Investment Services Driven by Your Mission
A Message from Chief Investment Officer
Johara Farhadieh
As investors reflect on the third quarter of 2025, it’s not hard to spot evidence of uncertainty. From geopolitical conflict and global trade tensions to sticky inflation and cooling labor market data, there are plenty of unknowns throughout the financial markets right now. Still, there are many optimistic signs. We continue to see compelling opportunities in global equity markets, and corporate earnings results remain strong.
Looking toward our work here at Wespath, I’m proud to celebrate several important milestones for our team and our clients. The successful launch of the International Equity Index Fund – I Series marks another step forward in our commitment to offering cost-effective, mission-focused investment solutions, while implementing a new benchmark for the Multiple Asset Fund – I Series provides a simpler, more transparent way for investors to measure our performance against industry standards.
Meanwhile, the release of our latest Sustainable Investment Report highlights our ongoing commitment to values-based stewardship and responsible investing. I’m excited for you to hear more about all these successes in this quarter’s letter.
Of course, I recognize that our progress as an organization is only meaningful if it helps our investors feel supported and empowered in living out their missions. We know the landscape ahead is complex. Our team is committed to walking alongside you, offering steady guidance and practical solutions, whether that’s through sound investment management or by helping you address operational hurdles. Our aim is to support you on every front, so you can focus on your mission with confidence.
Thank you for allowing us to be part of your journey. I hope you enjoy reading this quarter’s letter!
1 This letter is intended for institutional investor audiences. Wespath Benefits and Investments (“Wespath”) is a general agency of The United Methodist Church, a 501(c)(3) tax-exempt organization. Wespath administers benefit plans and together with its subsidiaries, UMC Benefit Board, Inc. (“UMCBB”) and Wespath Institutional Investments, LLC (“WII”), invests (or provides back-office services for) assets on behalf of benefit plan participants and beneficiaries, plan sponsors and other institutions controlled by, associated with or related to The United Methodist Church. The P Series funds are managed by UMCBB, and the I Series funds are managed by WII. As part of the Wespath organization, WII and UMCBB utilize certain shared personnel, including investment professionals. The shared personnel relationship is governed by the terms of a Dual Employee Agreement entered into by and among Wespath, WII and UMCBB. Unless otherwise noted, the firm referenced herein is defined to include Wespath, UMCBB and WII
Key Takeaways from Q3
• GDP: After tariff related volatility earlier in the year, Q2 2025 U.S. GDP grew at 3.8%. The Atlanta Fed GDP Now is forecasting Q3 2025 growth to come in at 3.9% (as of its September 26 estimate).
• Inflation: The August Consumer Price Index (CPI) reading showed year-over-year inflation at 2.9%, in line with expectations but slightly higher than the 2.7% number for June and July. The Personal Consumption Expenditures (PCE) Index was up 2.6% in July, higher than the 2.4% seen in May.
• Trade & Global Backdrop: Tariffs are weighing on the outlook for global economic growth. Some major forecasters have flagged upward pressure on prices and a drag on U.S. growth as earlier efforts to front-load tariffs fade. Meanwhile, growth in Europe is soft, with Germany remaining near stagnation.
• The Fed: On September 17, the Fed cut its benchmark interest rate by 25 basis points to 4.00%–4.25%. The central bank characterized the move as a “risk management” cut amid slower job gains, penciling in up to two additional cuts in 2025.
• Fiscal Spending: The U.S. federal government’s debt service costs are rising. Baseline projections now show net interest spending eclipsing $1 trillion by 2026 and climbing thereafter, narrowing future policy flexibility. Nevertheless, both the U.S. and governments around the world are expected to continue largescale deficit spending, which should provide a buoy for risk assets.
• Fiscal Spending: Wall Street consensus estimates indicate approximately 7–8% earnings per share (EPS) growth for the S&P 500 in Q3, which would represent a ninth straight quarter of positive EPS growth for the index. Meanwhile, the S&P 500’s forward P/E of approximately 22.6 sits above its five- and 10-year averages.
• Stocks: The S&P 500 gained 8.1% in Q3, bringing year-to-date returns to 14.8%. International equities also showed strong gains, with the MSCI ACWI ex-U.S.IMI index rising 6.9% in Q3 and 26.0% year to date.
• Bonds: The U.S. Aggregate Bond Index rose 2.0% in Q3, with year-to-date gains at a strong 6.1%. The U.S. 10-year yield fell from 4.3% to 4.1% in Q3, with steady inflation but softer employment data. Corporate and high-yield spreads narrowed slightly and remain near 30-year lows.
Monetary Policy & Labor Market Revisions
The Fed’s recent decision to cut interest rates was driven in part by softening data in the U.S. labor market. Notably, in September, the Bureau of Labor Statistics revised U.S. non-farm payroll gains downward by nearly one million jobs for the one-year period from April 2024 to March 2025.
This significant revision quickly reshaped the macroeconomic narrative, setting the stage for renewed monetary easing. Though the Fed has said its forecast of up to two additional cuts in 2025 will be data dependent, futures markets are already pricing in those 50 basis points of cuts, which would leave the central bank’s benchmark interest rate at 3.75% by the end of the year. Nevertheless, inflation remains noticeably above the Fed’s 2.0% target. The growing tension between a cooling labor market, lower interest rates and still-elevated inflation puts central bank policy squarely in focus as we head into Q4.
Commodities & Safe-Haven
Assets
Speaking of tension, we see some conflicting indicators of sentiment in financial markets. Stocks notched another solid quarter in Q3, and credit spreads continued to tighten. These types of results in risk assets are typically an indicator of a healthy risk appetite among investors, which is consistent with the support of lower interest rates and significant government spending.
Despite this, gold emerged as one of the quarter’s top performers, rising nearly 16%. A weaker U.S. dollar and persistent policy unknowns fueled inflows into the metal, reinforcing its role as a safe-haven asset in times of uncertainty but painting an unclear picture of overall investor sentiment.
Technology Spending & AI Momentum
Perhaps another positive indicator for risks assets is the continued trend of private sector spending. Corporate stock buyback activity remains strong, and global enterprise technology spending continues to accelerate, with artificial intelligence remaining the dominant theme. A standout moment in Q3 came from Oracle’s landmark $300 billion contract with OpenAI, which propelled its stock up 28% for the quarter. This underscores the growing strategic importance of AI across sectors and its continued impact on equity performance.
This AI-related optimism, as well as strong earnings results and earnings growth estimates, delivered a strong quarter for growth-oriented stocks in the U.S. Familiar names like Apple, Nvidia and Alphabet were among the strongest contributors, which helped U.S. stocks outperform their international peers in Q3.
Still, both international developed and emerging market stocks remain comfortably ahead of U.S. stocks on a year-todate basis. As our team wrote in the Investment Insights blog in September, international diversification offers exposure to different economic structures, attractive valuations and currency diversification (also read: Understanding U.S. Equity’s Historical Outperformance: A Case for Balanced Global Exposure).
New International Equity Index Fund for Institutional Investors
We’re excited to share that our newest institutional investor fund, the International Equity Index Fund – I Series (IEIF-I), launched on October 1! This fund offers investors a cost-effective, passively managed option for broad international equity exposure.
Benchmarked to the MSCI World ex-U.S. Index, which covers 22 out of 23 developed market countries (excluding the United States), IEIF-I complements Wespath’s existing actively managed international equity strategies, allowing clients to further customize their allocation between active and passive management. This fund launch exemplifies Wespath’s commitment to delivering mission-focused, values-aligned investment solutions for nonprofit organizations.
Read more here: 5 Things to Know About Wespath’s New International Equity Index Fund for Institutional Investors
A New Benchmark for the Multiple Asset Fund
Continuing the theme of enhancing our fund offerings, we’re also pleased to share an update to the benchmark for the Multiple Asset Fund – I Series (MAF-I), designed to better reflect the fund’s strategic allocation and align with industry standards. Effective October 1, MAF-I has adopted a simplified benchmark composed of 65% MSCI All Country World Index (ACWI) and 35% Bloomberg U.S. Aggregate Bond Index (U.S. Aggregate).
This change replaces the previous custom benchmark and provides a clearer, more transparent representation of the fund’s equity and fixed income exposures. The MSCI ACWI offers broad global equity coverage across developed and emerging markets, while the U.S. Aggregate is the most widely used proxy for investment-grade U.S. fixed income. By adopting widely recognized benchmarks, we hope to enhance comparability, improve performance tracking and reinforce our disciplined investment approach.
The new benchmark structure mirrors the fund’s neutral allocation of 65% equity and 35% fixed income, which has been reaffirmed through extensive research and optimization analysis led by our investment team and overseen by our Investment Committee. Clients can expect continued transparency and communication as we share more updates from the team’s latest research and fund enhancement efforts in the coming weeks.
In September, Wespath’s own Johara Farhadieh was named one of Pensions & Investments’ 2025 Influential Women in Institutional Investing! This honor places her among more than 40 distinguished women investment professionals celebrated this year.
“Recognitions like this remind me how fortunate I am to love my work and to wake up each day with the opportunity to make a difference for incredible people and organizations… It’s also an honor to be recognized alongside so many accomplished women on this year’s list. Thank you!” Johara said.
Read more in Pensions & Investments’ 2025 Influential Women in Institutional Investing profile
Johara Farhadieh Named to 2025 Influential Women in Institutional Investing List
New Report Highlights How Wespath Advances Values-Based Investing
In September, Wespath published its latest Sustainable Investment Report, highlighting our work on affordable housing, climate change, human rights and corporate governance over the past two years. In addition, the report explains how Wespath incorporates sustainable investment considerations into its investment process and asset manager selection to support investment returns.
Importantly, the report is more than just a summary of activities it’s also a valuable resource for anyone interested in values-based investing and sustainable investment strategies.
This year’s report was designed as a dynamic digital flipbook, making it easy for readers to navigate and share specific sections that matter most to them. In the report, you’ll hear about a broad spectrum of themes, including:
• Wespath’s Investment Process: This section details Wespath’s rigorous multi-phase approach to fund construction, asset manager selection, asset allocation and ongoing monitoring. We also showcase how this process supported the launch of two new funds for institutional investors.
• Investment Exclusions: The report outlines ethical exclusions, such as avoiding investments in weapons and other industries that do not align with faith-based principles, as well as sustainability-related exclusions focused on mitigating financial risk.
• Impact Investing: We feature several examples of impact investing, where we seek both positive societal outcomes and market-rate returns, including investments in affordable housing and partnerships with nonprofits that empower underserved communities. For instance, Wespath’s Positive Social Purpose Lending Program invested in a New York building that supports individuals served by local health agencies and provided loans to a nonprofit that supports economic development in South Africa, catalyzing support for Black entrepreneurs and farmers.
• Corporate Engagement: The report highlights engagements with financial giants like J.P. Morgan and Fidelity, as well as clothing brands Under Armour and Abercrombie & Fitch, demonstrating Wespath’s advocacy for responsible business practices across industries.
• Governance: This section describes how Wespath’s engagement led an asset manager to change proxy voting policies to support diversity disclosures.
Throughout the report, we also highlight several ecumenical and interfaith partnerships, including faithbased groups Wespath staff have helped lead and collaborative corporate engagements with other faith-based investors. We invite you to explore the digital flipbook and discover how Wespath’s holistic approach to sustainable investing is making a difference for diverse audiences and communities!
Themes to Watch in Q4
As we head into the final quarter of 2025, several key themes are poised to shape market narratives and drive investment outcomes:
Stocks: While U.S. stocks remain expensive by traditional measures like P/E ratio, the global fiscal and monetary backdrop remain supportive for asset prices. Corporate earnings growth is expected to be in the low double digits to end the year and above historical averages, putting valuations in context.
Opportunities outside U.S. equities: International markets have been outpacing the U.S. on cheaper valuations, a weaker U.S. dollar, broader earnings breadth and policy support in select regions. With the 2025 dollar slide still in effect, non-USD assets retain a tactical tailwind. Though corporate technology investment in AI remains a driver for U.S. mega-cap technology names, recent results reflect broadening global momentum.
Bonds: High-yield spreads have continued to contract and now remain near record lows, indicating bond investors are not particularly concerned with default risk right now. While the Fed’s dovish policy stance is likely to drive down yields, the U.S. yield curve has steepened with colliding tensions around inflation and containing government debt.
Geopolitics: Periodic spikes in geopolitical risk stemming from Middle East tensions, Europe’s defense build-up and Asia’s strategic positioning on themes like AI are all possibilities. Energy-supply disruptions or new sanctions could reignite price pressures and add uncertainty.
Trade policy: Tariffs remain a swing factor for profit margins and supply chains. As the impact of front-loaded orders meant to avoid new tariffs fades, watch for greater pass-through to consumer prices and selective onshoring incentives that shift capital expenditures and trade flows. As we’ve seen already this year, tariff policy can also change quickly.
Inflation expectations: The near-term path for inflation largely depends on wages, shelter and tariff spillovers. While inflation expectations show inflation subsiding, the Fed flagged the “two-sided risk” of cooling labor markets and still elevated prices which remain vulnerable to shifting economic dynamics.
Growth expectations: Economists are calling for moderate growth slower than 2024, but not recessionary. A softening labor market argues for gradual monetary policy easing, even with 3% GDP expected in the U.S. Europe remains soft but stabilizing, while Asia’s expected 4% growth remains the standout.