Market insights, September 2025
Monetary policy was a top focus for investors in September, with decision-making by the US Federal Reserve (Fed) the subject of intense scrutiny.
As we approach the home straight of 2025, the same recurring themes seem to have entrenched themselves, with little to suggest there will be much deviation across the final quarter. In September, trade tariffs, inflation, and armed conflict all continued to generate uncomfortable headlines.
Despite such a problematic backdrop, US equity markets once again managed to defy gravity. On the surface, and when viewed in isolation, they paint a picture of investor enthusiasm, as well as American corporate resilience.
But at the same, the price of gold – a so-called ‘safe haven’ asset – reached dizzy new heights last month too. That paints a very different picture to the one mentioned above – one of investor nerves, creaking economies, and widespread uncertainty.
If you thought these were confusing times, you’d be right.
The first US rate cut in 2025
Front-and-centre of most investor discussions last month was the Fed’s decision to reduce the fed funds target range to 4.00%-to-4.25%.
The 25-basis point cut was already priced in markets, but the ongoing friction between Trump (who wants larger and faster cutting) and Fed Chair Jerome Powell (who takes a cautious, data-led stance) rumbled on.
Relations soured further as the White House ramped up its efforts to oust Governor Lisa Cook, a Democrat appointee to the Fed Board.
The White House’s ongoing intrusion into the workings of the Fed does the US economy, as well as US assets, little favours.
Given the cracks that are starting to emerge in the US economy, there is a consensus that more cuts may follow. Recent data releases show the US jobs market taking a hit, as hiring plans go on pause amid tariff-linked economic uncertainty.
That said, Powell has been quick to caution investors that future cuts are a possibility rather than a certainty.
(For more context, please refer to our separate article: US Federal Reserve cuts rates).
Trouble on the home front?
Last month’s release of New Zealand GDP data for the June quarter made for grim reading. A sharper-than-expected economic contraction of 0.9% added more pressure on the government, as Kiwis continue to find the going tough.
While there was no rate cut in NZ last month, speculation mounted that a minimum 50-basis point reduction to the OCR may be coming in October.
Divergent fortunes around the world
Poor economic performance is certainly not unique to New Zealand in 2025.
Over in the UK, the Bank of England kept its base rate on hold at 4% in September but acknowledged the challenges and unknowns as the domestic economy grinds its way slowly towards year-end. As the meeting minutes stated, “Underlying UK GDP growth had remained subdued, consistent with a continued, gradual loosening in the labour market, as well as a margin of slack in the economy. There remained uncertainty around the degree to which slack had opened up and would continue to build.[1]”
In parallel, Chinese policymakers unveiled their latest attempts to catalyse amongst other things, more consumer spending. A 19-step package of measures was unveiled as US-led trade tariffs continued to fog up the direction of travel for global trade.
Meanwhile in Europe, the malfunctioning state of French politics was on show across the month. President Macron moved to appoint new Prime Minister, Sébastien Lecornu, after his predecessor, François Bayrou, lost a confidence vote at the start of September.
France’s rising debt pile is being closely watched by investors, and its economy is currently stuttering. Despite a contraction in French private sector activity, it wasn’t enough to stop eurozone business activity from rising at its quickest pace in 16 months, in September [3]. The biggest driver of that uptick was Germany.
Gold shines brightly
Amid so much uncertainty around the world right now, gold appears to be one of the biggest beneficiaries.
In September, the price per troy ounce reached new heights of $3,500, then $3,600, then $3,700, and later $3,800 (all in US dollar terms).
The soaring price reflects investor unease about a number of different issues – from stubborn inflation to political intrusion with the Fed, potential political shut down in the US, and even armed conflict.
The Ukraine-Russia war escalated in September, with Trump striking a noticeably different tone and labelling Russia a “paper tiger [4]”. His comments overlapped with repeated Russian incursions into NATO airspace, as Putin’s armed forces continued to probe and test the resolve of the alliance members.
The soaring price of gold was good news for those who already hold it, and less good news for those who want new exposure now. Coming in at these record-high price points risks coming back to bite when the price inevitably recedes.
More tariffs: Plus ça change
In one of the final acts of the month, Trump showed that he’s more than happy to keep unveiling new tariff measures.
This time, they were applied at the top end of the scale to medicines and pharmaceuticals (100% on US imports), through to kitchen cabinets and bathroom vanities (50% each), as well as heavy-duty trucks (25%).
For now, markets are shrugging off the aggressive trade stance being implemented by the White House. How long that tolerance lasts for, remains to be seen.
Brief summary
In many ways, the year so far, particularly from April onwards, is following a script where the same actors – tariffs, inflation, interest rates, and geopolitical tension - are delivering repetitive scenes.
As such, there was little in September that hasn’t already been seen or wasn’t largely on the cards. That said, tariffs being put on kitchen cabinets in the name of US national security raised a few eyebrows.
It’s been a long time since we saw synchronised global growth, and the divergent fortunes of major economies are becoming more evident than before.
With that in mind, maintaining diversified holdings, and investing for the long-term, should remain the priority for investors.
[1]Source: https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2025/september-2025
[2]Source: https://www.msn.com/en-us/money/markets/china-unveils-sweeping-plans-to-boost-domestic-economy-as-trump-tariffs-hit/ar-AA1MDJyF?ocid=BingNewsVerp
[3]Source: https://www.ft.com/content/19b31f30-2265-4f91-8b6b-d882445984be
[4]Source: https://www.bbc.com/news/articles/c3e70n4keyjo
Photo credit: Unsplash
