Rates Lower, Stocks Higher, What’s Next?

Highlights include:

• In the third quarter of 2025, equity markets delivered strong results across the board. The S&P 500 gained 8%, the Dow Jones rose nearly 6%, the Nasdaq jumped 11%, and international stocks, as tracked by the MSCI EAFE Index, advanced 5%.
• The rally was fueled by the Federal Reserve rate cut in September, as investors anticipated easier monetary policy would lower borrowing costs and support corporate profits, consumer demand and economic growth. Optimism around artificial intelligence and technology also played a role.
• Corporate results have proven to be more resilient than expected and the U.S. gross domestic product in the second quarter was higher than previously thought due to stronger-than-expected consumer spending.
• For the year, the S&P 500 has increased 15% through September, while the MSCI EAFE Index of international stocks has risen 25%.
• Stocks in the Communication Services and Technology sectors increased the most so far in 2025. Both sectors have rallied more than 20% on a year-to-date basis through September. The weakest sectors have been Health Care and Consumer Staples, gaining less than 4% each.

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Katharine E.W. Dudley, AIF^®
Senior Vice President, Client Advisor

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