Quarterly report
Small caps outpace large caps in Q3’s broad equity rally as market optimism is sustained
The third quarter of 2025 saw an improvement in the US growth outlook for 2025, and the Fed’s first rate cut of the year, all of which provided tailwinds for risk assets. While tariff uncertainty had not completely abated, it was not the main driver of market sentiment. The absence of further deterioration in the inflation outlook and marginal improvements in the trade landscape seemed to sustain market optimism.
Key highlights:
- Small caps outpace large caps in Q3
- Style leadership is mixed in Q3
- Industry performance reflects broader rally
- Earnings outlook continues to improve; Valuations mostly re-rate
- Russell IPO inclusion activity markedly improves
Authored by FTSE Russell’s Global Investment Research team, this quarterly publication provides a deep-dive into the performance and key market drivers of US equities, viewed through the lens of Russell large-cap (Russell 1000), small-cap (Russell 2000), Growth and Value indexes. It's part of a series of reports, available by email as soon as they are published.
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