Clime Economic and Market Commentary – September 2025
Most global share markets posted a sixth month of gains, with both the US and Australian markets enjoying new record highs mid-month. The key driver remains the Federal Reserve, which cleared the way for more US rate cuts later this year. To date, we have seen limited impact from US tariffs on trade, inflation, corporate profits, or the labour market, but those impacts may still be ahead.
The key US index, the S&P 500, was up 3.7% in September, and +17% over the last 12 months. The Dow Jones was up 2.2% for the month, and 11.5% for the last 12 months. For Nasdaq, the figures are +6% for the month, and +25.4% for the year.
Other notable performances over September include Japan (+6.5%) and Russia (-6.1%). European markets were broadly positive.
The Australian share market has lagged the US and Asia in recent months. The ASX200 was a touch lower over the month, up +10.56% for the year.
In the United States, economic data is strong
Equities reached new all-time highs during the month, despite typical September wobbles, with momentum looking to carry the market into the usually firm final months of the year. The Federal Reserve has confirmed its dovish pivot, the US dollar has resumed its weakness (generally good for shares but bad for inflation) and volatility remains subdued. The key message from markets is that central banks are willing to tolerate higher inflation to stabilise employment. That is a powerful tonic for markets. Moreover, while the current economic environment is spotty, forward indicators show resilience.
In the US, the second quarter GDP growth rate was revised up to 3.8%. Consumer spending was stronger than previously reported after figures were revised higher, growing at an annualised rate of 2.5% compared with 1.6% in the previous estimate. The growth in GDP was up from 3.3%, though first-quarter growth was revised lower to a 0.6% contraction.
The key Institute for Supply Management (ISM) Services index rebounded in the US, and while manufacturing remains subdued, it has moved off its lows. A typical progression is that as the ISM moves higher, retail sales recover, exports pick up, earnings grow, corporate confidence improves, capex expands, and payrolls rise.
On the US stock market, cyclical sectors are starting to outperform, and the bull market led earlier in the year by mega-tech companies is broadening out to include small caps, commodities, financials and industrials – suggesting that the economy will be on firmer footing in the coming year.
The surge in capital investment, much of it linked to the adoption of AI and automation, is accelerating. Companies are deploying these technologies to boost output and control costs. This productivity boom allows the economy to grow at a faster, non-inflationary pace, giving the Fed the flexibility to remain accommodative.
Of course, this positive outlook is not without risks. An oil price spike or higher-than-expected tariff-induced inflation could curtail the Fed’s easing cycle. Geopolitical tensions are still a wildcard capable of disrupting sentiment. High valuations mean that any correction could be severe.
However, risks should not obscure the positive outlook. Inflation may flare, geopolitics can surprise, and positioning looks stretched, yet the bigger picture is still supportive. Liquidity stays abundant, central banks are trending towards cutting, and households and corporates are feeling confident.
Australian economic data
Australia’s August CPI shock at 3.0% – above the 2.9% consensus forecast – triggered market repricing, with bond yields rising and November rate cut odds falling below 50%. The trimmed mean estimate, a key measure of underlying inflation, eased to 2.6% year-on-year in August, down from 2.7% in July and 3.4% a year earlier. However, this monthly series excluded electricity’s annual rise and other significant price swings.
Bond traders responded by sharply reducing expectations for further interest rate cuts, and the Australian dollar climbed while three-year government bond yields rose above 3.5%.
The inflation data prompted major banks to revise down their forecasts for rate cuts, a stark shift from earlier expectations that had fully priced in a November rate reduction. Bond traders are now anticipating just one more cut this cycle, likely in February, down from two earlier in the month.
Bond Markets, Currencies and Commodity Prices
Bond yields were down in the US but generally slightly higher elsewhere. US 10 year bonds ended the month at 4.16% and Australian bonds at 4.35%.
The AUD/USD exchange rate closed the month at US$0.66, a slight rise.
Commodities markets were strong, particularly precious metals gold and silver. Gold charged ahead and hit new all-time highs, up 9% for the month and 44% year on year. Silver was up 15% for the month, and up 50% YOY. With risks of a global recession having moderated since the beginning of the year, the diversification benefits of commodities are more attractive at the margin and precious metals offer a refuge of sorts.
The bull market in gold started when Russia invaded Ukraine in February 2022. In response, the United States and its allies froze the international reserves of Russia’s central bank. That convinced the central banks of countries with autocratic governments, which are hostile to the US, to increase their gold purchases.
While the sharp spike in price might mean gold is overbought and due for consolidation, our bullishness is supported by central banks that are increasing the percentage of their international reserves in gold. International gold reserves currently account for 15% of international reserves, according to the IMF – up from 9% when Russia invaded Ukraine.
Copper was a feature, up 5.3% for the month, and 5.7% YOY. Copper is nicknamed “Dr Copper” because its widespread use in industries like construction, manufacturing, and energy makes its price a strong leading indicator for the health of the global economy. When demand for copper rises, it suggests economic expansion, while falling demand can signal an economic slowdown, acting like a diagnostic tool for the economy’s “health”.
Copper has long been regarded as a cornerstone of the global energy transition. Its role in wind turbines, solar farms, electric vehicles (EVs) and power grid infrastructure has underpinned a steadily rising demand profile. However, the metal is now also riding two additional megatrends: artificial intelligence (AI) and increasing global military expenditure – both of which are poised to add further strain to a market already facing supply bottlenecks.
Crude oil was slightly down for the month, and is still down 5% YOY. Iron ore climbed back above US$105/tonne, and is up 13% YOY, supported by Chinese stimulus measures.
ASX miners got a boost in September, with the iron ore price back above $100/tonne, and gold up sharply.
A developing theme is the possible emergence of the global commodities cycle, which could see a rotation out of over-priced banks and into miners. The pro-cyclical rotation was evident in the outperformance of the ASX 200 Resources sector, which gained +6.1% for the month, while the ASX200 Industrials declined -2%.
Conclusion
Another month of gains on global share markets across most industry sectors and countries, aided by central banks in the mood to cut rates. This is despite sticky inflation and President Trump’s unpredictable tariff deals. As markets become more expensive, we remind investors of the importance of prudent stock selection based on fundamental metrics rather than jumping upon
