September 2025 Market Trends: What Investors Missed

Monetary policy shifts drive risk appetite

The month showed how a single shift in monetary tone can reset global risk appetite, from Wall Street to emerging Asia, and why diversification is becoming strategic again, not just defensive.

September’s story was one of resilience and recalibration. Investors balanced optimism around easier U.S. monetary policy (the set of tools used by central banks like the Bank of England to promote sustainable employment, stable prices, and moderate long-term interest rates) with the noise of global politics.

Equities rallied, bonds steadied, and gold shimmered, even as economic data hinted at slower growth ahead.

The chart below provides a visual snapshot of unhedged index fund investment returns for a selection of assets and regional exposures, both for the month of September and over three years, in sterling terms. It highlights the contrast between short-term sentiment and long-term performance. Gold has led decisively over three years, equities have shown steady strength, while commodities and bonds have lagged behind.

The Fed’s first rate cut and a renewed ‘risk-on’ mood

The U.S. Federal Reserve (Fed) finally delivered its first interest rate cut of 2025, trimming by 0.25%. It marked a subtle but powerful shift in sentiment. Investors interpreted the move as confirmation that the peak in rates has passed, even as inflation remains above the 2% target, currently at 2.9%.

The result was a global lift in risk appetite. The U.S S&P 500 Index gained, pushing global equities higher. Technology and other speculative growth sectors led the rally, reflecting renewed optimism about cheaper money ahead. U.S. bond yields eased slightly, with the 10-year Treasury ending the month lower.

Political noise vs. market focus

From Japan’s leadership change and France’s fifth prime minister in two years (who had already, spectacularly, resigned by the time this commentary was being prepared) to the UK’s cabinet turmoil and the U.S. government shutdown, politics dominated headlines but barely dented investor sentiment.

Global markets largely looked through the chaos. Japan’s Nikkei hit record highs, and the FTSE 100 gained, showing that investors are prioritising fundamentals over politics. In the UK, it was also a reminder that the stock market and the economy are not the same thing, helped by investors seeking relative value as concerns over U.S. equity valuations grow. The UK remains relatively cheap, with a strong share of overseas earnings providing an additional buffer.

Emerging markets and gold take the lead

While developed markets moved higher on optimism, Asia and emerging markets quietly outperformed, supported by dollar weakness and investor appetite for diversification beyond the U.S. and Europe.

Meanwhile, gold continued to shine, breaking new highs, as silver ended September at $46.64, just shy of its record close of $49.45 on January 18, 1980. A weaker dollar, falling real yields, and geopolitical unease reinforced gold’s appeal as a store of value, while silver’s rally was fuelled by investor sentiment, industrial demand, and persistent supply deficits.

What stands out for investors

September offered three enduring lessons:

1. Policy shifts move markets faster than politics. Markets are already looking beyond inflation toward easier policy. With rate cuts back on the table, risk assets are finding renewed support.

2. Noise fades. Political turbulence creates headlines, not necessarily portfolio risks. Markets reward focus, patience, and perspective.

3. Diversification isn’t defensive, it’s strategic. The tailwinds of a weaker dollar and lower interest rates have revitalised assets outside the U.S. Global diversification isn’t just about spreading risk; it’s about capturing opportunities where growth momentum is building.

In Summary

Even in turbulent times, markets often focus on what’s next rather than what’s loudest.

Disclaimer: This article is for information and educational purposes only. It expresses my personal views and frameworks for thinking about markets and investing. It does not constitute investment advice or a financial promotion, nor is it a personal recommendation to buy or sell any investment. Everyone’s situation is different, so if you are unsure about a decision, it’s important to seek guidance from a qualified financial professional.

The views, forecasts, and figures included reflect analysis at the time of writing, unless otherwise stated. sources used are believed to be reliable, but markets and circumstances can change quickly, which means our views may also evolve over time.