Investment environment overview 9/2025

Global equity markets extended their winning streak in September, marking a fifth consecutive month of gains as major indexes climbed to fresh record highs. Investor sentiment was lifted by the Fed’s first rate cut of the year, which lowered the target range to 4.00-4.25% and reinforced confidence amid continued signs of a cooling U.S. labor market. The S&P 500 and Nasdaq Composite advanced 3.5% and 5.6% respectively, their strongest September performances since 2010. Even the U.S. government shutdown in early October did seemingly little to shake the markets, with the Nasdaq Composite hitting a record high on October 2 and the S&P 500 following suit a day later. European equities also posted their best September since 2019, supported by optimism over resilient U.S. growth and the prospect of even lower interest rates, with the STOXX 600 up 1.2% for the month. The CSI 300 gained 2.6% over the month amid record retail buying and optimism on AI, semiconductors, and continued policy support from Beijing. Bitcoin continued its upward trajectory, and ended the month at around USD 114,000, a 6% monthly gain.

U.S. faces first government shutdown in 7 years

On October 1 the U.S. entered its first government shutdown in nearly seven years after Congressional Democrats and Republicans failed to reach agreement on a funding bill before the midnight deadline. The shutdown resulted from partisan disagreements over health insurance subsidies under the Affordable Care Act, with Democrats demanding extensions to expiring tax credits while Republicans insisted on a “clean” continuing resolution.

However, bond markets reflected underlying uncertainty as Treasury yields declined, with the 10-year yield falling by 5 basis points to 4.105%. Market participants expressed particular concern about delayed economic data releases, including the critical September employment report, which threatens to leave the Fed operating with limited information ahead of its late-October meeting.

Political turmoil sends French equities lower and yields higher

September marked a watershed moment for French politics as Prime Minister François Bayrou was ousted in a confidence vote on September 8, losing by a decisive 364-194 margin. The dismissal came after Bayrou’s controversial EUR 44b austerity budget, which proposed spending cuts including reduced pensions, healthcare spending cuts, and eliminating two public holidays. French equity markets responded negatively, with the CAC 40 declining by over 2% ahead of the vote and experiencing extended volatility throughout September.

More critically, French government bonds experienced significant stress, with 10-year OAT yields climbing to a 14-year high of 3.61% and 30-year yields reaching 4.5% – levels not seen since the 2011 Eurozone debt crisis.

The spread between French and German 10-year bonds widened to approximately 79 basis points, reflecting increased risk premiums for French sovereign debt. This represented a sharp deterioration from previous levels and positioned French bonds to briefly trade below Italian BTPs, traditionally viewed as the benchmark for heavily indebted European markets.

Economic data worsens; continued poor U.S. employment numbers

Economic indicators showed a mostly negative tendency during September in both Atlantic blocs. In the Eurozone, inflation rose to 2.2% YoY, while manufacturing PMI fell to 49.8 from a three-year high, unemployment edged up to 6.3% in August from a record-low 6.2%, while services PMI improved to 51.3 from 50.5. In the U.S., manufacturing PMI rose to 49.1 from 48.7, services PMI dropped to 50 from 52 and inflation accelerated to 2.9% YoY.

Most notably, private payrolls shed 32K jobs following a 3K loss in August, defying +50K expectations, the steepest decline since March 2023 and first back-to-back cuts since 2020. As mentioned, the Fed cut rates by 25 basis points to 4.00%-4.25% on September 17, its first since December, with two more cuts projected by year-end, while the ECB held rates unchanged on September 11.

Fed cut fails to move dollar while metals surge

The Fed rate cut had little impact on the FX market. EUR/USD briefly rose above 1.1900 but quickly returned to its range. A move above 1.1930 could trigger a larger USD slide, though confirmation from price actions is needed.

Gold remains overbought but reached our XAU/USD 3800–4000 target, thus we now are largely out of position. Similar with silver, which was accelerating and broke the key XAG/USD 47 level, with USD 50 per troy ounce now standing as the next major resistance.

Surpassing USD 50 appears to be a matter of time, but we have already taken most our chips off the table. Platinum experienced a brief, healthy correction and is now climbing again. We remain long and may add to positions if favorable setups arise.

Regional Highlights

The OMX Baltic Benchmark Index lost 2.2% during the month. Meanwhile, German defense contractor Rheinmetall signed a significant memorandum of understanding with Latvia on September 24 to establish a EUR 275m artillery shell production facility, representing the continued expansion of European defense company manufacturing in the Baltics. The joint venture, with Rheinmetall holding 51% ownership and Latvia’s State Defense Corporation controlling 49%, will produce tens of thousands of 155mm artillery shells annually beginning in spring 2027.