Q3 2025 PSN Top Guns: Record Highs and Exceptional Returns Across Global Markets
The third quarter of 2025 delivered impressive broad-based gains across global equity markets (MSCI World index, +7.36%), as investors demonstrated remarkable resilience in the face of ongoing policy uncertainties, trade tensions, persistent inflation, and elevated valuations. The strong equity performance was driven by demand for artificial intelligence and technology, a much-anticipated interest rate cut, and solid corporate earnings.
Despite the much-anticipated Federal Reserve rate cut, fixed income markets experienced mixed performance during Q3 2025, with the Bloomberg Global Aggregate Index posting a +0.60% return.
U.S. equity markets continued their upward trajectory throughout Q3 2025, with major indices reaching new highs in September. The S&P 500 Index gained 8.12% for the quarter, bringing year-to-date returns to an impressive +14.83%. The index reached a record close of 6,699 near quarter-end, representing a stunning recovery from the spring sell-off when the index was down approximately 15% year-to-date in early April.
Technology and AI-related sectors once again led market gains, with growth stocks significantly outperforming their value counterparts. The Russell 1000 Growth Index surged 10.51% compared to the Russell 1000 Value Index's more modest 5.33% gain. This growth leadership was primarily driven by continued investor enthusiasm for artificial intelligence themes, though stretched valuations became an increasingly discussed concern.
The quarter's standout performer was small-cap stocks, with the Russell 2000 Index delivering an exceptional +12.39% return, outpacing the Russell 1000 index by nearly 500 basis points. Below are some of the strategies that make up the PSN Top Guns Small Cap Universe:
- White Pine Capital, LLC.: Small Cap (+25.7% for the quarter)
- Advisory Research, Inc.: Partners (+24.3% for the quarter)
- Old West Investment Management, LLC: Old West Small Cap (+21.7% for the quarter)
A weaker U.S. dollar throughout 2025 significantly enhanced international market returns (MSCI World ex. USA Index, +5.41%) for U.S.-based investors through favorable currency translation effects during the quarter. This dollar weakness continued to be a key driver of international equity outperformance. Developed international equity markets (MSCI EAFE Index) posted a solid +4.83% return during the quarter, while emerging markets led global gains with an impressive +10.95% quarterly return (MSCI Emerging Markets Index), bringing year-to-date performance to an impressive +28.22%.
China emerged as a standout performer, posting a remarkable 20.76% (MSCI China Index) gain during the quarter and finishing up more than 41% year-to-date on broad earnings upgrades and supportive policy measures. The following strategies made the PSN Top Guns list for the International Equity Universe:
- RBC Global Asset Management: RBC China Equity (+31.9% for the quarter)
- Fisher Investments: China A-Share Equity (+27.6% for the quarter)
- Baillie Gifford Overseas Limited: China Equities (+24.6% for the quarter)
Fixed income markets experienced mixed performance during Q3 2025, largely influenced by divergent central bank policies and regional economic conditions. U.S. Treasury markets saw 10-year yields climb toward cycle highs in July before dropping sharply by September, ending the quarter at approximately 4.16% following the Federal Reserve's 25 basis point rate cut in September. The Bloomberg U.S. Treasury: 7 – 10 Year Index returned +1.76%.
Credit markets delivered strong performance, with U.S. credit spreads tightening throughout the quarter. High-yield bonds outperformed government securities, with the ICE BofA US High Yield Index returning +2.40% compared to government bonds' more modest returns.
The Bloomberg U.S. Aggregate Bond Index gained +2.03% for the quarter, bringing year-to-date returns to +6.13%, while municipal bonds (Bloomberg Municipal Bond Index) performed even better with a +3.0% quarterly return. Below are some of the strategies that make up the PSN Top Guns Municipals Universe:
- Richmond Capital Management: Opportunistic Muni CEF SMA (+5.2% for the quarter)
- MacKay Shields LLC: Municipal New York (+3.9% for the quarter)
- Columbia Threadneedle Investments: US Strategic Municipal Income (3.9% for the quarter)
To learn more about PSN Top Guns and see the entire list of winners.
PSN Top Guns quarterly commentary is presented by Zephyr's Market Strategist Ryan Nauman whose analysis and research has been shared on financial industry media including WealthManagement.com, Reuters, CNBC, Bloomberg, MarketWatch.com, Yahoo! Finance, and the Wall Street Journal, while being a regular guest on TD Ameritrade Network, Yahoo! Finance, Bloomberg TV, Bloomberg Radio and Chuck Jaffe’s Money Life podcast.