Global equity markets continued to advance in September, driven by strong investor enthusiasm for high-growth and AI. Technology and communication services led performance, while defensive areas of the market lagged. Growth stocks outpaced value, and large caps slightly outperformed small caps.
Outside the U.S., developed markets rose modestly, with technology and aerospace/defense leading the way, while emerging markets saw particularly strong momentum across Asia. China and South Korea were standouts, fueled by AI optimism and semiconductor investment, including partnerships between Korean tech giants and OpenAI that reinforced Asia’s growing role in the global AI supply chain.
In fixed income, the Federal Reserve reduced rates, citing a cooling labor market and the need for policy recalibration. Long-dated Treasuries and investment-grade corporates benefited from lower rates, while credit spreads tightened across sectors.
Real assets posted modest gains, with gold surging and REITs advancing. Commodities rose on metals strength, while energy prices eased amid higher production.
Looking forward, economic uncertainty from the U.S. government shutdown, elevated geopolitical risks, and shifting labor dynamics present challenges, but resilient consumer spending, solid corporate earnings, and accelerating clean energy investments suggest underlying support for continued growth.
Equities
Domestic equity markets posted their fifth consecutive month of gains in September. The S&P 500 Index returned 3.7%, while the broader Russell 3000 Index gained 3.5%.
The risk-on environment persisted, with momentum and high beta stocks continuing to outpace defensive and quality names. The AI theme maintained its market leadership during September. IT (+7.3%) and communications services (+5.4%) were the best performing sectors for the month, extending their gains year-to-date through the end of September (YTD) to index-leading +21.6% and +24.7%, respectively. Out of favor in a risk-on market, defensive consumer staples stocks (−1.7%) were the worst performers in September. Commodity-oriented materials (−0.4%) and energy (−0.1%) sectors also did not participate in the rally.
With the AI theme driving the markets, growth stocks outpaced their value counterparts: the Russell 3000 Growth Index gained 5.1% vs. 1.5% for the Russell 3000 Value. Large caps narrowly beat small caps, with the Russell 1000 Index gaining 3.5% versus 3.1% for the Russell 2000 Index.
With the recent gains, the forward multiple for the S&P 500 reached 22.8x. In the past 30 years, there were only two periods when the multiples were higher: during the COVID pandemic (2020) and the dot-com bubble (1999-2000).
Developed non-U.S. markets (+1.9%) continued to climb higher, closing the month up 25.1% YTD. September saw increased dispersion across sectors and industries. Banks (+4.1%) and aerospace/defense (+11.2%), both standouts so far in 2025, remained strong, but technology (+10.0%) was the best performing sector on the strength of semiconductors (+22.8%) and continued enthusiasm around AI. Conversely, the traditionally more defensive healthcare (−1.2%) and consumer staples (−2.8%) sectors saw modest losses. Energy (−2.5%) names also declined as weaker oil process weighed on companies across the sector. On the whole, growth (+2.5%) stocks outpaced value (+1.3%) for the month, but so far in 2025 value remained ahead by over 1,300 basis points.
Emerging markets surged +7.2% in September, bringing gains to +27.5% YTD. All sectors were positive in the month, but AI-driven momentum drove a resurgence in the tech and consumer discretionary sectors – particularly across Asia. China led the way (+9.8%), as its IT sector staged a comeback following years of regulatory pressure, ignited by optimism surrounding advancements in AI and Beijing’s push for advanced chip self-sufficiency. Bellwether tech names Alibaba (+53.3%) and Baidu (+49.3%) saw sharp gains following announcements of increased AI spending and in-house chip development, helping the Hang Seng Tech Index soar 41% – well ahead of the NASDAQ’s 17% gain
Other tech-heavy Asian markets, such as South Korea (+10.5%), also benefited from AI-related tailwinds. Markets responded positively after Korean tech giants Samsung Electronics and SK Hynix signed a letter of intent with OpenAI to source memory chips and build advanced data centers as part of the Stargate initiative, further positioning Korea as a rising player in the global AI supply chain.
Fixed Income
As was widely expected, the Federal Open Market Committee (FOMC) cut rates by 25 basis points (bps) on September 17. Markets were braced for the possibility of three dissenting votes; Governors Waller and Bowman called for a rate cut at the previous meeting and some felt they could dissent at the September meeting in favor of a larger rate cut. However, there was only one dissenting view, that of newly sworn-in Governor Stephen Miran, who argued for a 50 bps cut given his view that policy rates were more restrictive than the Fed believes. In the post-meeting press conference, Chair Jerome Powell described the rate reduction as a “risk management cut” in response to a cooling labor market and while the FOMC’s Summary of Economic Projections suggests two more rate cuts this year—in October and December—Powell stressed that shift in the median forecast should be viewed as one possible path, not a guarantee.
The yield curve saw falling rates at the front- and back-ends of the curve and neutral to modest increases in the belly of the curve. As a result of this shift, long-dated Treasuries rallied 3.1% and outperformed the +0.4% gain in Treasuries maturing over the next 5-10 years and the +0.3% rise in Treasuries maturing in the following 1-3 years.
Credit spreads ticked lower as rates fell. Investment-grade corporates, owing to a longer-duration profile than high yield corporates, gained 1.5% and outperformed their lower-quality counterparts by 70 bps. Within securitized products, mortgage-backed securities (Agency MBS) benefitted from a flattening curve and gained 1.2%, outperforming the +0.6% return of asset-backed securities (ABS) and the +0.4% of commercial mortgage-backed securities.
Real Assets
Real assets were generally positive in September, while lagging broader equity markets. Global REITs advanced 0.9%, with U.S. REITs up 1.2% following the Fed’s mid-month rate cut. A resilient healthcare sector (+4.4%) fueled gains in U.S. REITs, and office REITs (+2.2%) continued to rebound following a slow start to the year – the sectors have returned +26.7% and -1.0% YTD, respectively. Lodging REITs (−3.1%) fell on fears of a government shutdown.
Gold spiked +10.6%, representing a YTD return of +46.1%. A looming government shutdown drove demand for the safe haven asset, while globally, the de-dollarization trend continued and flows to ETFs increased. Metals and mining equities jumped 12.5% on gold’s advance and speculation of further government support within the industrial mining sector following an agreement between the DOE and General Motors to acquire equity stakes in Lithium Americas and its Thacker Pass project in Nevada.
Commodities rose 2.2% on strong performance from precious metals (+11.6%) and industrial metals (+3.7%), while energy (−0.1%), livestock (−0.8%), and agriculture (−3.4%) all saw declines.
WTI Crude fell 2.6%, ending the month just above $62 per barrel. Rising production from OPEC+ has put downward pressure on prices, but U.S. producers continued to maintain disciplined drilling operations. Natural gas jumped 14.7%, as demand for U.S. LNG continued. During the month, the European Commission proposed to ban Russian LNG imports a year earlier than expected, starting January 1, 2027. The U.S. has continued to pressure its allies to reduce Russian energy imports as it aims to help broker a peace deal in Ukraine. North American natural resource equities rose 2.9%, benefitting from exposures to metals and mining.
Global clean energy (+7.5%) continued the strong momentum seen since April, with hydrogen fuel cell companies seeing renewed investor interest from rising power demand, and some U.S. manufacturing companies benefitting from domestic operations. Global infrastructure rose +1.5%. ⬛
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