Global stock markets moved higher last month, although the pace of gains slowed across many developed regions. Even so, supportive policies, attractive valuations, and favourable currency trends helped maintain investor optimism.
In the US, the Federal Reserve cut the Fed Funds Rate by 25 basis points — the first reduction since December 2024. The move gave a welcome boost to fixed income markets, while commodities also finished the month in positive territory, despite some mixed performance among individual components.
Among commodities, precious metals were the clear standout. Gold prices surged to new highs, supported by renewed inflation concerns, the Fed’s rate cut, and continued uncertainty around the US government shutdown. Investors once again turned to gold as a safe-haven asset amid growing macroeconomic risks.
Market Activity
In September, we introduced a new real estate-focused allocation, now serving as the global property component within the Active Asset Allocation (AAA) and multi-asset funds. This fund tracks an index of the largest listed real estate companies across developed markets.
From a sector point of view, our current preferences include Communication Services, Materials, and Industrials. We remain underweight in Consumer Staples, Energy, and Utilities, while holding an overweight position in gold and maintaining a slightly shorter bond duration.
Regionally, our equity exposure is underweight in the US, overweight in Asia Pacific, and broadly neutral across Europe and Japan.
Equity Markets
Major US equity indices ended September on a strong note. Ongoing enthusiasm for AI-driven companies, resilient corporate earnings, and renewed optimism after the Fed’s rate cut all helped lift sentiment.
In Europe, equities also gained ground, supported by improving economic data and upbeat earnings reports. France, however, underperformed slightly amid continued political uncertainty. Meanwhile, Chinese equities advanced as government initiatives aimed at stabilising industrial profits and curbing price wars began to take effect.
On a global level, Information Technology (+7.0%) and Communication Services (+4.3%) led the way, while Consumer Staples (-2.4%) and Energy (-0.8%) lagged. This pattern reflects investors’ ongoing focus on a few dominant mega-cap names within the tech sector.
Bonds and Interest Rates
In September, the Federal Reserve reduced the federal funds rate to a range of 4.0%–4.25%, describing the move as a “middle path” to balance persistent inflation with a cooling labour market.
Across the Atlantic, the European Central Bank (ECB) held its deposit rate steady at 2%. ECB President Christine Lagarde signalled patience, noting potential risks tied to the ongoing US–EU tariff dispute.
US Treasury yields dipped to 4.02% mid-month before rebounding to 4.15%, while German 10-year bund yields held close to 2.7%, showing relative stability in the Eurozone bond market.
Commodities and Currencies
Oil prices fell in September, with WTI crude closing at $62.37 per barrel. Concerns about excess supply and softening demand outweighed hopes that the Fed’s rate cut would stimulate consumption.
In contrast, gold climbed 11.9% (USD terms) during the month, benefiting from economic uncertainty and rising expectations of further rate cuts.
The US dollar weakened slightly against the euro, with the exchange rate moving to 1.173 USD per euro by month-end (up from 1.169 in August). Softer US economic data and concerns over the growing federal deficit weighed on demand for the dollar.
Global Outlook
Looking ahead, the US economy is likely to continue slowing through late 2025. However, recent rate cuts and earlier-than-expected fiscal spending are helping to sustain modest growth. The ongoing US government shutdown, which began on 1 October 2025, remains a key downside risk.
Concerns about rising US government debt and limited political appetite for fiscal restraint are expected to keep long-term Treasury yields elevated.
Globally, economic growth is forecast to ease from 3.3% in 2024 to 3.2% in 2025, and 2.9% in 2026, as trade tensions and higher tariffs continue to weigh on investment and cross-border activity.
Inflation is expected to trend lower across most G20 economies as growth moderates and labour markets cool.
Investor sentiment remains strongest toward large-cap growth and technology companies, driven by accelerating AI adoption, increased demand for data centres and cloud infrastructure, and robust earnings from leaders such as NVIDIA and Microsoft.
However, potential headwinds remain. Rising tariffs, persistent fiscal concerns, and the risk of a correction in the technology sector could all challenge global markets in the months ahead.
Important Information
Warning: Past performance is not a reliable guide to future performance.
Warning: Benefits may be affected by changes in currency exchange rates.
Warning: The value of your investment may go down as well as up.
