well, with the steepening of the yield curve reversing as confidence on the rate cut path grew. There was further tightening in the credit market as investment-grade bonds outperformed government bonds, led by robust consumption and earnings.7
Europe
Despite posting a positive return over the quarter, European equities were the weakest of the major markets during the period. German equities proved a significant drag on the region, as the country’s industrial rot deepened, hamstrung by tariff uncertainty, sky-high commercial energy prices, and stiff competition from Chinese automakers8 in markets previously dominated by German brands. Despite French stocks faring better than others on the continent, the CAC 40 returned just 3.3%,9 which looks weak when considering the returns of other global developed markets. France’s political turmoil continued, with no clear end in sight, as the minority government struggled to do much of anything, embroiled in a stalemate with the other parliamentary parties.
These woes led to the French-German sovereign yield spread – a measure of the risk premium investors demand to hold French government bonds over the German Bund – widening to its greatest margin since January,10 as the government remained unable to push through a budget to address its fiscal shortfalls. Government bonds in Europe as a whole fell 0.2% over the quarter.11
Asia Pacific & Emerging Markets
The MSCI Asia Pacific Index returned 11.1% in sterling terms over the quarter, making it the strongest-performing major equity market for the period.12 Tech-heavy Taiwan and South Korea were supported by ongoing AI and semiconductor momentum, as was China, which also benefited from progress in China-US trade talks and hopes that President Xi Jinping’s recently introduced “anti-involution” drive – a policy aimed at reducing price wars and overcapacity in certain industries – will support more sustainable long-term economic growth.13
In Japan, equities reached new highs, with the TOPIX returning 10.5% in sterling terms.14 The divergence in monetary policy and indications of further government stimulus contributed to a weakening of the Yen,15 which in turn supported export-driven stocks. A US-Japan trade deal, involving a reduction in reciprocal tariffs from 25% to 15%, was also welcomed news; however, renegotiations may be on the table should the current agreement fail to support the country’s interests.16
Elsewhere, Indian equities continued to struggle year-to-date, for reasons highlighted in previous quarters. Disappointing corporate earnings, tariff headwinds, and a weakening currency all contributed to lacklustre performance. Combined with relatively high valuations versus cheaper regional markets such as Japan and China, this has unsurprisingly led to relative underperformance. India’s Independence Day did, however, bring news of an overhaul of its Goods and Services Tax regime (GST 2.0),17 which should help reduce administrative burdens and support domestic demand.
Gold and silver continued their impressive rallies, with the former soaring towards $4,000 per ounce, returning almost 20% to sterling investors, while silver returned over 30%.18 Gold’s ‘safe-haven’ status has served it well in a time of heightened political and market uncertainty, with inflation and policy risk threatening bond markets and high valuations and trade tensions causing some wariness around the future of equity market returns. President Trump’s trade policies have also tended to have a weakening effect on the dollar,19 which often increases overseas demand for gold. Bond and equity markets can become more closely correlated in times of market or economic stress, so investors often seek gold exposure to diversify some risk out of the portfolio during periods of high volatility.
Sustainability
Despite the President’s resistance to the energy transition, more and more American homes and businesses are getting their energy from renewable sources. Following the start of his second term, the Trump Administration has declared war on several green projects – namely, by reducing incentives, slowing wind farm construction, and prolonging the use of coal plants. Yet, as of June 2025, almost one-quarter of U.S. power generation was green. This represents a sizable increase from 18% in the same period a year earlier, according to data compiled by the U.S. Energy Information Administration.
Of course, some of this trend can be attributed to investments made prior to Trump’s election, but many regions have provided strong examples of how energy markets are changing. Take Texas, for example, which in 2025 set state records for wind generation, along with new highs for battery storage and solar output.20
Disasters such as those at the Chernobyl and Fukushima nuclear power plants have had lasting effects on policy related to the energy mix and have eroded public trust in nuclear power. The Fukushima disaster (2011) still requires cleanup costing trillions of yen and remains a politically sensitive topic in Japan. Despite this, the country is still set to keep nuclear power at the core of its energy strategy. The newly elected leader of Japan’s ruling party, Sanae Takaichi, has called for total energy independence through the deployment of next-generation reactors.21
While it may seem controversial to some, many studies show that – despite historical disasters – nuclear power is far safer when measured by death rates (from accidents and air pollution) per unit of electricity production.22 With waste disposal technologies improving, it is certainly worth reopening the conversation about nuclear power’s place in the energy transition.
Performance
Performance over the quarter has been positive across the board with many of our models outperforming their respective benchmarks. Our sustainable models slightly lagged the conventional models over the period; however, the gap between the two has narrowed.
Picking out individual funds, Artemis US Smaller Companies had a good quarter as they managed to navigate the macro headwinds created by Trump and the tariffs. Another area that saw decent returns was Emerging Markets exposure, which has benefitted from the weakening dollar.
As we move into Q4 we begin to look at next year and how our portfolios might look from January. The next three months will be spent analysing what has happened over the year and looking forward to what might happen in the year and years ahead. In due course, we will share our thoughts with you.
1 Morningstar FTSE 100 TR GBP 01/07/2025 – 30/09/2025
2 Morningstar FTSE 250 TR GBP 01/07/2025 – 30/09/2025
3 Morningstar Direct: S&P 500 TR GBP 01/07/2025 – 30/09/2025 +10.06%
7 https://www.schroders.com/en-lu/lu/individual/insights/quarterly-markets-review—q3-2025/
9 Morningstar Direct: Euronext Paris CAC 40 GR EUR 01/07/2025 – 30/09/2025 +3.26%
12 Morningstar MSCI AC Asia Pacific TR GBP 01/07/2025 – 30/09/2025
13 https://www.dbresearch.com/PROD/RI-PROD/PDFVIEWER.calias?pdfViewerPdfUrl=PROD0000000000603307
14 Morningstar TOPIX 1000 TR GDP 01/07/2025 – 30/09/2025
17 https://www.ft.com/content/08aab9f9-bb2b-4900-96c0-ed83edb37184
