Investment Update – September 2025

What happened in markets?

Global equities continued to post new highs in September, in particular Emerging Markets which delivered a gain of 7.5% over the month. The region is dominated by the equity markets of China, Taiwan, India and Korea which make up approximately 75% of the index, and the largest stocks include Taiwan Semiconductor Manufacturing, Tencent and Alibaba. Like their US counterparts, the recent performance of Chinese technology stocks has been boosted by AI expenditure.

Despite some evidence that the US labour market is weakening, The Federal Reserve Bank of Atlanta’s GDPNow model estimates a third quarter growth rate of 3.8%. This estimate incorporates real-time macroeconomic data, providing a reasonable barometer of the health of the US economy. Despite this, the Fed cut interest rates at it’s September meeting and left the door open to two more rate cuts before the end of the year.

However, the release of September’s US jobs report was postponed until November due to the ongoing government shutdown. Many government agencies and departments closed their doors after Congress failed to approve legislation to continue the government’s authority to spend money. As a regular feature of US politics, investors have so far brushed off the impact on financial markets.

Gold’s stellar run continued in September as it rose 11%, taking its gain to approximately 40%, in GBP terms. A combination of factors has driven demand for gold in recent years, including diversification from the US dollar and bonds.

What did we do in the funds?

Further increases to equity were made across the Esprit range, reflecting recent market momentum and our caution over government bonds given resilient growth and inflation, and fiscal deficits. The changes have been most prominent in Esprit Tactical Balanced and Esprit Tactical Growth, where these funds are the least constrained by the IA sector requirements on equity exposure.

We introduced a new European equity fund, M&G European ex-UK, a successful and long-running strategy which has recently launched in UK OEIC form. As early investors we were able to access a share class with extremely competitive terms, and a modest initial investment provides us with time to undertake further detailed analysis, including a meeting with the manager. This was funded by a reduction to the HSBC European Index fund.

We continued to nudge our gold exposure higher across the funds, acknowledging the strong momentum behind the asset class, partially funded by a reduction of VT RM Alternative Income. This fund has been highly correlated with gilt yields of late, and we have a preference for global infrastructure in the run-up to the UK budget in November.

What is the Outlook?

A resilient global economy, strong earnings growth fuelled by the AI boom, and the likelihood of further US rate cuts provides an accommodative backdrop for risk assets. However, weakness in the US labour and housing markets commands some attention, particularly if there is a spillover effect into corporate earnings.

For now, investors appear to be taking the view that the slowdown in the US jobs market over the summer will be contained and is likely to be offset by looser monetary policy heading into 2026 which should be supportive for broader earnings growth, particularly in areas of the market which have underperformed in recent years such as small caps.

We remain a little more cautious on global government bond markets, particularly US Treasuries, as negative economic news appears to have been discounted, but we believe that UK gilts offer long term value despite near term challenges and the window of uncertainty ahead of the budget on 26 November.

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Important information:

This document is issued by Shackleton, which is a trading style of Shackleton Advisers Limited. Shackleton makes no warranties or representations regarding the accuracy or completeness of the information contained herein.  We have prepared the following document based on our view of the current market. Nothing in this document shall be deemed to constitute financial or investment advice in any way. We recommend you speak to your adviser before making any decisions.  This document shall not constitute an invitation or inducement to any person to engage in investment activity. Past performance is not a guide to future returns and the value of capital invested and any income generated from may fluctuate in value.