Q3: Markets resilient in a challenging environment
Nine months into the year, markets have been stronger than many anticipated. Equity indexes posted sizeable gains, with the S&P 500, S&P/TSX, and MSCI EAFE up 13.7%, 21.4%, and 22.3%, respectively, year to date.1 Bonds also delivered positive returns of 6.1%, 3.0%, and 7.9% as measured by the Bloomberg US Aggregate Bond Index, the FTSE Canada Universe Bond Index, and the Bloomberg Global Aggregate Bond Index, respectively.1 For a period marked by ongoing uncertainty, these are notable results.
That resilience came against a steady flow of unsettling news. Concerns about slower growth persisted. Conflicts in Eastern Europe and the Middle East remained unresolved, and political instability along with trade disputes among the world's largest economies added to the strain. Under these circumstances, weaker performance would have seemed more likely.
Instead, several factors helped counter those pressures through the quarter. In the U.S., a major piece of legislation called the “One Big Beautiful Bill” may have bolstered investor confidence. Some easing of global tariff tensions contributed to more stability for international business. Central banks, particularly the U.S. Federal Reserve, lowered interest rates, supporting growth and indicating a readiness to act if conditions deteriorate. Recent advancements in artificial intelligence have garnered attention for their potential implications on productivity and profitability.
Short-term market fluctuations are a possibility but can’t be predicted with certainty. Stock prices are above long-term averages and recent market momentum has been observed in certain sectors, such as information technology. Seasonal patterns can also contribute to volatility toward year end. However, trying to time the market is notoriously difficult and often counterproductive. The lesson history teaches is that investors who stay focused on their long-term goals tend to have fared better over time.
Source: 1Bloomberg, January 1, 2025 to September 30, 2025.
The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The S&P/TSX Composite Index is the benchmark Canadian index that tracks the performance of companies listed on the Toronto Stock Exchange (TSX). The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. The Bloomberg US Aggregate Bond Index tracks the performance of U.S. investment-grade bonds in government, asset-backed, and corporate debt markets. The FTSE Canada Universe Bond Index tracks the performance of marketable government and corporate bonds outstanding in the Canadian market. The Bloomberg Global Aggregate Bond Index tracks the performance of global investment-grade debt in fixed-rate treasury, government-related, corporate, and securitized bond markets. It is not possible to invest directly in an index.