Third Quarter 2025 Review

By White Pine Wealth Management

Executive Summary

• The third quarter of 2025 saw a continuation of the forward momentum in the markets with large technology companies leading the way in the U.S. The S&P500 Index rose 8.1% in the 3^rd quarter and has now advanced 14.8% year-to-date. The tech-heavy Nasdaq Composite climbed 11.4% in the 3^rd quarter, bringing its year-to-date performance to 17.9%. But perhaps the biggest momentum change in U.S. markets was found among the smallest companies. After declining -1.8% over the first 2 quarters, the Russell 2000 index of small-cap stocks came to life in Q3, rising 12.4%, bringing its year-to-date total up to 10.4% by the end of September.¹

• Overseas markets built on previous gains in Q3. The MSCI All Country World Ex-U.S. Index rose 7% for the quarter and is up 27.3% year-to-date. Emerging Markets stocks fared even better, particularly in China, with the MSCI China Index rising 20.8% in Q3 and 41.85% year-to-date through September 30^th.¹

• After a brief but dramatic tariff-induced selloff in the first few trading days of April, markets have since staged a virtually uninterrupted rally. But fears around tariff policy persist, and popular hedges for stock market risk like gold and bitcoin have rallied alongside the stock market. By early May, Gold breached the $3,000 per ounce level, and by the end of September, the S&P GSCI Gold Index had risen over 45% year to date. The price of Bitcoin has risen nearly 28% year to date.¹ 

Fourth Quarter 2025 Outlook

In the current investing environment, with the potential for an economic boom thanks to A.I. technology on one hand, and unknowns surrounding geopolitics and trade policy on the other, what follows are some of the areas we will continue to pay close attention to as we close out 2025.

• The Federal Reserve: On September 17^th the Federal Reserve announced a quarter percent cut to the Fed Funds rate. This was the first Fed rate cut since December 2024 and was widely-expected by investors. Perhaps more important than the cut itself were Fed Chair Jerome Powell’s comments, which suggested that additional rate cuts at future meetings are likely. Over the past 40 years, the S&P 500 index has seen a median 12 month return of 15% when the Fed begins cutting rates in the absence of a recession.²  

• Economic Data: While many investors have been concerned about the economic ramifications of President Trump’s tariff policy, data shows the economy has been strong and growing. The latest GDP figures for the 2^nd quarter show 3.8% annualized growth and tracking estimates for Q3 are inferring a 3.9% annualized growth rate³. Also, August new home sales were up 20% month over month, which can be partly attributed to falling interest rates which began in the bond market ahead of the Fed’s September rate cut announcement⁴.In the absence of negative surprises, upbeat economic data combined with an accommodative Federal Reserve, would likely provide fertile ground for further market gains.

• Housing: Economic growth in 2025 has come about largely without the help of the housing market, often a significant contributor to the economy. Home affordability has declined significantly over the past decade thanks to rising prices and, more recently, rising mortgage rates. The ratio of home prices to income is currently higher than it was during the housing boom of the mid-2000’s². As a result, many would-be homebuyers have remained on the sidelines. It will likely take time for home affordability to improve but once it does, the housing market would likely provide an additional boost to the economy.

• Politics: On October 1^st, Congress failed to pass a stopgap bill to prevent a Government shutdown. In the past, despite being an attention-grabbing headline, government shutdowns have had limited impact on the stock market. However, markets may have to contend with a data vacuum until Federal data-producing agencies, such as the Bureau of Labor Statistics, are re-opened. Moreover, if the current shutdown lasts long enough to delay multiple pay cycles for federal workers, there could be economic consequences. It should be noted however, that a 2019 law guarantees automatic back pay once a shutdown concludes.⁵

Performance data provided by ¹ Y-Charts, ² Goldman Sachs, ³ Federal Reserve Bank of Atlanta, ⁴ National Association of Home Builders, ⁵ The Wall Street Journal, as of date for all sources is September 30, 2025.