This year in the stock market feels like a case study in Nassim Taleb’s concept of antifragility—the idea that some systems can not only withstand shocks but can actually benefit from them. 2025 has brought no shortage of disruptions thus far: sweeping tariff announcements, an evolving geopolitical order, and the ongoing technological revolution driven by artificial intelligence. Yet through these stressors, the global economy has adapted and the stock market has gone on to reach new highs.

International developed and emerging markets stocks have continued to gain with international developed markets up nearly 5% for the quarter (26% year-to-date) and emerging markets gaining nearly 11% for the quarter (28% year-to-date) ¹.

There are different drivers of returns beneath those headline numbers, but the underlying cause can be attributed to disruptions (some may argue with potentially negative longer-term effects) that have pushed segments of the market higher.

Antifragile systems thrive on volatility, learning and strengthening from disorder. The financial market’s response to 2025’s shocks offers a vivid illustration:

• AI disruption has accelerated corporate investment, driving a new capital-expenditure cycle. What once may have seemed speculative has evolved into a structural growth story, that appears to be broadening beyond the “Magnificent 7” into semiconductor, infrastructure, and industrial supply chains. Many have likened it to the dot.com boom of the 1990’s – though the question of whether we are in the very early stages i.e.1995 or the later stages i.e.1999 of this boom remains.
• Tariffs and policy uncertainty have pressured some sectors but also re-energized discussion on domestic production, boosting select U.S. manufacturers and compelling renewed capital investment.
• Geopolitical shifts and U.S. policy changes have led to a declining U.S. dollar relative to international currencies, which has buoyed international stock returns this year. Even taking out the impact of the currency movement, international stocks have benefited from the changing winds of the new administration’s policies from tariffs to geopolitics. Unlike the U.S. equity market which has been fueled by AI momentum in technology stocks, the driver of returns in international developed markets has been more “boring” sectors like financials and industrials. European bank stocks in particular are up nearly 70%¹ in 2025 boosted by better profitability and a pickup in M&A activity. Aerospace and defense stocks in Europe are also benefiting from the expectation of increased military spending given geopolitical shifts.

Each of these forces has introduced volatility to the system —but the cumulative effect has been adaptation and opportunity, not collapse.

In fixed income, the Bloomberg U.S. Aggregate Bond Index rose 2% in Q3, bringing year-to-date returns to 6%. Lower treasury yields, tighter credit spreads, and steady demand for quality income all contributed to positive total returns across investment-grade, municipal, and high-yield sectors. The Bloomberg Municipal Bond Index gained 3% for the quarter ¹.

Even with the strong returns across asset classes so far this year, risks to the downside remain with high stock market valuations, a re-escalation in trade tensions and a slowing labor market, raising concerns about a slowing economy. The U.S. government shutdown (still in effect as of the writing of this letter) has also garnered significant attention in headlines – though data from past government shutdowns shows that these events tend to have limited impact on market returns.

It’s tempting to mistake uncertainty for fragility or to believe that every headline must translate into portfolio action. Antifragility, in behavioral terms, calls for discipline when it comes to investing. It’s the decision not to flinch when the system shakes.

This doesn’t mean that the market won’t go down at some point. Antifragile systems can still break down e.g. the Great Financial Crisis in 2008, but the hallmark of an antifragile system is that it bounces back and gets better.

Looking ahead, we remain constructive but measured. The AI investment cycle appears durable and the interest rate cutting cycle should support both risk assets and high-quality fixed income. Trimming back positions that are above target and adding exposure to diversifying asset classes including alternative investments is prudent given where we are at today.

As Taleb wrote, “Wind extinguishes a candle and energizes fire.” This year’s market turbulence has served as wind — testing structure and ultimately rewarding investors who stayed the course.