AAF Wealth Management Q3 2025 Market Insights

In an ongoing commitment to keep you abreast on a range of issues that might affect your business, AAFCPAs is pleased to share Q3 2025 Market Insights published by AAF Wealth Management. This provides investors with an understanding of what’s driven performance of late.

Global securities markets have maintained impressive momentum in 2025, delivering strong returns for investors in the U.S. and abroad. As we move into fall, it is an opportune time to review the factors driving performance in equity and fixed income markets and to consider what to watch for in the months ahead. Political, economic, and seasonal developments will help set the tone for the remainder of the year and into 2026. Careful monitoring and thoughtful strategy can help navigate these changes with confidence.

Year-to-Date and Q3 Market Performance

Following the nearly 19 percent decline that accompanied April’s initial tariff announcement, asset prices rebounded sharply, driving strong performance across global equity and bond markets. Investor interest expanded beyond tech stocks to include companies across sectors, market caps, and regions. While lower valuations may have sparked renewed interest in April and May, subsequent gains reflected a growing appetite for risk and return as non-U.S. markets recorded some of their best results in years.

Non-U.S. markets have continued that momentum, delivering strong double-digit returns this year. More than 30 countries have posted gains exceeding 20 percent with Greece, South Korea, Peru, Spain, and Vietnam among the standouts—each advancing more than 60 percent through early fall.

By contrast, only a few markets have recorded negative results. The S&P 500’s roughly 15 percent gain through Q3 placed it in the lower quartile among developed markets at the time of this writing. Investors with broad and diversified international exposure have benefited most, seeing the strongest portfolio growth year to date.

Differences in market maturity and company size, particularly between developed and emerging markets, have also contributed to variations in returns across asset class. For instance, large cap names in the U.S. have posted positive returns exceeding 14 percent, while their smaller competitors have managed 10.5 percent thus far.

Outside the U.S., developed international countries have posted returns of around 25 percent on average, while their emerging market competitors have gained more than 28 percent. Even bonds managed to get into the game with returns exceeding six percent. Global bonds offered even stronger numbers than those in the U.S., returning nearly eight percent through early October. Much of this strength reflects investor expectations that the U.S. Federal Reserve will begin lowering interest rates.

Key Performance Drivers

Strong gains in artificial intelligence (AI), robust demand for emerging technology, solid corporate earnings, and expectations of federal rate cuts all contributed to Q3 performance. On a macro level, a weaker U.S. dollar bolstered international markets, helping them outperform the U.S. while strengthening digital assets, commodities, and precious metals.

Easing concerns over U.S. trade policy also created a more supportive backdrop for global growth. Companies have begun reconfiguring supply chains to reduce reliance on the U.S. and, to a lesser extent, China—addressing trade uncertainties that emerged earlier in the year. Anticipation of a rate cut further bolstered NASDAQ gains, as economic data increasingly pointed toward a likely reduction in rates.

Economic Overview

At its September meeting, the Federal Reserve, led by Jerome Powell, lowered the Federal Funds Rate (FFR) by .25 percent, ending nine months of uncertainty. Stronger-than-expected second quarter U.S. GDP, softening trends in weekly and monthly jobs reports, and moderate inflation readings prompted the Fed’s first step in nearly a year to provide liquidity as the economy moves into Q4.

Government Shutdown Update

Market participants watched the Fed’s September decision against the backdrop of a potential government shutdown. As of this writing, the federal government has been shut down for about a week, with little progress reported toward reopening.

The closure centers on familiar budgetary disputes between Republican and Democratic lawmakers. Unique to this event are issues such as expiring tax credits, cuts to Medicaid, and broader implications for governmental health agencies.

While markets have remained resilient, we recognize that prolonged uncertainty can be unsettling. Should the shutdown continue, markets may begin to reflect that reality through lower asset prices. Such periods often call for portfolio review to ensure allocations remain aligned with long-term objectives and positioned to capture opportunities that can emerge during volatility.

Legislative and Policy Changes

Changes in federal taxes, spending, immigration policy, and defense allocations are expected to influence government finances over time. H.R.1, commonly referred to as the One Big Beautiful Bill (OBBB), is central to these shifts, affecting tax structure, deductions, and federal revenue.

The increase in the federal debt limit to $5 trillion, combined with lower federal tax collection from higher deductions, reduced payroll taxes, and higher State and Local Tax (SALT) limits under OBBB, may place upward pressure on Treasury interest rates over time.

Rising interest rates and the potential for higher inflation could persist if the Federal Reserve lowers the Federal Funds Rate enough to support economic growth envisioned under the White House’s America First strategy. As government policy, regulation, and law evolve, our investment strategies will adapt, as new leaders and laggards emerge in the market.

How We Help

With a quarter remaining until 2026, AAF Wealth Management has been focused on implementing portfolio adjustments, identifying tax loss harvesting opportunities, and preparing for new rules and regulations that will affect all clients in the year ahead. Legislation continues to influence both tax planning and investment strategy, making it increasingly important to stay informed.

As an affiliate of AAFCPAs, AAF Wealth Management integrates personalized financial planning with deep tax expertise. We offer tax guides, insights on tax strategy optimization, and educational webinar resources. We invite you to join our upcoming Individual/Family Tax and Wealth Preservation webinar on October 23, 2025, from 12–1 PM ET. Our advisors will share key considerations for year-end planning and forward-looking strategies for 2026.

These insights were contributed by Kevin Hodson, CMT, CAIA, AIF, Director of Investments & Wealth Advisory, AAF Wealth Management.

Questions? Reach out to our authors directly or your AAFCPAs partner.

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*AAF Wealth Management is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where AAF Wealth Management and its representatives are properly licensed or exempt from licensure. This blog is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by AAF Wealth Management unless a client service agreement is in place.