Will Dickson

The third quarter of 2025 was marked by persistent volatility in global markets, with political developments in the US continuing to dominate investor sentiment. The implementation and frequent adjustment of tariff policies by the Trump administration generated significant swings in equities and currencies, while concerns over US debt sustainability further pressured longer-dated bonds.

Nevertheless, global equity markets have seen continued strength, rising strongly over the quarter. This continues a rally that began in mid-April. There was limited dispersion between regions with the exception of European equities, which gave back the prior quarter outperformance. Encouragingly, while US tech saw strong momentum later in the quarter, smaller companies were an area of strength. This suggests a broadening out of the rally.

Fixed income assets that were more stable through the equity market volatility earlier in the year, were the centre of market volatility towards the end of the quarter. In particular, rising yields on US long-dated bonds reflected persistent fiscal concerns. The potential repayment of tariffs judged unlawful was viewed by the market as further stretching the US fiscal position. In the UK, pressure on the Chancellor to balance the books, triggered weakness in gilts, particularly those at longer durations. 30-year gilt yields reached their highest level this century, in the quarter.

Conversely, alternatives such as infrastructure and gold provided defensive qualities, with gold particularly supported by central bank demand and geopolitical risk. Furthermore, the perceived fragility of the existing global currency system appears to be driving precautionary buying.

Overall, our investment stance remains neutral, with a continued preference for higher-quality fixed income, selective non-US equities, and defensive alternatives. Looking forward, the sustainability of corporate earnings and the resilience of consumer spending will be crucial in determining whether markets can hold current valuations. We expect volatility to remain elevated, driven by geopolitical shocks, tariff announcements, and the direction of global monetary policy.

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