September monthly investment update - Reflections on August 2025

The month of August (and September too) are historically seen as the more challenging months on the stock market calendar and there could be several reasons for this: Investment market fatigue could be one and seasonal patterns could be another. Or it could just be that August is the time when many global investors step away from their trading desks to enjoy a summer break.

Whatever the reason(s), this year's stock market returns in August have been marginally positive - building on the strong gains seen for global equities in June and July. This is despite the havoc caused by those reciprocal trade tariffs announcements in April. This, of course, is good news for those of our funds invested in stocks. All eyes are now on September to see if this trend continues, or not!

Trade tariffs tensions

It seems that the key to market stability in 2025 for global investors is one of 'self-adjustment' and 'acceptance'. This could be in response to the 'new norm' of an ever-changing geopolitical landscape. For example, ongoing trade tariff negotiations between the US and countries worldwide continued during the month. Most countries came off better than their worst fears. As we mentioned in our last update, Europe got a better deal than was originally announced with a 15% tariff agreement. However, investor 'acceptance' doesn’t mean there haven’t been casualties.

During the month, India was chastised by the US government with an additional 25% tariff for its continued use of Russian oil - taking its total tariffs to 50%. Switzerland on the other hand, faces a 39% tariff (the highest in Europe), as President Trump wants the country to take more US defence and energy exports. So, tensions remain elevated.

The peace talks treadmill

The US continued global peace talks during the month. This time though, it wasn’t with President Netanyahu of Israel. It was the turn of President Putin, who flew in from Moscow to Alaska to attend a meeting with the US president to discuss the Russia/Ukraine conflict. As the world’s media were left aghast at a much-publicised press-conference-that-wasn’t, it appeared that nothing of great note was gained.

Within weeks of the meeting, President Putin continued his assault on Ukraine as Kyiv came under fresh fire. The lead up to these types of high-profile events (and there have been a few this year), and the lack of progress made, only reinforces the notion that investment markets are no longer overreacting to them. This time, at least, the effect was minimal.

Major indices hit new highs

Global stock markets started August on the back foot but quickly regained traction: US equities, for example, performed solidly throughout August with all major US indices hitting new highs. However, as the month came to an end, those technology shares which had powered US markets throughout the summer, fell, primarily over an AI chip China/US trade war.

Meanwhile, mega-chip giant Nvidia announced its latest quarterly results which some analysts felt were underwhelming - causing the company’s share price to dip slightly. Nvidia is still the world’s most valuable company, and we’ve talked about the impact of the ‘magnificent 7’ tech giants before in our updates and their continuing resurgence. But it does appear that uncertainty about corporate profitability (from all the recent huge AI investment) is starting to creep into investors thinking, along with the potential for investors to look for more diversification in their portfolios.

The UK’s FTSE 100 reached another all-time high towards the end of the month, mirroring the investor confidence seen in other parts of global markets. European equities also continued to enjoy their time in the spotlight - seen as a solid alternative to their US counterparts - understandable given the size of the combined EU market. This investor-sentiment shift towards the continent has been notable this year. However, this could all be about to change. France (as the second biggest economy in the EU) faces a resurgence of its political woes following the recent announcement (by the government) of an unpopular debt-reduction plan. This led to the calling of a vote of confidence for the French government scheduled for the 8 September. Investors’ immediate reaction was to sell both French stocks and government bonds at the end of August.

Interest rate cuts and inflation news

In the US, the Federal Reserve’s Chair, Jerome Powell attended the Jackson Hole economic symposium – an annual event hosted by the Federal Reserve Bank of Kansas City to focus on significant economic issues. In what was his last keynote speech at this event, Mr Powell talked about trade tariffs but sounded more concerned about the US job market. His speech effectively hinted at a September interest rate cut, which rallied investors, and contributed to the US indices reaching those record highs we mentioned earlier. A cut in interest rates will, of course, be music to President Trump’s ears, though at the time he was busy threatening to sack the Federal Reserve’s Governor Lisa Cook over financial history allegations. This could be seen as another step for the President to gain more control over the Federal Reserve – which theoretically operates independently of the US government to prevent such political influence.

Earlier in the month, the Bank of England’s Monetary Policy Committee narrowly voted for a quarter percent cut to interest rates from 4.25% to 4%. But it wasn’t straightforward. So contrasting were their views on whether rates should be cut, that all nine members had to vote twice in order to secure a majority - something that has not been done before. It was the fear that inflation could soon be double the 2% target that probably prevented the vote for this latest cut being unanimous. Later in the month, it appeared their fears were not unfounded. Official figures released showed that UK inflation rose by 3.8% in the year to July (up from the June figure of 3.6%) – the highest it has been in 18 months. This rise was attributed, in the main, to an increase in air fares and food.

Bond markets’ update

Bond markets continue to take the brunt of stubbornly high inflation. This has been a constant source of concern for those invested in low-risk funds containing a higher mix of fixed income investments. Global bond investors will not want to see governments issuing ever-increasing amounts of government bonds to pay for their spending plans as it pushes up the longer-term cost of government debt (detrimental to fixed income investors worldwide).

Only last month, we talked about how the effects of President Trump’s Big Beautiful Bill could create a US bond market crisis. Similarly, here in the UK, the Autumn Budget is scheduled for 26 November. On the day, Chancellor Rachel Reeves may have no choice but to announce plans to issue even more government debt if she cannot find a way to plug the black hole in the UK’s finances through tax rises.

As long-term investors, we look through these periods of (understandable) investor concern, and shorter-term market turbulence, and seek out opportunities to buy longer-dated government bonds to benefit our funds in the future.