As we close out the third quarter of 2025, I’m pleased to report strong performance across nearly all asset classes. This quarter serves as a powerful reminder of why maintaining investment discipline during periods of volatility is so important to long-term success.
What a Difference a Little Time Makes
It’s worth taking a moment to reflect on where we were just six months ago. In our first quarter review, we discussed how global equities had fallen more than 15% between mid-February and early April of this year. Market participants were deeply concerned about entering bear market territory, and anxiety was running high as we grappled with the economic implications of new tariff policies.
Fast forward to today, and the picture looks dramatically different. The third quarter delivered strong returns that have improved year-to-date performance and reminded us once again why staying invested through market turbulence is important.
Third Quarter Performance Highlights
The third quarter of 2025 was strong by almost any measure:
- Small-Cap Equities led the way with an impressive 12.39% return, as measured by the Russell 2000 Index
- Global Equities posted solid gains of 7.67%, as measured by the MSCI ACWI IMI Index
- US Large-Cap Equities delivered strong performance with the S&P 500 returning 8.12%
- US Bonds contributed positive returns of 2.03%, as measured by the Bloomberg US Aggregate Index
The breadth of this quarter’s performance, with gains across equity market capitalizations and geographies, as well as positive fixed income returns, demonstrates the kind of broad-based recovery that follows many market corrections.
Year-to-Date Performance: A Study in Resilience
When we look at the full year-to-date picture through September 30, 2025, the recovery becomes even more impressive:
- Global Equities have gained 18.25% for the year
- International Developed Equities (MSCI World ex-US Index) have surged 25.34%
- Emerging Markets (MSCI Emerging Markets IMI Index) have delivered 25.95% returns, leading all major equity categories
- US Equities (Russell 3000 Index) have posted strong returns of 14.40%
- US Fixed Income (Bloomberg US Aggregate Index) has contributed 6.13% to balanced portfolios
These year-to-date figures represent a remarkable turnaround from the negative sentiment that dominated markets in early spring. Investors who maintained discipline and stayed invested through the volatility were likely rewarded, while those who reacted emotionally to the downturn probably locked in losses and presumably missed this substantial recovery.
The Enduring Value of Diversification
One of the most important lessons from 2025’s market performance is the value of global diversification. This year has provided a textbook example of why Abacus Wealth Partners constructs portfolios with exposure across different markets and geographies.
Consider this striking statistic: On a year-to-date basis, International Developed Equities (MSCI World ex-US Index) have outperformed their US counterparts (S&P 500 Index) by 10.51%. That’s a substantial performance differential that has meaningfully impacted diversified portfolios.
Abacus maintains diversified portfolios because it is impossible to predict when different parts of the market will outperform or underperform. Investors who concentrated solely in US equities, perhaps swayed by years of US market leadership, have missed significant gains available in international markets this year.
This unpredictability is why Abacus doesn’t chase recent performance or try to time which markets will lead in any given period. Instead, we maintain strategic allocations across global markets, helping to allow your portfolio to capture returns wherever they occur.
Lessons from a Volatile Year
As we move into the final quarter of 2025, several key themes emerge from this year’s market experience:
Market timing is exceptionally difficult. Those who sold during the spring downturn, convinced that markets would continue falling, likely missed one of the strongest quarterly rallies. The cost of being out of the market during recovery periods can be substantial and difficult to recover from.
Diversification continues to demonstrate its worth. While diversification doesn’t guarantee gains or protect against all losses, it does help position your portfolio to benefit from whichever markets are performing well. This year, that meant international equities taking the lead after years of US dominance.
Bear market fears don’t always materialize. Despite briefly entering a bear market in early April, markets recovered strongly. Not every significant decline becomes a prolonged bear market, and distinguishing between the two in real time is virtually impossible.
Policy uncertainty creates volatility, but markets adapt. While the implementation of tariff policies created substantial market volatility in the first quarter, markets have adapted to the new environment and found footing. This adaptability is a recurring theme throughout market history.
What Abacus is Doing for You
Abacus’s investment approach remains consistent through both market downturns and recoveries:
- Maintaining strategic asset allocations that provide diversification across global markets
- Rebalancing portfolios systematically to manage risk and capture opportunities created by market movements
- Staying focused on evidence-based investing rather than reacting to short-term market sentiment
- Providing ongoing guidance to help you stay committed to your long-term financial plan
As always, if you have questions about your portfolio, your financial plan, or how recent market movements affect your specific situation, please don’t hesitate to reach out to your Abacus advisor. We’re here to provide guidance and perspective as markets continue to evolve. Not an Abacus client? Connect with our team to learn how our advisors can help you align your investments and financial plan with your goals and values.
Looking Ahead
While we’re pleased with the market recovery this year, we maintain realistic expectations going forward. Strong quarters like Q3 remind us of the market’s potential for positive returns, but they don’t guarantee future performance. What they do reinforce is the importance of staying invested, maintaining diversification, and keeping a long-term perspective.
The third quarter of 2025 has been a powerful reminder that patience and discipline in investing are often rewarded, even when the path forward seems uncertain.
