Chinese equities and gold were the top performing assets in September as investors wrestled with the direction of inflation and interest rates, according to data compiled by Fairview Investing’s Ben Yearsley.
It has been a profitable month for many investors as prices increased across most asset classes. The Federal Reserve delivering on a long-awaited cut to interest rates and a relatively positive macro picture helped sentiment considerably.
China was the top fund sector, continuing its strong 2025. The Hang Seng is up 37% so far in 2025. Tech, commodities, emerging markets and Latin America made up the rest of the top five.
Fund sectors – One month (top five) Return % China/Greater China 8.15 Technology & Technology Innovation 6.58 Commodities & Natural Resources 6.41 Global Emerging Markets 6.25 Latin America 6.14
The picture is not entirely rosey however, with some concerns lingering over a possible uptick in inflation as tariffs feed through into the data.
Yearsley said: “Is there anything that isn’t near record highs? Gold, US indices, Japan, even the FTSE is near the peak and has had an excellent quarter gaining 7.53%. It is fair to say US equities are looking a bit ‘toppy’ and even Jerome Powell is making comments about valuation. There is life outside the hot spots though with areas such as biotech coming to the party as well now and the continued resurgence of undervalued areas such as China.
“September finally saw the US Federal Reserve cut rates – only 0.25%, however since then the Fed has hinted at more to come before the end of the year,” he continued.
“The UK and Europe didn’t follow suit, though the ECB has been ahead of the curve and has now effectively said that’s it for now. The backdrop to the rate cut was a weakening jobs market with only 22,000 jobs added in August, well below estimates.
“Inflation continues to be a hot and uncomfortable topic of conversation. The latest US reading is well above the Fed’s target of 2% – in fact, the Core PCE for August was 2.9%, however whether it is political pressure or because they think it’s temporary the Fed has looked through it and signaled more cuts.”
Turning to the UK specifically, the concern is more acute. Yearsley noted the UK still has an inflation problem, with August’s CPI at 3.8%.
“Intriguingly various high profile bond managers have come out backing the UK saying that fears are overdone and more rate cuts are on the cards. Food inflation is a particular worry. Truflation puts UK inflation at 4.15% and US at 2%,” he said.
“UK borrowing costs hit a 27 year high in September with the 30-year gilt rising to 5.7% and at a gilt auction last month the sale price of inflation linked gilts was at a 20-year peak,” he continued. “To be fair the linker attracted bids of almost four times the nominal value a ten-year auction attracted bids of £140bn.”
Yearsley added that from a currency perspective it was “a nothing month”, with the US rate cut throwing up no surprises. Sterling rose marginally against the yen but fell 0.83% versus the euro and 0.32% against the dollar.
In commodities, gold continued its “astonishing run”, hitting new all-time highs again and closed the month with an ounce costing $3,873, up from $3,518 at the start of September. A barrel of Brent was range bound in September and ended a dollar down to close at $67.02. The price of a therm of natural gas edged up slightly in September to 80.4p compared with 77.9 pence a month ago.
According to Fairview’s data, the poorest performing fund sectors in September were European smaller caps, Indian equities, UK property, property and Gilts.
Fund sectors – One month (bottom five) Return % European Smaller Companies 0.01 India/Indian Subcontinent 0.08 UK Direct Property 0.18 Property Other 0.55 UK Gilts 0.61
