Quarterly Market Insights

October 2025

A Season of Surging Markets and Shifting Narratives  

The third quarter of 2025 has been a period of remarkable market activity and evolving economic narratives. Investors have witnessed significant moves across equities, bonds, currencies and commodities, with several themes dominating the headlines. 

Gold’s Meteoric Rise and the AI Investment Boom 

Gold has captured attention with a dramatic rally, driven by both investor and central bank demand as they seek diversification away from the US dollar. While such price action can be exhilarating, history reminds us that rapid, sentiment-driven surges often lead to equally sharp corrections. As always, we encourage clients to view such episodes through a long-term lens, recognising that the most durable gains are rarely found in the heat of a frenzy. 

Meanwhile, artificial intelligence remains the engine of equity market returns. The world’s largest technology companies have committed unprecedented capital to AI infrastructure, forging new alliances and reshaping the competitive landscape. 

This echoes the late 1990s IT boom, with concentrated gains and rising correlations among the market’s giants. While innovation is a powerful force, we remain mindful that today’s winners are often already priced for perfection. 

Emerging Markets Step into the Light 

A notable feature of Q3 has been the broad re-rating of emerging market assets. Improved fundamentals, healthier balance sheets, moderating inflation and proactive central banks have supported both equity and fixed income markets in these regions. 

Countries like Brazil, China and South Korea have stood out, not just for their leadership in advanced technologies but also for compelling valuations. These markets, while volatile, offer differentiated sources of long-term growth for patient investors. 

Developed Markets: Resilience Amid Uncertainty 

Developed market equities, particularly in the US, UK and Europe, continued to post gains, buoyed by robust corporate earnings and supportive monetary policy. The much-anticipated interest rate cut in the US materialised in September, with markets now pricing in further easing.

In the UK, inflation remains above target, prompting the Bank of England to hold rates steady. Across regions, the interplay of politics, policy and economic data continues to shape sentiment, but the underlying message is one of resilience. 

Fixed Income: Opportunity in Quality and Diversification 

Bond markets have also delivered positive returns, with emerging market debt and high-quality government bonds benefiting from falling yields and currency appreciation. As always, diversification across geographies and asset classes has helped to cushion portfolios against volatility and capture opportunities as they arise. 

Looking Forward: The Value of Discipline and Diversification 

As we reflect on the quarter, a few enduring principles stand out. 

 

• Diversification remains essential. The best opportunities are often found where others are not looking and a broad approach helps manage risk in uncertain times.

• Long-term focus is key. Markets will always offer distractions, whether in the form of gold rallies, AI booms or political headlines, but the real rewards accrue to those who stay the course.

• Valuation matters. We continue to seek out areas where prices do not fully reflect long-term potential, while avoiding the temptation to chase what is already popular.

In Closing 

The past three months have offered both excitement and challenge, but our commitment remains unchanged: to help you navigate complexity with clarity, discipline and a focus on your long-term goals.

If you have questions or would like to discuss your financial plan in more detail, please reach out to us at info@waughmcdonald.co.ke

This newsletter is for information purposes only and does not constitute investment advice. Please consult with your adviser to ensure your strategy remains aligned with your objectives.