Markets in 2025 have been anything but predictable, with geopolitical shifts, tariffs, and surprising regional performances keeping investors alert. In this quarterly market update, Darius McDermott and Juliet Schooling Latter unpack the latest global investment trends and surprises from Q3.
They discuss the shifting performance between regions, with Europe and Latin America outpacing the US, while China’s rally sparks debate on sustainability. Tariffs, inflation, and political uncertainty remain at the forefront, influencing investor sentiment and sector positioning. Fixed income markets are analysed in light of sticky inflation and unusual bond dynamics. Finally, looking ahead, both highlight where investors may find value, the importance of diversification, and strategies for navigating an uncertain final quarter of 2025.
Why you should listen to the interview: Gain insights beyond the headlines to explain what’s really driving markets – from tariffs and AI to gold, commodities, and healthcare valuations. If you want clear, candid insights on where risks remain, which regions are leading, and how to position your portfolio for the months ahead, this update is unmissable.
This interview was recorded on 24 September 2025. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview.
Interview highlights:
Market performance and surprises
“Markets have been a bit like the British weather recently. Every so often you get dark clouds gathering, but by the time you’ve dug out your umbrella, the clouds have cleared, the sun’s come out and you need your sunglasses instead.
“Markets have just been climbing a wall of worry, haven’t they? There was the sharp sell off obviously in early April on the tariff announcements, but markets bounce back and they’ve just been sort of undaunted really. There’s the threat to global growth from tariffs. There’s persistent inflation, geopolitical tensions. There has been this shift in relative performance with the US sort of going from last year’s star performer to this year’s sort of laggard at just to 2.5% year to date last time I looked. And most regions outstrip the US now with Europe up over 15% year to date. I won’t mention China.
“On Q3, I have to confess, I’m just a bit confused. I was at a conference yesterday and someone on the panel said, risk is as expensive it’s ever been and US large cap growth is at its highest ever multiples, but I’m still bullish. It just doesn’t quite add up to me. I was expecting to see a pullback in the third quarter. So I guess that’s what I’m saying. That’s what’s surprised me, really.”
Market complacency
“I think the tariff concerns that were at their heighten around Liberation Day have definitely eased. What I still don’t fully understand yet, now they are about to be introduced, and as Juliet already said in our last discussion, what impact those tariffs will have. Will they be inflationary, like everybody says tariffs are, what impact will they have that have on markets? So I think most people have, I wouldn’t say tariff fatigue, but are less concerned about tariffs than they were six months ago. Yet they haven’t really started, if you know what I mean.
“Again, yesterday somebody was talking about the companies they’ve spoken to and the general feeling is that about 5% of the tariff will be worn by the producers, but the rest is going to be passed on to the US consumer. And obviously that will be very inflationary and how much that will impact consumption and things like that, has yet to be seen.
“But interestingly on the volatility side, the level of the VIX is at quite a low level. Valuations are high, but volatility is low, which again points to how sort of complacent markets are to me.”
Insights on China and Emerging Markets
“I’m always a little bit wary of China, it’s an authoritarian regime which means there’s always that level of uncertainty surrounding how foreign investors are treated. And indeed some sectors can be wiped out by changing government policy. The government is happy to manipulate markets, you’re never quite sure whether the stats are accurate and so forth.
“But having said that, yes, China had become incredibly cheap, so I wasn’t really surprised by its outperformance. Will it continue to outperform? I’m not sure. I mean, China is definitely changing with regard to the tariffs, it’s putting factories on the ground in other countries. And as it’s become more advanced, it’s sort of moving away from cheap manufacturing into higher value added areas.
And also its anti-evolution policies which are designed to sort of combat deflation and reduce excess capacity, they’re coming into effect.
“We saw a Chinese manager last week, they said that Chinese equities are broadly around fair value, not expensive. And the other factor I think that again comes back to my slightly flippant first answer about it’s the ‘Year of the yuan’ is the weakening of the dollar. And generally a weaker dollar is good for emerging markets and it’s good for emerging markets, it’s good for China, the biggest emerging market.”
European defence stocks
“Europe has fared very well this year. European companies are up over 17% and Europe generally is up over 15%, which sort of compares with 2.5% for the US. I mean basically, again, Europe was oversold. So when investors got a little bit disenchanted with the US and started looking around for other homes for their money, they looked at Europe and saw that it was kind of refreshingly cheap in comparison. And yes, the defence companies are a big part of that because Germany announced a fiscal stimulus plan over the summer, which is a big shift away from Germany’s traditional fiscal conservatism and aims to boost defence and infrastructure. So that is obviously going to boost economic growth in Europe as well.
“I think the other point, as I would describe it, is flow. People are maybe looking elsewhere for a change because the US had this big blip, but if you think 70% of the MSCI World is US, so 70% of most capital goes into the US. If you buy an MSCI tracker, you’re gonna get 70% of the US. Nominally, the US is expensive on valuations,; so people are thinking ‘where else should I look?’ They’re not going to stop putting money at the US but that potential change of flow has also been supportive for Europe and other regions.”
Year-end opportunities
“I would say maybe reduce risk. As I mentioned, I’m sort of wary of equity valuations looking a bit stretched and markets looking vulnerable to negative economic and political events. But I think there are pockets of value out there. I mean, dare I say it, UK smaller companies still look good on a long term basis. And as we talked about, healthcare looks a little bit oversold. India, which is another area I like, is actually down over 8% year to date. So could that be a good entry point? And, you know, as Darius has mentioned, emerging markets are positively impacted by the weak dollar. So that’s another interesting area. But always above all, stay diversified and if there’s a pullback, use it as a buying opportunity if you can.
“I think maybe the lesson of the year is that markets can go down and I think we all understood why markets went down, that tariff fear looked really bad for global growth, and a potential global recession. But that was quickly removed and then markets have more than bounced. If you were trying to be clever in timing markets, I think just buy the dips is fine.”
Conclusion: As markets head into the final quarter of 2025, investors face a delicate balance between stretched valuations and emerging opportunities. While political risks, inflation, and volatility continue to hover in the background, themes like healthcare, UK smaller companies, and precious metals may offer long-term rewards, while diversification remains crucial.
