Q3 Market Review: North American Markets Show Resilience

The third quarter of 2025 presented significant challenges for global markets: persistent inflation concerns, geopolitical tensions, and uncertainty around central bank policies. Yet, North American markets demonstrated remarkable resilience, outperforming many international counterparts. This review examines what drove this performance and what it means for investors going forward.

Key Highlights

The S&P/TSX Composite Index gained 4.2% in Q3, while the S&P 500 rose 5.8%. Technology and financial sectors led the gains, while energy showed volatility. Canadian markets benefited from strong commodity prices and resilient consumer spending.

What Drove the Resilience?

Several factors contributed to North American market strength:

Strong Corporate Earnings: Many companies exceeded expectations, driven by operational efficiency and pricing power.
Commodity Strength: Canadian markets benefited from elevated oil and natural gas prices, supporting the energy sector.
Consumer Resilience: Despite inflation, consumer spending remained robust, supporting retail and services sectors.
Technology Innovation: AI and cloud computing continued to drive growth in tech stocks.

Sector Performance

Not all sectors performed equally:

Technology: Up 8.3% - Continued AI adoption and cloud migration drove gains
Financials: Up 6.1% - Benefited from higher interest rates and strong loan growth
Energy: Volatile, ending up 2.4% - Geopolitical factors created swings
Real Estate: Down 1.2% - Higher rates continued to pressure REITs

Looking Ahead

As we enter Q4, several factors will shape market direction:

Interest Rate Trajectory: Central bank decisions will continue to influence market sentiment and sector rotation.

Earnings Season: Q4 earnings reports will reveal how companies are navigating economic headwinds.

Geopolitical Stability: International tensions could create volatility, but North American markets may remain relatively insulated.

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Frequently asked questions

Why did North American markets outperform in Q3?

North American markets benefited from strong corporate earnings, resilient consumer spending, and relative economic stability compared to other regions. Technology and financial sectors drove much of the gains, while commodity strength supported Canadian markets.

Should I adjust my portfolio based on Q3 performance?

Market performance in a single quarter shouldn't drive major portfolio changes. However, it's a good time to review your asset allocation, ensure diversification, and consider rebalancing if your portfolio has drifted from your target allocation. Focus on your long-term financial goals rather than short-term market movements.

What sectors look promising for Q4?

While past performance doesn't guarantee future results, technology and financials showed strong fundamentals in Q3. However, market conditions can change quickly. It's important to maintain a diversified portfolio across sectors rather than chasing recent winners. Consider your risk tolerance and investment timeline.

How should I interpret market volatility?

Market volatility is normal and expected. The key is to maintain a long-term perspective and avoid making emotional decisions based on short-term fluctuations. A well-diversified portfolio aligned with your risk tolerance and financial goals can help you weather market volatility over time.