The MSCI World gained 7.3% (in USD terms) in the third quarter, extending its powerful rally from April lows (+33.3%). Equity market strength and continued narrow leadership were underpinned by the US Federal Reserve’s shift to more accommodative policies, resilient macroeconomic data, subsiding tariff fears, and enthusiasm over artificial intelligence. Investors’ risk appetite extended to credit, with the strongest returns found in riskier emerging market (JPM EMBI +4.4%) and high-yield (Barclays High Yield +2.4%) debt. The Fed’s decision to lower policy rates provided support for short-duration US Treasuries, although yield curves continued to steepen as investors remain nervous over persistent inflationary pressures. After a challenging first half, the US dollar rose a modest 0.9% on a trade-weighted basis as growth differentials improved. Gold surged 16.6%, surpassing its inflation-adjusted 1980 peak, fueled by elevated geopolitical risks, lingering concerns of stagflation, and ongoing central bank accumulation.
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