The stock market pushed to fresh record highs in the third quarter as artificial intelligence and other technology stocks were back in the driver\u2019s seat. In a twist, small-company stocks soared in September, but they ultimately failed to outperform big-company stocks in the quarter. Meanwhile, bond yields fell and prices rose as traders anticipated the Federal Reserve\u2019s first interest rate cut since 2024.<\/p>\n
Investors appeared to look beyond a host of risk factors that could pull markets lower in the months ahead, including rising valuations, elevated inflation, a weakening labor market, and ongoing uncertainty surrounding US fiscal deficit and US trade policy.<\/p>\n
Which Stocks Powered the Stock Market Rally in Q3? But in a sign that some investors are concerned about the risks bubbling under the surface, gold powered to a record high of more than $3,800 per ounce as it jumped 17% in the third quarter. At the same time, markets like Canada, China, and Japan continued to outperform the United States, while Europe fell behind.<\/p>\n<\/p>\n Key Stats: Q3 2025 Stock and Bond Market Performance<\/p>\n Q3 Stock Market Performance<\/p>\n The equity market again appeared unstoppable in the third quarter, powering higher despite concerns about stretched valuations, uncertain policy, and the ongoing impact of tariffs.<\/p>\n Stocks rose 8% in the third quarter and are now up <\/b>35% since bottoming out on April 8, in the wake of President Donald Trump\u2019s sweeping tariff announcements. The Morningstar Wide Moat Composite Index<\/a>, which includes stocks our analysts believe have the largest and most durable competitive advantages, gained 8.7% between July and September and is now up more than 15.0% for the year.<\/p>\n In July, Nvidia NVDA<\/a> became the first company in the world to reach a market capitalization of more than $4 trillion<\/a>. Meanwhile, the IPO market rebounded as investors clamored for more exposure to new technology and AI firms.<\/p>\n Analysts say stocks could keep climbing<\/a> over the course of the fall, as long as fundamentals hold up and the third-quarter earnings season delivers solid results.<\/p>\n Within the Morningstar Style Box, growth stocks continued to outperform value by a slim margin, even as value stocks rebounded from the second quarter. Small-cap growth saw the best returns, climbing 8.54% in the third quarter, compared with 7.22% returns for the small-cap value category. Large-cap growth stocks edged ahead of the large-cap value category, with returns of 6.66%, compared with 6.17% for large value stocks. The most muted returns came from mid-cap growth stocks, which saw gains of 2.53%.<\/p>\n Overall, the Morningstar US Small Cap Index<\/a> trailed the Morningstar US Large Cap Index<\/a>, thanks to the outsized influence of mega-cap tech names like Nvidia.<\/p>\n Stock Sector Performance<\/p>\n Tech stocks continued to outperform the rest of the market in the third quarter, building on the blistering rally that began after the market hit a low in April. Communication services stocks climbed 12.75%, while technology was up 12.4%.<\/p>\n Energy stocks returned 5.8%, while consumer cyclicals climbed 8.9% as tariffs failed to dent discretionary spending. Consumer defensives were the only sector in the red, with losses of 2.71%. Healthcare stocks, which have lagged all year, found themselves in positive territory with a return of 4.51%.<\/p>\n<\/p>\n Q3 Dividend Stock Performance<\/p>\n Dividend stocks again lagged the broader market\u2019s 8% <\/b>gain in the third quarter, though they posted higher returns compared with the second quarter. The Dividend Composite Index rose 6.4% for the quarter, compared with a 3.7% gain in the second quarter.<\/p>\n The Morningstar US Dividend Growth Index<\/a> rose 7.0%, while the Morningstar Dividend Leaders Index<\/a>, which includes the 100 stocks from the Composite Index with the highest yields, saw the smallest gains with a return of 4.8%.<\/p>\n<\/p>\n Global Market Performance<\/p>\n As investors turned their attention to the US tech rally, international markets saw more muted returns in the third quarter after their blistering rally in the first half of the year.<\/p>\n Chinese markets saw the strongest returns, climbing 20.1% for the quarter. Canadian markets outperformed the US with gains of 10.4%, while Japanese markets returned 8.57%.<\/p>\n![\"Flagship](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/10\/G27ED77QHVBKZPA5TXUDFYHTCI.png\")
<\/a>Best- and Worst-Performing Stocks ![\"The](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/10\/YSJIQ7OIKJFFXF3SDEVORL4KFA.jpg\")
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![\"Line](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/10\/7GHKIYL2IJCY7FNNQ53XO3ELUY.png\")
Value vs. Growth Performance<\/p>\n![\"Three](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/10\/DZRAMF6SBNFDTLBIRXKDYJEZWQ.png\")
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