3Q25 Quarterly Market Review
Quarterly Market Review
Stock markets posted strong gains as investors grew more confident in the Federal Reserve’s ability to guide the economy toward a soft landing—cooling inflation and easing rates without triggering a recession.
Still, with indexes reaching new highs and much of the momentum concentrated in a few AI-related companies, a key question emerges: are we in bubble territory?
What We'll Cover
Key Takeaways
Markets delivered steady gains as investors looked past the noise, supported by the Fed’s first rate cut of the year and signals of more to come.
Bonds regained stability, providing the steady income they’re meant to deliver.
Global stocks advanced, led by continued U.S. strength and renewed momentum in emerging markets.
Despite America’s lead this quarter, international markets still hold an edge this year.
Artificial intelligence remained a major theme, although diversified investors have already captured its growth through broad market exposure.
What the Headlines Don’t Show
MSCI All Country World Index with selected headlines from 3Q25
These headlines are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily events from a long-term perspective and avoid making investment decisions based solely on the news.
In USD. MSCI All Country World Index, net dividends. MSCI data © MSCI 2025, all rights reserved. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Headlines are sourced from various publicly available news outlets and are provided for context, not to explain the market's behavior.
Market Summary
Returns as of September 30, 2025
Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: US Bonds (Bloomberg US Aggregate Bond Index), and Global Bonds ex US (Bloomberg Global Aggregate ex-USD Bond Index [hedged to USD]), US Stocks (Russell 3000 Index), International Stocks (MSCI World ex USA Index [net dividends]), and Emerging Markets (MSCI Emerging Markets Index [net dividends]). S&P data © 2025 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2025, all rights reserved. Bloomberg data provided by Bloomberg.
Steady Gains, Subtle Surprises
Markets spent the summer worrying about everything from tariffs to tweets, yet the global economy simply shrugged and moved on. U.S. stocks posted modest gains, with the Russell 3000 Index lifted by steady employment and a mild uptick in inflation. The Fed trimmed rates by a quarter point, offering psychological comfort more than economic necessity. Emerging markets outperformed the U.S. and developed peers, proving that sometimes the most unloved regions deliver the best surprises. Once again, investors who resisted the urge to outsmart the market came out ahead, surprising no one but the impatient.
The AI Revolution You Already Own
Artificial intelligence continued to dominate market headlines and boardroom conversations alike. Yet most diversified investors already hold substantial exposure: the top five AI ETFs account for over 40% of the U.S. market and nearly one-third of global capitalization. It’s not just NVIDIA and Apple; Caterpillar and Honeywell are in the mix too, because apparently even bulldozers want to be “smart.”
The message is simple: broad diversification is the most reliable way to participate in technological revolutions without picking favorites. Chasing the next “AI winner” is optional. Owning the market isn’t.
Bonds Remembered Their Job
After a turbulent few years, fixed income finally did what it’s supposed to do: provide stability and real returns. Yields across the U.S. Treasury curve declined modestly, with the 10-year yield falling to 4.16%, which boosted both Treasuries and municipal bonds. Intermediate corporates returned roughly 2%, which may not sound thrilling but beats the drama of last year’s drawdowns. Investors rediscovered that bonds don’t need fireworks to earn their keep. Sometimes, quiet consistency is the real alpha.
Real Estate Sipped an Espresso and Waited for Lower Rates
U.S. REITs outperformed their international counterparts, but rising property values and expensive financing kept enthusiasm in check. The housing market set record prices even as sales cooled, a reminder that affordability and optimism don’t always share a ZIP code. For patient investors, REITs remain a valuable diversifier and an inflation hedge. Think of them as your portfolio’s sensible landlord: not exciting, but always collecting rent.
Global Growth Found Its Footing
International developed markets advanced modestly, while emerging markets led the pack thanks to easing inflation and revived trade flows. Small caps generally outperformed large, hinting at improving confidence beneath the surface. Despite ongoing geopolitical theatrics, global diversification quietly paid off again. The lesson is simple: the world’s economy rarely moves in sync with U.S. headlines, and that’s precisely the point of owning it.
The “One Big Beautiful Bill”: Policy with a Long Fuse
Congress passed the so-called “Megabill,” a sweeping package reshaping tax and industrial policy. Vanguard’s review reminds us that such legislation unfolds over years, not news cycles, and markets care more about profits than politics. Investors tempted to trade on headlines should remember that tax reform is a planning event, not an investment signal. The smart move is coordination between your portfolio and your planner, not reaction.
The Quarter’s Real Lesson: Don’t Just Do Something, Sit There
Between rate cuts, tariff talk, and election theater, the third quarter offered endless reasons to “wait for clarity.” Yet, clarity, as usual, arrived after the markets had moved. Those who stayed invested benefited from resilience across asset classes, while timers continued perfecting their hindsight.
After a quarter filled with noise, one theme stands out across every asset class: discipline still wins. At OLIO, we believe patient investors don’t wait for calm. They create it by staying the course.
The big money is not in the buying and the selling, but in the waiting.
The same perspective matters now more than ever as markets enter another stretch defined by headlines, uncertainty, and opportunity.
Staying the Course When Markets Get Loud
Markets are rarely calm, and the months ahead will likely bring their share of headlines and uncertainty. Inflation updates, Federal Reserve policy shifts, global conflicts, and developments in artificial intelligence will continue to shape the narrative.
Through it all, our approach remains unchanged: use volatility to your advantage rather than as a reason to retreat. Periods of fear or short-term disruption often create opportunities to buy great companies at better prices. Staying consistent with your plan and continuing regular contributions is one of the most reliable ways to build lasting success.
The cost of stepping aside, even briefly, can be significant. The chart below illustrates the effect of missing just a handful of the best days in the market over the past 25 years, using the Russell 3000 Index as a broad measure of the U.S. stock market. Missing only the 10 best days would have cut long-term returns by nearly half.
Missing the Best Market Days
Returns as of September 30, 2025
The hypothetical performance shown reflects the U.S. Stock Market as represented by the Russell 3000 Index Total Return over a 25-year period.
Indices are unmanaged and not available for direct investment. Index performance does not reflect fees, expenses, or the impact of taxes associated with investing in an actual portfolio.
All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes.
This quarter was a clear reminder of the value of staying patient. Investors who maintained their focus on the long term, rather than reacting to every headline, saw that discipline rewarded them. In markets like these, the fundamentals still matter – and so does perspective.
Disclosures
All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. The content on this blog is for informational and educational purposes only and should not be construed as personalized financial advice, tax advice, legal advice, an offer or solicitation to buy or sell any security, or a recommendation to pursue any specific investment strategy. The information provided is general in nature and may not be suitable for your individual circumstances.
Olio Financial Planning, LLC (“OLIO”) is a registered investment adviser with the United States Securities and Exchange Commission, domiciled in Virginia. Investment advisory services are only provided to investors who become OLIO clients under a written agreement. Past performance does not guarantee future results, and all investments involve risk, including the potential loss of principal.
Nothing contained herein should be interpreted as a guarantee of any specific outcome. Forward-looking statements or projections are based on assumptions and current market conditions, which are subject to change without notice. Actual results may differ materially.
You should consult your own financial, legal, tax, or other professional advisors before making any financial decisions. OLIO does not guarantee that the information presented is current, accurate, or complete, and assumes no responsibility for any errors or omissions.