The Takeaway
Value posted modest yet broad-based outperformance in the third quarter of 2025, led by strong gains in US mid-caps and developed markets outside the US, while the US small-cap segment remained an exception where growth outpaced value by a small margin.
Volatility patterns within the US showed clear style contrasts—large-cap growth indexes exhibited higher volatility than its value counterpart, whereas in the mid- and small-cap segments, value indexes were slightly more volatile than growth.
Valuation spreads, as measured by the P/E ratio, between growth and value narrowed across the board, after witnessing an increase in the previous quarter. Emerging markets saw the sharpest compression in valuation differentials.
The third quarter of 2025 delivered strong performance across the US, developed markets outside the US, and emerging markets. However, the lead of developed markets outside the US over the US narrowed during the period. In the US, the technology sector contributed roughly half of the index’s total return, while the consumer defensive sector was the only laggard. Within developed markets outside the US, Japan and Canada together accounted for more than half of the region’s overall performance. In emerging markets, gains were concentrated in China, Taiwan, and South Korea, which collectively drove the majority of the region’s returns.
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