Global markets surged in the September quarter of 2025 driven by optimism around monetary easing and A.I. innovation alleviating earlier concerns over tariffs and slowing growth. Global equities powered higher on a wave of strong earnings, a long-anticipated US rate cut, and continued enthusiasm for A.I. Commodity and credit markets also strengthened, while volatility briefly flared around policy uncertainty and fiscal stress, particularly in Europe, amid a looming US government shutdown.
Global markets surged in the September quarter of 2025 driven by optimism around monetary easing and A.I. innovation alleviating earlier concerns over tariffs and slowing growth. Global equities powered higher on a wave of strong earnings, a long-anticipated US rate cut, and continued enthusiasm for A.I. Commodity and credit markets also strengthened, while volatility briefly flared around policy uncertainty and fiscal stress, particularly in Europe, amid a looming US government shutdown.
Policy pivots, technology tailwinds, and trade relief were the main thematics that drove markets higher in the September quarter. Following a volatile first half to the year, Q3 saw a decisive shift in sentiment. The Federal Reserve’s first rate cut since September 2024 set the tone, sending equity markets to fresh highs.
The S&P 500 gained 8.1%, with robust earnings from major US tech names underpinning performance. The Nasdaq Composite rose more than 10%, extending its dominance over value-oriented peers. Small-caps outperformed for the first time in a year delivering a return of 12.4%, reflecting broadening market leadership away from pure mega-cap tech. A.I. stocks continued their rally, with Nvidia becoming the world’s first $4 trillion company, and IPO activity rebounded as investors sought exposure to the sector.
Enthusiasm for A.I. spilled over into Asian markets, where the MSCI Asia ex-Japan Index surged 11.1%, led by powerful rallies in Chinese and Taiwanese technology stocks. Hong Kong’s Hang Seng Tech Index jumped 22%, reflecting policy support for semiconductors and easing US-China trade tensions.
Emerging markets posted a sharp 11% gain, with Asian tech stocks and cyclical sectors leading, as trade anxiety faded and policy support increased. European equities rose just 2.8%, held back by persistent weakness in German industrials and tight fiscal constraints, while Japan’s TOPIX climbed 11% amid yen depreciation, export support, and post-election stimulus.
Australian equities rose almost 5% extending gains for a third consecutive quarter. ASX 200 leadership rotated into Materials (+21%), Resources (+20%), Utilities (+11%), and Consumer Discretionary (+10%), boosted by resilient domestic consumption and optimism around imminent RBA rate cuts. Healthcare remained the laggard, falling 9% largely due to CSL. Small companies surged, strongly outperforming large companies with small resources (+26%) outperforming, supported by surging gold prices and an improvement in commodity demand.
Real assets once again performed well, with Australian listed property up 4.5%, even after a large negative return of 3.1% in September, tracking global listed property and global listed infrastructure gains supported by declining yields and stabilising credit spreads. Currency hedging benefited global returns in the quarter as the US dollar fell against the Aussie.
Fixed-income markets delivered mixed fortunes. Overall, bond markets produced muted positive returns, with global bonds returning 1% and Australian bonds 0.4% for the September quarter, whilst yield curves steepened as short-term interest rates fell more than long-term interest rates. Credit spreads tightened, especially in US high yield (+2.4%) and investment grade (+1.9%) debt. European bonds declined 0.2% as political uncertainty and fiscal strains widened spreads, while UK gilts fell 0.7% and Japanese government bonds posted a weak result of -1.5% on political uncertainty and hawkish Bank of Japan signals. Emerging market debt was a standout, gaining 4.4%, fuelled by a weaker dollar and narrowing credit spreads.
Commodity markets stayed firm. The Bloomberg Commodity Index rose 3.7%, driven by industrial metals and a 15% leap in gold prices as real yields fell and geopolitical anxiety persisted. Oil was broadly flat as OPEC+ discipline balanced softer demand.
The economic backdrop for the quarter was one of cooling inflation, easing policy, and uneven growth. Globally, growth momentum moderated but remained resilient.
US GDP growth reached 1.8% annualised, slightly above forecast, despite significant payroll revisions – BLS data showed job gains averaged just 29,000 a month in Q3, down from 99,000 a month in Q2, with total payrolls revised lower by a large 911,000 for the prior twelve months. Consumption held firm, business investment was resilient, and inflation remained sticky – creeping higher as tariff effects were passed through to end-users. The US Federal Reserve’s 0.25% interest rate cut to 4.00-4.25%, the first since September 2024, signalled a shift to a data-dependent easing cycle. Market pricing for further interest rate cuts rose, with the US dollar weakening as a result.
Europe’s economy remained sluggish, growing just 1.2% over the year with inflation at 2.1%. Fiscal policy turned more restrictive, with France and Germany at the heart of debates over deficits and debt reform, while the European central bank maintained interest rates at 2%, awaiting clearer signals. The UK faced dual headwinds – sticky inflation and fiscal fragility, prompting market volatility ahead of the November budget. The result pushed 30-year government bond yields to multi-decade highs.
In the Asia-Pacific, China’s incremental stimulus through interest rate and reserve-requirement cuts (~1 trillion yuan) aimed to stabilise property and consumption, leading to mixed results. Japan struggled with low growth and above-target inflation, with their policy remaining cautious post-election and the Bank of Japan signalling tighter interest rates ahead. India paused its interest rate cycle following mid-year cuts and faced a slowdown in domestic growth.
Australia’s economy persisted in a low-growth mode; June-quarter GDP was just +0.3%, annual growth held near 1.5%, and real output per capita stagnated (i.e. per capita recession). The RBA kept interest rates at 4.35%, highlighting inflation progress, but with employment growth slowing and business sentiment sinking to three-year lows. While exports benefited from firm commodity demand, public spending restraint weighed on activity. Policy debate focused on productivity reforms and sustaining household confidence amid continued stagnation.
This quarter can be characterised as a few months of trade truces, fiscal strains, and geopolitical ripples. The geopolitical landscape remained tense but less disruptive to markets than earlier in the year. The US-China tariff pause was extended through the quarter, calming trade anxieties and boosting confidence in Asia’s tech exporters. Mid-quarter, Israel-Iran tensions escalated again, triggering short-lived commodity volatility. US involvement and strategic signalling helped contain market fallout, though risks lingered due to unresolved regional instability.
In the United States, the Trump administration continued to adopt a transactional stance on trade, seeking bilateral agreements ahead of the scheduled tariff reassessment in December. Domestic tensions persisted, but fiscal restraint gained traction as Congress debated debt-limit curbs and targeted spending cuts, with a potential government shut-down looming.
Europe faced political fragmentation. France saw another cabinet reshuffle after a no-confidence vote, while Germany’s slow growth reignited fiscal reform debates. In the Indo-Pacific, Taiwan’s August referendum on nuclear reactivation highlighted regional energy vulnerabilities, while renewed North Korean missile tests underscored persistent security risks.
In Australia, fiscal pressure deepened as weaker nominal GDP and subdued company tax receipts widened deficits. The government’s focus turned toward productivity reform and housing supply measures, with monetary policy doing the heavy lifting to maintain stability.
Easing momentum, elevated valuations, and policy makers testing the length of road in which they can kick the can down, best surmise the forward period.
Looking ahead to the December quarter, markets face a crossroads. The combination of very high equity valuations, slowing growth, and converging monetary easing suggests more moderate returns ahead. With approximately 1% of interest rate cuts by the US Federal Reserve, priced into the next 12 months by markets, there is a growing risk that investors underestimate the inflationary impact of residual tariffs and fiscal pressures.
While A.I. driven sectors may continue to command leadership, breadth is expected to widen as investors rotate toward lagging value and cyclical sectors. Bonds offer balance and retain diversification appeal if growth deteriorates further, while real assets remain valuable inflation hedges with valuation appeal versus tech-driven equities.
Despite near-term optimism, structural themes such as public-debt consolidation, demographic aging & immigration, and conflict resolution & foreign policy, will likely set the tone for period ahead. The September quarter reaffirmed that markets thrive on liquidity and confidence yet remain vulnerable to policy missteps and geopolitical flare-ups.
Maintaining diversification and taking a cautious and valuation-disciplined approach remains essential as monetary easing gains traction but fundamental growth, particularly earnings, lag behind. Now is not the time to chase growth or returns.
The June quarter was marked by resilience and recovery in global financial markets, despite a volatile backdrop shaped by shifting trade policies, persistent inflation and geopolitical tensions. After a turbulent start driven by new US tariffs and escalating conflict in the Middle East, markets rebounded strongly as optimism returned on the back of tariff implementation delays and some trade truces, robust corporate earnings and a dose of central bank hope.
As we have reached the end of another financial year, we wanted to send a reminder about income distributions.
The Australian equity market started the year with great gusto with key economic metrics broadly supporting the market. This swiftly turned in February and the local bourse continued to fall throughout the remainder of the quarter. The slide was largely due to the uncertainty over US President Trump's tariffs. Fear and speculation finally became reality as the index began its steep decent in early February, falling circa -10.3%; an official correction and potentially heading towards bear territory and global recession. The Australian market reacted sharply and negatively to the Trump tariffs during the March quarter and overall experienced its steepest losses since the onset of the COVID-19 pandemic. The Australian equity market ended the quarter down (-2.8%).