Monthly economic and market review: September 2025
The US Federal Reserve Bank cut the target of the Federal Funds rate by 25 basis points after having kept the policy rate unchanged since the December 2024 cut.
The US Federal Reserve Bank cut the target of the Federal Funds rate by 25 basis points after having kept the policy rate unchanged since the December 2024 cut.
Source: FACTSET
It finally happened!
The 1991 Queen song “I’m Going Slightly Mad” had Freddy Mercury famously singing “It finally happened”, as he reflected on the decline of his mental health as his physical health deteriorated. In the US, amidst all of the madness of the politics and the challenges to the independence of the central bank, it finally happened! The US Federal Reserve Bank cut the target of the Federal Funds rate by 25 basis points after having kept the policy rate unchanged since the December 2024 cut. President Trump did manage to appoint one of his own (Stephen Miran) onto the Federal Open Market Committee (“FOMC”) before the meeting and Miran immediately began advocating for sharp cuts in rates. President Trump’s attempts to remove Governor Lisa Cook from the Federal Reserve Board of Governors for fraud, however, have so far been scuppered in the courts but Supreme Court hearings will begin in January. Accompanying the Fed’s rate cut in September was their Summary of Economic Projections or “Dot Plot” and that showed the Fed’s own expectations of a rate cut at each of the final two meetings of the FOMC this year. The promise of lower interest rates, the strong Q2 earnings reporting season just past and the ongoing dominance of the artificial intelligence theme pushed the US markets to several new all-time highs in September to take the tally of new S&P 500 highs in 2025 to 29.
Over the course of September, the S&P 500 index gained 3.5% to record a fifth consecutive monthly gain and a sixth positive month out of the nine months of the year so far. The gain in September left the index return at 13.7% for 2025 so far with a total market return of 14.8% when dividends are included. The strong performance was not broad-based and only three of 11 market sectors managed to outperform the benchmark index. Those sectors all related to technology and the boom in artificial intelligence, with the associated burgeoning demand for semiconductor chips and hardware, cloud computing, data warehousing, software applications and all of the utilities required to power and cool the compute process. Corporate action such as Nvidia’s announced investments into Intel and OpenAI further fuelled the AI fire. The list of winning companies in September and for the year as a whole is littered with names from these related industries. Alphabet and Apple were amongst the winners in September after a favourable resolution of the Alphabet antitrust case in the US and the certainty that Apple could continue to receive $20bn annually for keeping Google as it’s default browser on the iPhone. The annual September Apple event which saw the release of the iPhone 17 and new AirPods and Apple Watch versions was also ultimately well-received.
At the end of the month, the sectors that outperformed the 3.5% gain of the S&P 500 included Technology (+7.21%), Communication Services (+5.53%) and Utilities (+3.98%). The underperforming sectors included Materials (-2.31%), Consumer Staples (-1.82%), Energy (-0.52%), Real Estate (-0.14%), Financials (+0.04 %), Healthcare (+1.62%), Industrials (+1.72%), and Consumer Discretionary (+3.12%) - see the tables in the appendix below for some of the larger monthly and year-to-date price movements of stocks drawn from the S&P 500 index and the FTSE/JSE Top 40 index.
S&P 500 (blue, RHS) & FTSE/JSE All Share Index (green, LHS) – last 12 months
Source: FACTSET
The very lopsided performance of the local market continued throughout September as the gold price surged almost $400/oz to record highs and the platinum price moved above $1,600/oz to levels last seen in 2013. Copper was not to be outdone and the base metal topped $10,000/mt for the first time since its brief foray above that level in July of this year. The growth in precious metals prices was the key driver of local market performance in September, as it generally has been for the year as a whole. In September, the Resources sector on the JSE advanced 24.85% while the Industrials (-6.99%) and Financials (-2.98%) sectors both retreated. The top nine gainers amongst the Top 40 stocks were all commodity-related with the platinum group metals companies rising between 38% and 53% in the month. The gold counters had a more “modest” gain of between 23% and 34% in September. All of that left the FTSE/JSE All Share index up 6.0% in September, the seventh consecutive positive month for the local market and the eighth positive month this year. The JSE has been setting new all-time records over the course of this year and notched up several more in September, closing the month out at a fresh peak (see the chart above).
For the nine months of the year so far, the gold and platinum stocks lead the way with gains of between 109% and 229%. These large capitalisation companies have had a marked impact on the performance of the Resources index which is up a whopping 100% this year. In contrast, the Financials index is up just 6% and the Industrials index is down 16%. Non-commodity-related counters such as Prosus (+61.6%), Naspers (+49.9%), British American Tobacco (+34.8%), Richemont (+17.8%) and the telecommunications companies (+31% to +58%) have had a positive impact on the index but many of the so-called “SA Incorporated” stocks have had a torrid time as the South African economy has grown at a snail’s pace. Many of the JSE’s listed clothing and food retailers are deep in the red this year and reflect the weak state of domestic demand. The Bidvest Group, which is often seen as a barometer of the health of the local economy, is down almost a fifth this year.
With inflation falling below the bottom of the 3-6% target range for a brief time, the South African Reserve Bank (“SARB”) recently considered the time as right to begin modelling policy on a 3% point-target. This was after the SARB had cut rates five times over the past year, reducing the repo rate from 8.25% to 7.00%. While the SARB will continue to determine policy based on the available data from meeting to meeting, they have already explained that a new 3% target will require rates to remain higher in the shorter-term as inflation expectations are adjusted lower and as actual inflation trends around the target level. This is expected to marginally hamper economic growth in the shorter-term (around two years) but should be repaid in spades in time to come as a lower inflation rate with lowered interest rates should more permanently improve our potential economic growth rate. The SARB could still very modestly ease up on policy in the shorter term but they do want to brandish their big stick to manage those inflation expectations lower for the greater long-term good. With the US still easing rates and with the SARB largely standing firm on rates (as they did at their September meeting), the potential is for the rand to retain a firmer bias. The local currency should also be well-supported by strong commodity prices if we don’t score another own-goal on the mining production front during this precious metals price boom.
The US earnings outlook is positive but valuations are high
As we enter the final quarter of the year, the start of the US third quarter earnings reporting season is around the corner. JP Morgan Chase, Wells Fargo, Citigroup and Goldman Sachs are amongst the big banking groups that will kick us off with earnings reports on 14 October. Bank of America and Bank of New York Mellon follow closely on the 15th and then the floodgates open. Valuations are high and expectations are high and any company earnings or outlook disappointments are likely to be harshly punished. That punishment could be meted out to the reporting company as well as to its industry peers, whether deserved or not. Nevertheless, a strong earnings reporting season is in prospect, thanks to those high growth technology and communications names already mentioned. For this third quarter, earnings growth of 7.5% year-on-year is expected from revenue growth of 6.1%. This strong market earnings underpin is set to continue with double digit earnings growth pencilled in for this year and next year (see Factset earnings consensus for the S&P 500 companies in the table below). The recent market performance both locally and abroad has been concentrated in specific sectors and that trend is likely to continue, at least in the shorter-term, and sector and stock selection is going to be key to performance. The wildcard in the mix remains the politicians, one or two of whom are perhaps suffering from Freddy Mercury’s “slight” affliction to a more severe degree.
Appendix: Market Movers
