Market Commentary

September 2025

Global share markets extended their winning streak in September, with the MSCI World Index – Net rising 2.5% in unhedged AUD terms and 3.6% in hedged AUD terms. This marked the sixth consecutive monthly gain for global equities, driven by a combination of central bank policy shifts, resilient corporate earnings, and continued enthusiasm around artificial intelligence (AI) investments. 

A key catalyst for the rally was the US Federal Reserve’s decision to cut interest rates by 25 basis points, lowering the benchmark federal funds rate to a target range of 4.00%–4.25%. This was the Fed’s first rate cut since December 2024 and came in response to signs of a softening labour market. August’s jobs report showed just 22,000 new jobs, well below expectations, and the unemployment rate ticked up to 4.3%. Fed Chair Jerome Powell described the move as a “middle path” between persistent inflation and rising employment risks, and the Fed’s updated projections now suggest two more rate cuts may follow before year-end. 

Equity markets responded positively. The S&P 500 gained 3.5%, while the Nasdaq Composite surged 5.7%, led by strong performances in technology and AI-related stocks. Emerging markets also outperformed, with the MSCI Emerging Markets Index up 7.2%, supported by gains in Chinese equities and renewed investor appetite for risk. 

However, geopolitical tensions and fiscal uncertainties remained a concern. The US faced the threat of a government shutdown at the end of the month, and new tariffs on pharmaceuticals and industrial goods added complexity to the inflation outlook. 

The Australian share market took a breather in September, with the S&P/ASX 200 Index falling 1.4%. The decline was attributed to unexpectedly high inflation figures late in the month, which tempered expectations for further rate cuts by the Reserve Bank of Australia (RBA). The RBA held the official cash rate steady at 3.60%, citing persistent inflation and strong consumer spending as reasons for caution. 

Despite the pullback, the local market remained supported by strength in the banking and resources sectors, as well as a better-than-expected reporting season. However, stretched valuations and soft earnings guidance from several companies led to profit-taking, particularly in high-growth names. 

Fixed income markets delivered mixed results. Global bonds posted modest gains, with the Bloomberg Global Aggregate Index – AUD hedged returning 1.1%. US Treasury yields declined across the curve following the Fed’s rate cut, with the 10-year yield ending the month at 4.15%, down from 4.23% in August. High-yield bonds outperformed investment-grade counterparts, benefiting from the risk-on sentiment. 

Australian bonds underperformed slightly, with the Bloomberg AusBond Composite 0+ Year Index returning 0.4%. The RBA’s decision to hold rates steady and higher-than-expected inflation data weighed on sentiment. 

The Australian cash market returned 0.3%, as measured by the Bloomberg AusBond Bank Bill Index, consistent with prior months.

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