Q3 2025 Post-Mortem From an Investment Adviser: Markets Continue to Climb, Gold Shines

The third quarter saw market gains driven by Fed rate cuts and strong earnings, despite high valuations and concerns about speculative trading and job growth. Gold and international stocks could be potential hedges.

By Prem Patel, MBA, IAR

published 2 October 2025

in Features

Gold bars lined up. — (Image credit: Getty Images)

Autumn is here with falling leaves, football and October baseball. Turning our attention to the third quarter's market, post-April's recovery, there were heavy headlines, from tariff talks to jobs revisions, but market volatility stayed subdued overall.

For investors eyeing retirement and portfolios, here's what unfolded and what it means going forward.

S&P 500's steady climb

Q3 further extended Q2's rebound, with the S&P 500 up 8% to just under 6,700, surpassing February's peak. Fed rate cuts and strong earnings fueled five straight positive months, a bullish turn after Q2's topping flirtation, and holding well above the 200-day moving average.

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Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Valuations, however, flash caution. S&P's forward P/E hit 24x, earnings yield is at 4.2%, matching 10-year Treasury yields. The price-to-sales ratio is highest on record at 3.3.

The Buffett Indicator climbed to 217%, topping the peaks during the dot-com bubble and before the 1929 crash, and two standard deviations above the long-term trendline. High valuations suggest leaner long-term returns, but they're not reliable for short-term predictions.

Technically, the market is at an interesting position as the S&P 500 nears a monthly channel ceiling, and the Russell 2000 eyes a double top. But momentum is strong, and the question is still open on whether this is a sustainable breakout or the setup for a pullback ahead.

Speculative trading, with 0DTE (zero days to expiration) options at a record 75% of Nasdaq total options volume, fuels risk.

U.S. markets were led by the Russell 2000 small-cap value index. The S&P Equal Weight was one of the weakest areas as the Magnificent 7 powered much of the gain, led by AI-fueled and other momentum names.

Across S&P sectors, communication services, information tech and consumer discretionary led with double-digit gains, while consumer staples lagged and was negative for the quarter.

Takeaway: Raise some cash if you're concerned about valuations. Rebalance if megacap strength continues, tilting toward mid/small-caps or value for rotation potential.

Global markets hold strong

International stocks continued their uptrend, with the MSCI All World Ex-U.S. up 5% in Q3. Emerging markets finished stronger, outperforming developed international and the U.S.

The dollar steadied after the big first-half drop, leaving it with its worst year since 1973. International markets overall were led by China, Japan, Mexico and Spain, while India and Germany lagged.

Overall, ex-U.S. stocks trade at 17x and emerging markets at 14x, while the S&P trades at 24x. Markets have been supported by global central banks having cut interest rates 168 times over the past 12 months, which is the third-highest reading this century.

Takeaway: Allocating to international stocks buffers some U.S. risks. Favor emerging markets for value.

Bonds steady amid yield pressure

Bonds edged slightly positive in Q3, with the 10-year Treasury yield at 4.1% after Q2's spike. The 30-year dipped to 4.7%, post-September's Fed cut, though inflation concerns lifted long-end yields.

Annualized interest payments topped $1.1 trillion, fueling deficit debates. The average 30-year mortgage rate is currently at about 6.4% as housing remains historically unaffordable.

Globally, Japan's 10-year yield hit 1.1%, and Switzerland's held close to zero, highlighting divergence.

Takeaway: Short-term bonds may hedge yield volatility. Emerging market local bonds add currency diversification.

Gold's momentum continues

Gold climbed to over $3,850 per ounce, having the best September in 14 years and best overall year since 1979. Gold miners (GDX up 116% YTD) are scorching-hot.

Silver is approaching $50 per ounce, its highest since 2011 (and 1980), poised for a historic breakout if it clears the level after decades of attempts. Platinum and palladium followed strongly.

Dollar weakness from the first half of the year lingered as a tailwind, alongside central bank buying, geopolitics and fiscal concerns.

Morgan Stanley now favors a 20% gold allocation as a more resilient inflation hedge at a time when U.S. equities are offering historically low upside over Treasuries, while DoubleLine Capital CEO Jeffrey Gundlach, known as the "bond king," believes holding a 25% gold position "isn't excessive."

Gold is now the second-largest reserve asset, behind the U.S. dollar.

Takeaway: If you lack precious metals exposure, explore a modest allocation on dips to hedge long-term inflation, adjusting for your risk tolerance.

Crypto's mixed bag

Cryptocurrencies held strong in Q3, with bitcoin (BTC) above $110,000. Bitcoin now makes up 58% of the overall crypto market, which is valued at $3.9 trillion.

Altcoins like ethereum, XRP and Solana outperformed bitcoin on momentum trades. Regulatory uncertainty looms.

Takeaway: Limit crypto to 5% or less for most portfolios, favoring bitcoin for relative stability.

Jobs under pressure

Q3 job growth slowed, with the Bureau of Labor Statistics' September revision from 2024-early 2025 the largest since 2000, slashing monthly averages to 70,000.

AI's impact grew: Walmart CEO Doug McMillon told The Wall Street Journal that he plans to keep the company's workforce at 2.1 million as AI reshapes roles.

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Hiring froze, per the Federal Reserve's so-called Beige Book. The Fed is eyeing cuts to spur hiring, risking inflation (2.9% core PCE, the highest since February).

Fed Chair Jerome Powell noted in a September 23 speech, "Near-term risks to inflation are tilted to the upside and risks to employment to the downside, a challenging situation."

Takeaway: Bolster emergency funds (six to 12 months' expenses) and increase retirement contributions for AI-driven disruptions.

What else can you do?

Here are some actionable steps to consider:

Optimize IRAs and 401(k)s with tax-advantaged funding and dollar-cost averaging.
Diversify globally. U.S. valuations urge caution. Explore ex-U.S. or emerging market equities and bonds.
Consider precious metals. Gold's soaring; silver or miners may offer value on pullbacks.
Add bonds. Short-term bonds could hedge rising risks.
Stay nimble as volatility could increase. Government shutdown, global tensions, Q3 earnings, tariffs, Fed moves and the One Big Beautiful Bill Act.

Markets don't rest — nor should you. Stay close for all the market moves as we finish out 2025!

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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In 2010, Prem Patel founded GreenRock Advisory, an independent firm within the Schwab Advisor Network, serving affluent clients nationwide. As a registered investment adviser and fiduciary, Prem enjoys forging lifelong relationships with clients, delivering personalized, unbiased guidance to help them achieve their financial goals. With 30 years of personal investment experience, he draws on his Series 65 license, MBA from The Ohio State University Fisher College of Business — specializing in investments, finance and economics — and deep study of financial history to sharpen his market insight.