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14th October 2025
Cappuccino Commentary
A relaxed read on the issues of the day
September Review
Despite lingering concerns from earlier tariff shocks and geopolitical tensions, equity markets rallied on AI-driven optimism, cooling inflation, and expectations of central bank rate cutting. The latter notably from the Federal Reserve in the US. Whilst at the same time, the US showed economic resilience with Gross Domestic Product (GDP) growth for the third quarter, with GDP being revised upwards to nearly 4% on an annualised basis. Positives certainly seemed to outweigh any negatives.
All equity regions delivered positive returns over the month with the best performing being the emerging markets and US posting returns of +4.2% and +2.8% respectively. US President Trump continues to talk down the strength of the dollar, arguing it would be good for US competitiveness. This coupled with interest rate cuts and challenges to the Federal Reserve’s independence all have contributed to a weaker dollar, which declined a further 2% through September. A weaker dollar is normally a positive outcome for emerging markets, and so it proved. Generally it lowers the cost of financing and debt and can be a tailwind for capital flows. Alongside this, we have seen rising consumption and positive news flow from companies in the emerging regions.
Global equities were broadly up +2.1%, with the US +2.8%. Technology and AI-heavy stocks were the leaders on the back of continued euphoria over AI-driver optimism, while expectations of further interest rate cuts could potentially provide a tailwind for markets.
Japan, Europe and the UK lagged but still posted positive returns. If we take Japan as an example – the Nikkei 225, the index of the largest 225 companies hit an all-time high, passing through the 45,000 level for the first time. More positive news on tariff deals, corporate reforms and share buybacks were some of the drivers. It was a similar situation in our home market with the FTSE 100 also hitting all-time highs. While there remains concerns about what November’s UK budget might bring, this did not hold the market back, and what was particularly pleasing to see was the domestic and small cap parts of the market outperforming large cap shares. Halfway through the month, we also saw Trump make his second UK state visit and agree to invest £150bn in the UK as part of the “Tech Prosperity Deal”.
Though returns across bond markets were subdued relative to the equity markets, they were still positive, providing a good ballast to portfolios. Rate cuts in the US and controlled inflation were major contributors. The US government shutdown could have stoked concerns but was generally overlooked by markets.
A strong month all round. It’s not often we see the central bank cutting interest rates when the economy is not in recession, which is the scenario in the US. This could potentially add fuel to the fire at a later date but is currently providing a tailwind for markets. It appears the thought of mid-term elections next year, is front and central in Trump’s mind and he is looking to drive the US economy and the stock market to gain support. The risks are that this could contribute to inflation especially twinned with the impact of the tariffs. So far markets have favoured the positive interpretation over the negatives. However, we continue to monitor these factors, employing appropriate caution and diversification, whilst still looking to cherry-pick selective opportunities.
Please note:
For regulated financial advisers and investment professionals only. Copia does not provide financial advice, and the contents of this document should not be taken as such. The value of investments can increase and decrease, past performance and historical data cannot guarantee future success, and any references to individual stocks or asset classes are made purely for illustrative purposes.
The performance of each asset class is represented by certain Exchange Traded Funds and Passive Funds available to UK investors and expressed in GBP terms selected by Copia Capital Management to represent that asset class, as reported at last UK market close before the end of the calendar month. Reference to a particular asset class does not represent a recommendation to seek exposure to that asset class. This information is included for comparison purposes for the period stated but is not an indicator of potential maximum loss for other periods or in the future.