Market Review 22nd September 2025

Everything you need to know, Simplified!

Summary

• Global equities are defying September’s seasonal weakness, up 3.4% in September (GBP terms), with US large, mid and small caps all hitting record highs

• US 500 forward earnings reached a new high of $294.91, with mid and small caps also seeing improving earnings support, underpinning the rally despite stretched valuations

• The US Federal Reserve (Fed) cut rates by 25bps to 4.00–4.25%, amid mixed employment and inflation signals

• US Treasury yields bear-steepened post-rate cut, reflecting bond market caution over inflation and potential policy missteps

• The Bank of England (BoE) held rates at 4.0%, with inflation still elevated and fiscal credibility risks from Westminster posing a bigger threat to UK assets and sterling.

---

Market Review

Melt up continues

September is notorious for being the weakest month for equity markets. This year, however, it has been unusually strong. Global equities are up 3.4% month-to-date (in GBP terms), with a further 1.6% rally last week. US indices led the way, with large, mid and small caps all pushing to record highs.

While some are quick to draw comparisons with the tech bubble of the late-90s, unlike then today’s rally is underpinned by an equally impressive earnings backdrop. Forward earnings for the US 500 reached a new high of $294.91 last week. Earnings momentum is no longer confined to the megacaps too, with mid and small caps now also seeing improving earnings support.

It’s true, valuations are stretched. The US 500 forward P/E (price-to-earnings ratio measures how much investors are willing to pay for a company’s earnings) multiple is 23x, only a few points shy of the 1999 peak of 25x. This is slightly skewed by the ‘magnificent seven’ tech related behemoths which continue to be magnificent, rising 4.16% last week and 57.7% from the April low. Excluding those seven stocks the rest of the US equity market is trading on a forward multiple of 21x.

For now, equities are buoyed by the strong corporate backdrop, and last week found additional support in a more accommodative monetary policy as the Fed cut rates for the first time this year.

Fed resumes rate cuts

The Fed cut rates by 0.25% on Wednesday, bringing the target range down to 4.00–4.25%. The decision was justified by signs of softer employment data and subdued inflation momentum. Unofficially, it is hard to ignore the political backdrop: President Trump has been pressing for lower rates, and Stephen Miran, one of the chief architects of Trump’s economic strategy – now on the Federal Open Market Committee (FOMC) – openly argued for a 0.5% move. His ‘dots’ (longer-term rate projections in the Fed’s dot plot) point to policy closer to 2.75% by year end.

Economic data remains noisy and mixed. Job openings have fallen, but unemployment is still near historic lows. Part of this apparent disconnect may be structural: with immigration tightening, the economy may now require fewer new jobs to keep unemployment low. In that case, weaker job growth may not be a sign of weakness at all.

Inflation is also unresolved and the outlook is uncertain. Tariff effects are yet to feed through fully, while services and wage inflation remain sticky. The bond market voiced its scepticism, with the yield curve bear steepening (longer-dated yields rising more than short). The 2-year rose 0.016% to 3.57%, while the 30-year climbed 0.063% to 4.74% - a familiar pattern this year. The move in long yields underscores caution about the risks of a policy error and suggests that the market is not convinced that inflation has been tamed. Higher long yields also reflect unease over ongoing fiscal profligacy. The situation from that respect is not quite so stark as it is across the Atlantic.

BoE steady while political risks and stagflation looms

As widely expected, the BoE held rates steady on Thursday at 4.0%. Andrew Bailey, Governor of the BoE, and colleagues would like to cut if they can, but with inflation at 3.8% the data simply doesn’t allow it. For now, the BoE are following the ‘persistent inflation’ path it set out in May.

Base effects suggest inflation may rise further in October, leaving December as the next realistic window. The bigger risk comes from Westminster: further deterioration in fiscal credibility could weigh on UK assets and sterling.

The next few months will be pivotal, with the Autumn Budget a critical test. For now, the government’s strategy appears to lean on higher taxes - yet with the UK arguably on the wrong side of the Laffer curve (demonstrates the relationship between tax rates and government revenue), this risks raising less, not more. What is required is spending reform, with welfare and pensions obvious flashpoints.

---

The week ahead

Friday: Core Personal Consumption Expenditures (PCE) Price Index

Our thoughts: The Fed’s favoured inflation gauge is anticipated to show core inflation still stubbornly high at 2.9%.

---

Your weekly market review was powered by Canaccord Wealth

---

Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity. Where investment is made in currencies other than the investor’s base currency, the value of those investments, and any income from the m, will be affected by movements in exchange rates. This effect may be unfavourable as well as favourable. Past performance and future forecasts figures are not a reliable indicator of future results.