September delivered solid returns across global equity markets, as optimism over lower interest rates, resilient economic data, and appetites for growth again reasserted themselves.
Source: Bloomberg
At a regional level, emerging market equities (shown in orange above) led performance in September, advancing 5.8% in euro terms. Asia Pacific ex-Japan (in yellow) followed closely with a 4.4% gain. Chinese has been a strong performing market this year but Taiwan was a major contributor in September. Emerging Markets typically benefit from a softer dollar, easing trade tensions, and a continued improvement in investor sentiment.
In the U.S., markets continued to grind higher, with the large-cap S&P 500 (shown in green) rising 3.25%, though still trailing the technology-heavy Nasdaq. Optimism over interest rate cuts provided a strong tailwind for mega-cap growth stocks, as the Federal Reserve delivered its first 0.25% interest rate reduction of 2025. Expectations of further cuts provided support to equities – particularly in rate-sensitive sectors. The renewed ‘lower-for-longer’ interest rate story reignited investor confidence, driving fresh capital back into stocks.
Positive corporate earnings reports also underpinned equity market optimism, with many companies continuing to surpass forecasts. Readers may have expected trade wars and tariffs to hold back share prices. Positive company results helped reassure investors that, despite ongoing global tariff concerns, corporate performance remains resilient – easing fears that slowing economic momentum might threaten stock valuations.
Across Europe and the UK, equity markets showed resilience though gains were capped by lingering political risks and growth concerns. In continental Europe, the MSCI Europe ex UK index advanced 1.5%, buoyed by strength in technology, healthcare, and industrial sectors.
In the UK, equity markets were more subdued. The FTSE 100 showed limited upside, reflecting the headwinds from a weak domestic economy and sterling volatility. The FTSE 250, which has greater exposure to UK-centric businesses, underperformed, weighed down by lingering concerns about demand, inflation, and policy direction.
Bond returns were mixed but generally positive and heavily influenced by positioning in short or long-dated assets. Early in the month, interest rate cuts in the US and other markets boosted bond prices. As we went through September, In several regions, stronger-than-expected inflation (negative for bonds) pushed yields on shorter-dated bonds higher (reduced prices), while longer maturities fared better.
Source: Bloomberg
Credit markets (corporate bonds) fared comparatively better than sovereigns (government bonds), with investment-grade bonds (higher quality) supported by solid corporate earnings and strong balance sheets.
In the commodity space, gold continues to shine (excuse the pun), up another 9% in September driven by continuing concerns about government debt and trade disputes. Oil, on the other hand, was down 6.6% for the month as producers continue to expand supply.
Looking ahead, one of the biggest risks is that inflation could turn out higher than expected, which would likely push interest rate expectations back up. In September, inflation across the eurozone rose to 2.2%, from 2.0% in August, with Germany running even hotter at 2.4%. In response, the European Central Bank kept its main rate unchanged at 2.00%, acknowledging the uncertainty around tariffs and future price pressures, but repeating its commitment to bring inflation back under control over time.
At the same time, ongoing trade disputes remain a worry for businesses and investors alike. Many companies are now feeling the impact of earlier tariff measures, either absorbing higher costs themselves or passing them on to consumers. For investors, this mix of sticky inflation and trade uncertainty reinforces why central banks are cautious about cutting rates too quickly, and why markets may remain volatile in the months ahead.
Taken together, September’s economic landscape is one of mixed signals: growth is holding up better than many feared, but inflation remains stubborn and trade policy uncertainty hasn’t gone away. For markets, this has translated into a supportive environment for equities. We will watch the announcements on earnings for Q3 very carefully for insights from corporates on performance and future profitability. Market watchers will be particularly interested to see if the Magnificent Seven technology shares can continue to deliver on market expectations. Bonds will react to any signs of inflation emerging and will watch carefully for signals regarding future US interest rate cuts.
At Fairstone, we remain committed to building well-diversified portfolios across regions and asset classes, with a focus on delivering long-term growth, accepting the inevitable ups and downs on the journey to delivering positive client outcomes aligned to their attitude to risk.
This publication was prepared by Imogen Hambly CFA, Portfolio Manager for Fairstone Private Wealth Ltd (United Kingdom).Fairstone Private Wealth Ltd. is authorised and regulated by the Financial Conduct Authority (FRN: 457558)
This publication is for general information purposes and is not an invitation to deal or address your specific requirements. The information is believed to be reliable but is not guaranteed. Any expressions of opinions are subject to change without notice. This publication is not to be reproduced in whole or in part without prior permission. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information of the various source material, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. We cannot accept responsibility for any loss due to acts or omissions taken in respect of the information contained within the articles. Thresholds, percentage rates and tax may be amended due to future legislative changes.
Information as of the date of publication 03/10/2025
