SEI Forward.

Market review 

Risk assets continued their ascent during the third quarter. Solid earnings and accommodative policies—both fiscal and monetary—were enough to overcome the hurdles of several tariff announcements and a deteriorating employment picture in the U.S. While artificial intelligence (AI) was once again a dominant theme, the rally broadened during the quarter to finally include U.S. small-cap stocks, which have lagged since the Liberation Day lows in early April. Emerging markets were boosted by the AI carryover into China, while European stocks failed to keep pace due to political turmoil and a stable U.S. dollar. 

The U.S. Federal Reserve (Fed) joined the monetary easing party late in the quarter despite strong economic growth, stubborn inflation, and a stock market at or near all-time highs. Job growth was the final straw for policymakers as a massive downward data revision reset the employment picture and prompted the first 2025 rate cut in the U.S. While yields in the U.S. finished the quarter slightly lower, developed-market yields broadly rose over the past 3 months, particularly in Europe, on continued concerns of ballooning debt and political instability in France. 

Geopolitics in general remained a pressure point for markets. Hopes for a resolution in the Russia/Ukraine conflict have been dashed, questions concerning President’s Trump’s firing of Fed Governor Cook remain unanswered, and the U.S. government inched closer to a shutdown. Gold was a prime beneficiary as these tailwinds, along with consistent demand from investors and central banks, helped the precious metal reach new highs.

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