Global equities rose to new highs in Q3 2025, supported by stronger activity, resilient earnings, and structural themes in AI, cloud, and the energy transition, despite trade-policy uncertainty. In the US, gains were concentrated in the ‘Magnificent 7’ while breadth improved abroad. Asia benefited from a deescalation in US–China tensions and a more balanced US–Japan deal; UK large caps gained from a partial reversal in sterling strength; the Eurozone lagged as investors awaited German fiscal stimulus.
Growth has been bolstered by frontloaded spending ahead of expected tariffs, whose rollout proved more measured than feared. In the US, the ‘One Big Beautiful Bill Act’, which was passed on July 4th, delivered retroactive R&D and capex tax breaks, lifting investment even as hiring softened, implying productivity gains. Nearterm prospects for the US economy point to moderate growth, soft job creation, and subdued consumption as tariffs constrain household spending. A key near term risk would be the failure of the US and China to agree a trade deal before the 10th November deadline, but so far, the Trump administration has trodden a path towards de-escalating the trade conflict, so the base case is for either a deal or another can-kicking exercise. Inflation remains above target in the US and UK; both the Fed and BOE cut 0.25% in the quarter. The Fed’s dovish turn implies up to 1.25% more cuts, while the Bank of England may deliver four additional 0.25% cuts. US growth could well be ‘Ushaped’ into the November 2026 midterms as the economy shifts from labour to capital on the back of AI-related investment. With the 6.5%ofGDP deficit threatening higher long yields, pointing to dollar weakness and support for gold, the US administration is doing its utmost to engineer a change in the composition of the senior leadership in the Federal Reserve to deliver lower interest rates to stimulate growth and reduce borrowing rates.
The European Central Bank has already eased more aggressively, with prospective defence and industrial outlays boosting equities. The UK faces mixed growth, volatile data, strong sterling, and looming fiscal tightening. Japan should grow moderately, with inflation easing and the Bank of Japan tightening monetary policy ahead. China’s expansion has cooled at the margin, prompting coordinated fiscalmonetary support to bolster household incomes, financial conditions, and profitability.
Diversified exposure to regions and long-term growth sectors remain prudent, with policy shifts and trade outcomes remaining pivotal for investors.
The value of securities and the income from them can fall as well as rise. Past performance should not be seen as an indicator of future returns. All views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any products or securities.
