Q3 2025 Market Commentary

Concerns regarding tariffs and the potential for resulting global economic instability have eased to some extent, as trade agreements have been progressing and temporary pauses have been established with several key US trading partners. The economy outside of the United States appears to be maintaining stability, with capital predominantly flowing out of the US and into foreign markets throughout the year. This shift reflects investor sentiment that views domestic markets as more vulnerable in the current environment. The reallocation of capital has contributed to strong relative performance abroad, where international markets have delivered outsized returns compared to their US counterparts (though mostly driven by dollar weakness).

Within the United States, economic data continues to present a mixed picture, marked by both areas of resilience and emerging signs of softening. The labor market has begun to show moderation, with a slowdown in monthly job creation and a gradual uptick in the unemployment rate. In response, the Federal Reserve shifted its policy emphasis from inflation containment toward supporting employment, implementing a 0.25% rate cut in September following the latest labor market readings.

At the same time, consumer spending, specifically in higher-income households, remains a key source of strength for the US economy. Retail sales have shown solid year-over-year growth, supported by higher equity valuations that have boosted disposable income among higher-income households. Additionally, corporate capital expenditures continue to contribute to GDP growth, with significant investments directed toward artificial intelligence and related technologies.

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