Q3 2025 Market Insights: Why We Believe Discipline and Diversification Still Win

Recent market highs have sparked optimism and reinforced the values of discipline and perspective. Reflecting on the past quarter—and the lessons learned over years of investing—I’m reminded that while headlines and short-term events often create anxiety, patient and diversified investors have historically been rewarded. What drives markets rarely makes the front page.

Investment Philosophy

At Savant, we follow an evidence-based approach rooted in wisdom, temperance, and humility. We don’t invest in asset classes because we know which will outperform in the short term—because we don’t. Rather, we invest in them because we believe diversification is an important element for long-term success. Our disciplined process focuses on what we can control: risk, costs, and taxes.

Economy and Market Overview

Economy

The third quarter delivered strong economic data and growing expectations for interest rate cuts.  On September 25, the Bureau of Economic Analysis (BEA) reported real GDP grew at an annualized rate of 3.8% in Q2, rebounding from a -0.61% contraction in Q1[1]. The Atlanta Fed GDPNow Forecast for Q3 stands at 3.8%[2].

Labor markets show signs of slowing, with minimal job creation and slightly higher unemployment. Inflation remains near 3%[3], above the Fed’s 2% target[4]. In September, the Fed cut rates, citing labor market risks over inflation concerns. Despite a government shutdown and global conflicts, significant investments in AI and other innovations provided some market support. Uncertainty persists, but markets appear to remain optimistic.

Stocks

• U.S. Stocks: Markets rallied on the AI mega-trend and solid economic data. The S&P 500 rose 8.2% for the quarter and 14.8% year to date[5].  Small-cap value stocks led Q3, up 12.6%[6].
• International Stocks: International stocks slightly lagged U.S. markets in Q3 but posted strong year-to-date gains. Developed international markets climbed 25.1%[7], while emerging markets surged 27.5%[8].  Lower valuations and a weaker dollar fueled growth. International equities now represent nearly 35% of global stock value, underscoring the importance of global diversification[9].

Bonds

The bond market anticipated a rate cut for months, and the Fed delivered in September, citing labor market concerns and a slight shift in focus on inflation. Short-term rates fell, while long-term rates stayed elevated.

The U.S. intermediate bond index is up 6.1% year to date[10]. The 10-year Treasury yield stood at 4.16% on September 30.[11]  Bonds remain a vital component of a diversified portfolio.

Alternatives

Alternative investments posted positive returns in Q3 and contributed to strong year-to-date results. Each asset class offers unique risk and return drivers, complementing traditional stock and bond allocations. Year to date:

• Real Assets: +10%
• Reinsurance: +8.8%
• Direct Lending: +6.3%
• Trend Following: -8.8%
• Multi-Strategy: +7.3%

We use alternative investments to add low-correlated assets that can help enhance portfolio stability over time.

Looking Ahead

As year-end approaches, uncertainty remains—but so do opportunities. The sheer number of variables can make investing feel daunting. At Savant, we rely on evidence-based principles and lessons from history. Markets are unpredictable, so we prepare by diversifying across asset classes and focusing on controllable factors: risk, cost, and taxes. We believe portfolios tend to perform best when aligned with a financial plan and managed with discipline.

The year 2025 has had its share of ups and downs, but patient investors with diversified portfolios have been rewarded.

This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation. Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only.

C. Zach Ivey Chief Investment Officer CFA®, CFP®, MBA

Zach has been involved in the financial services industry since 2001. He is a member of the Chartered Financial Analyst Society of Alabama and the Financial Planning Association.