Global Asset Allocation Team Market Update – September 2025
In August, investors welcomed a dovish-leaning message from Federal Reserve Chair Powel at his Jackson Hole appearance – where he pivoted his focus towards downward risks to the labor market versus upside risks to inflation. That saw investors ramp-up their wagers for imminent rate cuts from the Federal Reserve. A series of trade agreements between the United States and its trading partners were also met with an optimistic response from investors last month.
Global equity markets closed out strong month in August. The MSCI All Country World posted a robust +2.4% gain. Regionally speaking, all major benchmarks we track generated positive results. The S&P 500 hit several record highs and gained 1.9% for the month, while the S&P/TSX led the global charge and advanced 4.8% thanks to solid performance in the heavily weighted gold sector (+19.8%). Elsewhere, the MSCI EAFE posted a respectable 4.1% gain, while the MSCI gauge of emerging market stocks rose 1.2%.
Fixed income markets also generated positive results as traders ramped up their wagers for central bank rate cuts. Yield curves steepened in a bullish fashion, with the decline in the policy-sensitive two-year yield exceeding that of the longer-term ten-year yield. In the United States, dovish-leaning rhetoric from both Chair Powell and Governor Waller appeared to open the door to a rate cut at the September 16-17 gathering – with those wagers rising to 90%. The 2-year treasury yield fell by 34 basis points to 3.62% – while the 10-year yield declined 15 basis points to 4.23%. Similarly in Canada, a softer than expected reading on second quarter GDP and a weak jobs report saw traders increase the odds of a September rate cut to 70%. The 2-year Government of Canada bond yield declined 13 basis points to 2.64%, while the 10-year yield fell 8 basis points to 3.38%. For the month, the Bloomberg US Aggregate Bond Index rose 1.2%, while the FTSE Canada Bond Universe gained 0.4%.
The US dollar (-2.2%) weakened on the back of the prospect for rate cuts and attacks on the Federal Reserve. The greenback was weaker versus all its Group-of-10 peers.
Finally, oil (-7.6%) stumbled following reports that OPEC and its allies are preparing to release additional idled capacity – which is threatening to amplify the supply glut in the market. By contrast, gold (+5.9%) pushed towards a record high as the prospect of US interest rate cuts and growing concerns about the future of the Federal Reserve boosted bullion prices.
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