Market Commentary
Q3 2025
Global Equity Markets
Global equity markets experienced heightened volatility during the third quarter. Despite this, U.S. indices posted robust gains, with the S&P 500 up 8.1% and the Nasdaq rising 11.4%, supported by sustained investment in AI infrastructure and accommodative monetary policy.
Emerging markets outpaced most developed peers, returning approximately 11%, driven by a weaker U.S. dollar and strong performance across Asia. Chinese tech stocks rebounded, while Japan and Taiwan also recorded double-digit returns, underscoring regional momentum.
In Europe, the MSCI Europe ex UK Index rose 2.1%, led by financials and healthcare. UK equities advanced as the FTSE 100 reached a record 9,000 points in July, though sentiment softened later in the quarter amid rising borrowing costs and fiscal concerns.
The Federal Reserve reduced its benchmark rate from 4.25% to 4.00% in response to softening labour market data and inflationary pressures linked to tariff volatility. This policy shift contributed to a decline in the 10-year U.S. Treasury yield, which ended the quarter at 4.15%, down 10 basis points.
The prospect of further easing was increasingly priced into bond markets. Emerging market debt benefited from improved risk sentiment and dollar weakness, leading to a broad-based rally across sovereign and corporate issuances.
Fixed income and Monetary policy:
Commodities:
Investor demand for safe-haven assets intensified during the quarter. Gold reached an all-time high, while silver surged by 30%, reflecting heightened market uncertainty and risk aversion. These moves underscore a broader sentiment of caution among investors, driven by geopolitical tensions and macroeconomic instability.
Investment-grade bonds saw modest gains by quarter-end, recovering from April’s losses. High-yield credit performed well, supported by risk-on sentiment and strong corporate fundamentals. Global bond markets were mixed, with currency effects playing a significant role due to the 7.1% decline in the DXY dollar index.
Q3 2025 IP MPS Performance and fund changes
During Q3 2025, the IP Model Portfolios outperformed their respective benchmarks. Accumulation models delivered returns exceeding benchmarks by over 1% across all strategies and the Income portfolios continued to perform well with their bias towards UK and Europe.
Market volatility driven by tariff negotiations between the U.S. and major Asian economies, including China and India, remained a key focus for the investment committee, alongside tactical positioning within both Accumulation and Passive portfolios.
Accumulation Range
In the period, we introduced the Artemis SmartGARP European fund for its value-oriented approach which has performed strongly over the long term into the moderately adventurous and adventurous portfolios. U.S. equity allocation was marginally increased to align more closely with MSCI ACWI, whilst maintaining a slight underweight position relative to benchmark. The portfolios are all well diversified across all geographic regions to provide good diversification and to give downside protection.
Income Range
The Income range continued to perform strongly and therefore only a minor change was made, this was a switch from the Fidelity Enhanced Income fund due to risk-adjusted return concerns into the Schroder Income Maximiser fund.
Passive Range
We slightly increased U.S. equity exposure across all portfolios by re-adding the Fidelity Index US P fund, the aim of which was to complement this fund with our existing holding in the L&G S&P 500 Equal Weighted Index fund.
Martin Nelmes
Investment Director and Chairman of the Network Investment Committee
This document is aimed at Investment Professionals only and should not be relied upon by Private Investors. Our comments and opinion are intended as general information only and do not constitute advice or recommendation. Information is sourced directly from fund managers and websites. Therefore, this information is as current as is available at the time of production.
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