September 2025 Market Update

Overview

Global markets powered ahead in September, with a key global equity benchmark rising about 3.3% and pushing the Q3 total return to roughly 8.9%.

Earlier in the year, markets had trembled over fears of rising unemployment, but those worries eased as central banks pivoted back toward policy easing.

In September, the Federal Reserve cut rates by 25bps, ending a nine-month pause and rekindling hopes for further monetary stimulus.

Several additional dynamics stood out:

• Equity breadth and tech strength: The rally wasn’t narrowly focused. While AI and mega-cap tech stocks grabbed headlines, smaller caps and regions beyond the U.S. also participated.

• Valuation caution: Even as sentiment ran hot, some observers warned that markets may have grown “priced for perfection.” Vanguard’s CIO noted that stretched price-to-sales multiples could temper returns ahead.

• Bond market tailwinds: In fixed income, U.S. Treasury yields softened and credit spreads tightened, helping global bond indices post modest gains.

In the UK, equities delivered a solid 6.9% gain in Q3, but fiscal stress is increasingly visible. Thirty-year gilt yields above 5.7% mark their highest since the late 1990s, reflecting investor unease over widening deficits. Capital Economics estimates this move has added roughly £5.8bn to annual debt-servicing costs, squeezing fiscal headroom and filtering through to higher mortgage rates, which are now pressuring households as fixed-term deals expire.

Full update below…