Q3 2025 Investment Review
Summary
The U.S. bond market posted positive returns in Q3 2025, supported by a 25-basis-point Fed rate cut in September and falling interest rates. The Bloomberg Aggregate Index gained about 2.0%, led by gains in corporate bonds, agency MBS, and long-duration utilities. Credit spreads tightened to near multi-decade lows, reflecting investor appetite for yield despite inflation hovering above the Fed’s 2% target.
The economy remained resilient with modest GDP growth and a slowing labor market balancing openings and unemployment. Inflation measures rose slightly, with the Fed signaling a likely inflation rate ending near 3%.
Q4 Strategy
The Q4 2025 strategy adopts a cautious but optimistic stance in response to resilient risk markets. National Investment Services continues to overweight financials, benefiting from favorable regulatory shifts, while modestly increasing exposure to technology and consumer sectors. Opportunities in CMBS and ABS markets remain attractive, focusing on seasoned discount containers, private student loans, and hyperscale data center ABS. Given inflation resting near 3% and a complex economic backdrop, the approach balances selective risk-taking with prudent portfolio positioning to navigate potential volatility in the final quarter.
