Despite the continuation of President Trump’s aggressive tariff policy, September 2025 went against the grain as an historically weak month for equities as most major markets returned solid gains. Markets were further buoyed by an easing of inflation fears, more resilient economic indicators, as well as a rate cut by the Federal Reserve, despite the looming possibility of a US government shutdown on the 1 October 2025 with the democrats and republicans failing to agree on a temporary spending bill.

The US markets were positive, as the S&P 500 hit a record high on 22 September, and ending the month higher by 3.5%, while the Dow, which also recorded new record highs, ended the month higher by 1.9%. The Nasdaq outperformed both, ending the month higher by 5.6%, reaching new highs for the sixth month in a row on the back of innovations around AI. US headline inflation for August (CPI) picked up, printing at 2.9% compared to the July print of 2.7%, while core CPI (excluding food and energy), rose by 2.9% compared to July’s 3.1%. August core PCE, the Fed’s preferred inflation measure, remained steady at 2.9% YoY.

The S&P 500 earnings per share (EPS) forecast is still at +10% YoY for 2025, but growth remains concentrated in Al mega-caps while the broader market (Energy, Financials, Cyclicals) faces margin headwinds from tariffs, wages, and weaker demand. EPS revisions are positive but have narrowed and the Q2 2025 beat ratio was 81%, with the Mag 7 driving outsized gains. Tech/Industrials were upgraded while Energy, Autos and Materials were downgraded while the breadth of revisions continues to weaken. The S&P 500 is trading at ~22.5x forward earnings, well above historical norms and the equity risk premiums remain near cycle lows. Policy easing (Fed rate cuts) supports these multiples, but there are risks to the downside from tariffs (margin drag) and fiscal deficits (longer-term valuation fragility). Interestingly, investment style dispersion is at extreme levels with tech mega-caps trading at 26-30x forward earnings; Growth/Quality is richly valued, while Value is attractive but faces negative earnings revisions. Price action has been robust across most periods and is not in overbought territory. Relative momentum is turning with the US regaining outperformance vs EAFE/Europe/UK/Japan but is still underperforming EM/Asia. US equities remain the global growth proxy, but strength is narrow and crowded – making the market both resilient and fragile at the same time.

Following the trend, European markets recorded their best performance in a September since 2019, with heightened optimism around a resilient US economy, as well as the possibility of lower rates boosting market sentiment. Although the CAC 40 closed the month higher by 2.5%, the Dax slowed marginally, closing softer by 0.1%. Headline inflation in August for the Eurozone came in at 2.1%, compared to the July print of 2.0%, ahead of the ECB’s 2.0% inflation target. Unlike its US counterpart, the ECB held rates steady as it continues to struggle with economic uncertainty despite reaching a trade agreement with the US, while European inflation seems to have stabilised.

Eurozone growth remains weak and uneven, with modest stabilisation during 2025 driven by real wage gains, lower energy costs, and improving tourism in Southern Europe. However, structural challenges, tepid consumer demand, and poor external demand continue to weigh on the outlook. European earnings revisions remain net negative while credit growth is subdued amid tighter financial conditions, weak capital expenditure, and cautious corporate investment behaviour, signalling a mid-to-late cycle environment. Fiscal policy support is constrained by the reimposition of EU budget rules, limiting flexibility despite growing needs for green and defence spending. The lack of bold policy stimulus curbs upside potential. In the UK, the FTSE 100 recorded new highs, closing 1.8% up for the month, with the inflation print for August unchanged from the July number of 3.8% YoY and close to the highs recorded in January 2024.

Growth remains subdued in the euro zone with GDP forecast at ~1.2% for 2025. Externally driven sectors such as luxury, healthcare and staples have outperformed while domestic cyclicals lag due to tariffs, higher energy costs, and the tight fiscal conditions. Germany is underperforming while Spain has remained more resilient. EPS outlook consensus is for + 5/6% for 2025, but revisions are closer to + 3/4%, highlighting the downside risk. Upgrades in EPS are concentrated in staples and healthcare with downgrades in autos, chemicals, and UK cyclicals. Luxury/staples are showing strong double-digit EPS growth on global demand and positive FX tailwinds. European valuations are slightly rich in absolute terms but trade at a 30-40% discount to US. The UK is the cheapest developed market (DM), but sentiment and cyclicals drag. Europe and the UK are trading at deep discounts to the US, with dividends and free cash flow yields attractive, but earnings risk remains skewed to the downside, with no immediate catalysts.

Asian markets ended the month higher, and despite still being subject to at least 50% tariffs, China shrugged off economic concerns. The Shanghai Composite ended the month higher by 0.6%, and the Hang Seng leapt by 7.1%. Like the US, tech counters took centre stage as AI innovations created a buzz.

Growth is resilient in Asia but remains uneven as Asia ex-Japan benefits from policy easing and liquidity tailwinds with the earnings outlook being constructive. Asia ex-Japan leads (Korea, India and Taiwan on semiconductors and tech/financials). LatAm remains mixed with Brazil positive, while in the broader LatAm growth is softer. Emerging markets (EM) are trading at ~30% discount to DM with Asia ex-Japan’s valuation richer but still cheaper than DM growth. LatAm/EMEA seems to offer better relative value. The short-term performance is mixed as Asia ex-Japan looks stretched, but dips are attracting buyers. EM equities are supported by a weaker dollar, Fed easing, and stabilising global PMls, but leadership is narrow.

In Japan, the Nikkei closed the month higher by 5.8%, with the headline inflation print for August falling to 2.7% YoY, compared to the July number of 3.1% YoY, above the BoJ’s inflation target of 2.0%. Like the ECB, the BoJ kept rates unchanged at 0.5%, in line with market expectations.

Q2 2025 GDP growth beat expectations on resilient domestic demand, but tariffs are weighing on exports/machinery investment. Activity is likely to dip in H2 2025 before stabilising in 2026 as global trade improves. Stabilising global PMls remain supportive, but exports are the main risk. Inflation is shifting to wages and services led with wage growth broadening into SMEs, reinforcing consumption but raising persistent inflation risk.

Record share buybacks, cross-shareholding reductions, and governance upgrades are driving shareholder yields above global peers. These reforms underpin the long-term inflows and resilience with price action and flows remaining positive, indices are near relative highs vs global peers. We have noted a rotation toward financials and domestic sectors while exporters are pressured by tariffs. Japanese equities remain supported by reforms, buybacks, and improved return on equity (ROE), but near-term upside is constrained by tariff risks and BoJ policy normalisation.

South Africa

In South Africa, in September the JSE ALSI had its seventh consecutive monthly gain, up 6.0%, with the RESI-10 up 27.4% and precious metals again in the vanguard. The rest of the local market was constrained as financials were weaker by 2.7%, property weaker by 1.2%, but industrials ended firmer by 1.3%.

Some stock highlights for the month, led by precious metals (gold and platinum) were Valterra Platinum up 52.9%, DRD Gold up 50.9%, SSW up 48%, Northam up 42.4%, Impala up 38.3%, Harmony up 34%, Goldfields up 26%. Stock lowlights for the month were Sappi down by 20%, KAP, weaker by 20%, Santam lower by 13.7% and Sun International declining by 13.6%.