What we saw: Financial markets continued the positive momentum in place for most of 2025, driving most asset classes higher despite ongoing inflationary pressures and signs of a cooling US labor market. Domestic equities continued to rise, driven by stronger-than-expected economic growth, positive corporate earnings revisions, and a pivotal shift toward easing monetary policy. 

The Federal Reserve’s decision to implement its first interest rate cut since December 2024 provided a third quarter boost to investor sentiment. The S&P 500 climbed 3.6% in September, bringing its year-to-date return to 14.8%. The Russell 2000 reached a record high, signaling renewed optimism for small-cap stocks. Global equities also continued their positive ascent, with most major global indices across developed and emerging markets posting double-digit gains for the year to date. Fixed income markets also experienced positive price appreciation, with the Barclays US Aggregate Bond Index up 2.5% and higher yielding bonds gaining 7.4% year to date, as investors consider the beginning of lower interest rates. 

A key driver of economic momentum has been the generative AI investment cycle, now contributing nearly 1% to annual GDP growth. However, there are emerging signs of a maturing bull market, as AI capital expenditures and the associated market impact are approaching levels historically associated with market bubbles. Despite the strong performance, traditional equity valuation metrics suggest caution is necessary going forward. The S&P 500’s forward price-to-earnings ratio stands at 23, and the Buffett Indicator (measuring market capitalization relative to GDP) has reached an elevated 232%, indicating potential overvaluation for equities. 

Looking ahead, markets will digest the potential for continued growth against mixed scenarios of moderate economic expansion, easing inflation, and anticipated US Federal Reserve rate cuts through the end of 2025 and throughout 2026.  

Performance of NCCF investment managers: Diversified portfolios have reaped the benefits of broad exposure, particularly in international equities, natural resources and infrastructure, which helped minimize volatility in early 2025. NCCF managers experienced modest gains during the third quarter of 2025 in the range of 2 to 6%. Returns remain positive on a rolling longer term basis, with most managers averaging close to double-digit positive returns at the three-year interval, and returns at the five-,10-and 15-year intervals are in line with the broader goal of supporting endowment spending.  

More market commentary is available from NCCF’s investment advisor, Graystone Morgan Stanley. For investment information specific to your fund, please contact your Donor Engagement Officer or email support@nccommunityfoundation.org.     

	1-Year	3-Years	5-Years	10-Years	15-Years
Long Term Diversified Pool	11.0%	13.9%	8.5%	7.6%	7.3%
Benchmark – Diversified	11.4%	14.6%	9.0%	8.4%	7.7%
Long Term Growth Pool	12.6%	18.4%	11.0%	9.8%	9.3%
Benchmark – Blended	11.1%	15.9%	9.3%	9.2%	9.1%
All Managers (Net Weighted)	11.5%	15.4%	9.1%	8.4%	8.1%
Benchmark – Broad	12.9%	17.5%	9.3%	9.0%	8.0%
Benchmark – Broad: This benchmark represents a general approach to investment. 70% MSCI All Country World Equity Index , 30% Bloomberg Barclays Aggregate Bond Ind
Benchmark – Diversified: This benchmark represents a diversified approach to investment with material allocations to a combination of private equity, private debt, and alternative investments. 24% MSCI ACWI ex US, 20% S&P 500, 10% Russell 2500, 18% Bloomberg Barclays Aggregate Bond Index, 10% HFRI FOF index, 6% MSCI Infrastructure, 6% Cambridge Private Equity, 4% Barclay CTA, 2% Cambridge Private Debt
Benchmark – Blended: This benchmark represents a diversified approach to investment in public markets. 35% R1000, 15% Russell Midcap, 5% R2000, 10% MSCI EAFE Net, 30% Barclays Govt/Credit Bond, 5% FTSE Treasury Bill 3 Month.