Canada surged.
Small caps surged more.
Equities rebounded across every region in the third quarter, with Canadian and emerging market stocks out in front. The S&P 500 gained in all three months and added 7.8% on the quarter, its best third quarter since 2020 and before that the best since 2010.
Markets, in one table
| Returns | Canada | US | Dev exNA | EM | Global REITs | CA bonds | Global bonds |
|---|---|---|---|---|---|---|---|
| Q3 | 12.50% | 10.21% | 7.04% | 12.05% | 6.28% | 1.55% | 0.75% |
| YTD | 23.93% | 10.36% | 21.53% | 21.85% | 5.02% | 2.72% | 2.71% |
| 1 year | 28.60% | 20.46% | 18.84% | 19.49% | 1.71% | 2.71% | 1.36% |
Index returns in Canadian dollars as of September 30, 2025. Source: Dimensional Fund Advisors Canada. Past performance is no guarantee of future results. Indices are not available for direct investment. All rights reserved.
Canada surged 12.5% for the quarter on the back of energy, materials and small-cap strength. US markets added 10.2% in Canadian dollar terms. Bonds offered modest gains as yields stabilized, with Canadian bonds up 1.6% and global bonds up 0.8%.
Over a full year, Canada's 28.6% stands out as one of the strongest performances among major markets.
Country performance
Egypt, Peru, China, Colombia and South Africa led for the quarter. India, the Philippines and Denmark lagged. Canada outpaced its global peers, helped by heavy exposure to commodities and financials.
Stretch that to twelve months and Colombia and Greece dominated the global rankings with returns above 70% to 90%, while Canada and the US held leadership among the large developed markets.
Sector highlights
Dispersion between sectors stayed wide. In Canada, materials, energy and financials each posted double-digit gains. Information technology cooled after a strong run, and utilities and real estate lagged.
Factor performance in Canada
| Canada | Size | Value | Growth | High prof. | Low prof. |
|---|---|---|---|---|---|
| Large | 11.8% | 12.9% | 10.7% | 8.2% | 15.2% |
| Small | 21.2% | 25.5% | 17.0% | 17.0% | 26.6% |
Canada market returns in Canadian dollars, Q3 2025. Source: Dimensional Fund Advisors Canada. Past performance is no guarantee of future results. All rights reserved.
Small caps surged 21.2%, nearly double the large-cap return near 11.8%. Year to date, small-cap gains approached 37%, which is about as clear a size premium as you'll see in a nine-month window.
Value outpaced growth within both large and small caps, a complete reversal of 2023's growth dominance, supported by strength in energy, industrials and financials, the sectors typically overweight in value indices. High-profitability stocks lagged low-profitability ones.
Factor performance globally
| All country | Size | Value | Growth | High prof. | Low prof. |
|---|---|---|---|---|---|
| Large | 10.2% | 9.6% | 10.7% | 10.0% | 10.4% |
| Small | 9.7% | 10.2% | 9.2% | 7.8% | 11.7% |
All country markets returns in Canadian dollars, Q3 2025. Source: Dimensional Fund Advisors Canada. Past performance is no guarantee of future results. All rights reserved.
The global picture ran the other way on size. Large caps led as investors favoured stability amid mixed economic signals, and small caps gave back some of their early-year strength at 9.7% against 10.2%. Within small caps value beat growth, while large-cap growth, driven by US technology, stayed on top. High-profitability companies again underperformed as investors rotated toward riskier, more cyclical names.
Small caps nearly doubled large caps in Canada and lagged them globally, in the same three months. That's the argument for owning the whole market rather than the part that worked last year.
What history says about fourth quarters
S&P 500 average quarterly returns, 1950 to 2024
Historically the fourth quarter has been the strongest of the year, higher 80% of the time and up 4.2% on average, and it hasn't been close. Whether that pattern holds in any particular year is another question entirely, and a seasonal average is a description of the past rather than a forecast.
Questions about your own portfolio?
Happy to walk through how these returns and trends actually affect what you hold, and what if anything is worth changing. Book a time and we'll talk it through.
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Guillaume Girard, CFA, CFP®
Founder & Financial Planner
Girard Wealth · Victoria, BC
Main Line: 226-241-4559
Portfolio Strategies Corporation
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