The exuberance on the global equity markets continued in September, as it marked the sixth consecutive monthly gain for the global stocks. The MSCI All Country World Equity index rose 3.5% for the month, and 7.3% for the quarter, bringing the overall gain for 2025 to over 17% (all returns in USD). Global stocks were buoyed by the rising US stocks, as American shares represent more than two-thirds of the world market capitalization. Driven by continuing AI enthusiasm, the S&P500 had a phenomenal run – as of the end of September, the flagship American equity index had completed its fifth best six-month rally since 1950. The US dollar steadied during the month, but its weakness has greatly disadvantaged international investors in American shares – for example, against the Euro, the US dollar has depreciated by more than 13% at the end of September, wiping out all positive returns from US equities year-to-date for Euro-based investors. Stock markets in the United States advanced solidly during the month, supported by the Federal Reserve's widely anticipated 25 basis point rate cut, and strong corporate earnings. Overall economic figures were positive: second quarter GDP was revised up to 3.8% (from the previous 3.3%); core inflation (PCE) stayed below 3%; and US retail sales remained strong, while unemployment levels held at 4.3%. Against this backdrop, the federal government began the fourth quarter in a shutdown as Congress was unable to reach a necessary compromise. European markets trailed in September as euro zone inflation numbers rose above the ECB's 2% target, putting a pause in the central bank's rate-cutting endeavors. In the United Kingdom, inflation came out even worse, running at 3.8% (the highest inflation among G7 countries), driven by higher taxes, and increases in regulated prices. In France, the newly formed government was also short-lived due to the political turmoil, as a divided parliament continues to fail managing the needed budget cuts. Emerging markets also had a solid month: the MSCI Emerging Markets index surged 7% in September, extending its strong performance to over 27% for the year to date (in USD). The Chinese market was a notable leader for the month, and the year so far, lifted by the extension of the US-China trade truce and AI optimism. The broad Bloomberg Commodity Index ended up 1.7% for September – oil prices fell, but previous metals (most notably gold and silver) rallied strongly. Sector-wise globally, Technology and Communication stocks led the market, as investors’ demonstrated clear appetite for risk, (growth outperformed value), while Energy and Consumer staples lagged. It is worth pointing out that for the last three years some sectors with significant AI exposure – like US large-cap technology companies – have recorded returns close to the astounding 40% per year! The end of September marked the end of a positive quarter for the Bloomberg Global Aggregate Bond index, which rose by 60 basis points (0.6%), as US Treasuries rallied and credit spreads tightened. Bond markets were volatile throughout the quarter, amid all the political uncertainty and all the concerns around fiscal sustainability of some developed countries (even USA). The performance of government bond markets was mixed, with UK, German, and Japanese yields all rose over the third quarter (bond yields move inversely to bond prices), while US Treasury yields actually ended the quarter lower. A resurgence of US Treasury issuance during September was well absorbed by the markets, reflecting an ongoing investor demand for yield, and generally positive sentiment. There was similarly positive performance across Eurozone and UK investment grade bond markets. However, given the strong rally during the last half-year, the currently elevated stock valuations, the stubborn inflation, and the ongoing geopolitical tensions, markets continue to face headwinds and potential challenges before year end.
         The most important event for the American financial markets in September was the Federal Reserve’s cut of interest rates by 25 basis points – the first cut for this year comes after an extended pause. Although the move was widely expected, the central bank’s more dovish tone, in response to a softer labor market and moderate inflation, boosted investor confidence and drove US stocks and bonds markets higher. The S&P500 climbed 8% (in USD) in Q3, reaching new record highs, with small-cap stocks and Technology shares leading gains. The tech-heavy equity index NASDAQ100 had a particularly strong September, adding 5.4% for the month and 9% for the quarter. Technology stocks thrived on infrastructure investment and strategic partnerships, as a number of announcements were made for purchases of large quantities chips and deals for data center capacity utilization. The rally broadened – for example, US small-cap stocks chalked up a new high for the first time in nearly four years. The market’s ascend was helped by the economic data from September, confirming that the underpinnings of the economy remain solid (GDP growth for Q2 was revised up to an annual 3.8%) with consumer spending holding steady (retail sales increased 5% year-on-year in August) despite softer labor markets. However, there were clearer signs of cooling: in the three months to August, the US economy posted average monthly job gains of 29 000, down from 99 000 to May. The Bureau of Labour Statistics (BLS) also revised its payroll employment growth figures lower by almost one million in the 12 months to March 2025, signalling that the US economy was not as robust as previously thought. The headline inflation (CPI) accelerated from 2.7% year-on-year to 2.9% in August - but tariff pass-through has so far been more limited than previously feared. As a result, the Fed was able to lower the fed funds rate. With the direction of the future rate movements known to be downward, some economically sensitive sectors surged. Such were the small caps and REITs stocks, expected to benefit from the lower rate environment (as mortgages and loans become cheaper); as well as emerging markets, expected to benefit from the cheaper US dollar.  Technology and Communication services were the strongest performers, while the laggards were Healthcare (under pressure by Donald Trump) and Energy (hurt by falling oil prices). Bonds delivered positive returns across the board – US government bonds returned 1.5% on average for the quarter. At the same time, the yield curve steepened because short-term Treasury yields fell more as Fed’s focus shifted from inflation to growth risks (given the deteriorating US labor market). By the time the Fed delivered its 25 bps cut (from 4.25% to 4.00%) at its September meeting, the impact was fully priced in and markets did not react. The important 2-year Treasury note yielded 3.6% at the end of September, and the 10-year one finished the month at 4.16%. Meanwhile, US investment grade spreads tightened further, and corporate credit outperformed government bonds, reaching multi-decade tight levels. Lower-quality bonds (aka “high-yield”) stood out within fixed income, providing the strongest gains, as economic growth remained supportive. . The bond market benefited from a resurgence in US issuance during September, which was well absorbed by investors, reflecting positive sentiment and the search for yield. Now, one potential source of market turmoil as we head into the fourth quarter could be the US government shutdown: we remain on the lookout.
          European equities also enjoyed a positive September at large. The pan-European equity index Stoxx600 finished 3Q with 3.1% overall return, with about half of that achieved in September (1.43%, all in EUR). The performance of continental exchanges was somewhat mixed. German stocks were a drag, with the flagship German index DAX flat for September (-0.09%) and the quarter (-0.12%), while France’s CAC40 rose, despite the ongoing political instability – by 2.5% in September and 3% for the quarter. In general, gains were led by strong results in the Financials and Healthcare sectors, while Telecoms and Communication services lagged. Bank shares benefited from robust corporate earnings. UK equities posted strong gains, with the FTSE100 index rising more than 6.7% during Q3 (in GBP), which was its best quarter since late 2022. This robust performance was underpinned by a resilient global economy—since three-quarters of the index’s revenues come from abroad, and a weaker British pound further supported internationally oriented companies. Notably, Basic Materials stocks rallied on higher gold prices. The London Stock Exchange also witnessed a resurgence in initial public offerings. Domestically, the UK economic backdrop remained challenging. Inflation remained high at 3.8% in August, driven by food, energy, and utility costs. The Bank of England cut its interest rates —the first reduction since 2020— by 0.25 percentage points to 4.0%, potentially easing borrowing costs. On the continent the services sector expanded in Germany, Italy, and Spain, but France lagged due to political uncertainty. Former Prime Minister François Bayrou was forced to step down after a failed confidence vote over fiscal consolidation measures. He was replaced by Sébastien Lecornu, but uncertainty remains high as the new government struggles to pass deficit-cutting budgets. Export demand remained weak, with new export orders in the Eurozone declining for the twenty-eighth consecutive month, reflecting ongoing global trade challenges. Contrary to the US, European government bond yields rose, as tariff uncertainties were resolved and Germany increased infrastructure and defense spending. The ECB held policy rates steady during September, signaling the end of its rate-cutting cycle. Although inflation forecasts were revised downward below the ECB’s 2% target, September inflation figures are expected to slightly exceed this level. In the UK, persistent inflation and concerns over government finances pushed 30-year Gilt yields to their highest since May 1998. Public sector net borrowing was reported at over £11 billion above forecasts, worsening fiscal concerns. Over the quarter, the spread between 10-year French and German government bond yields widened to its largest this year, reflecting heightened fiscal and political risks in France. French government bonds underperformed as the country grappled with a 6% budget deficit and political obstacles to fiscal reform. Fitch, a rating agency, downgraded France’s sovereign rating from AA- to A+ due to ongoing political fragmentation and a weak fiscal situation. European corporate credit markets also performed strongly – the high-yield bonds delivered higher returns over government bonds for the quarter. Investor appetite for higher-yielding assets remained solid despite inflationary and political challenges.
         September brought challenges for investors on the Bulgarian Stock Exchange (BSE) after the main indices reversed their direction from the summer. Although with small losses, both main stock indices on the domestic exchange, the flagship SOFIX and the broad BGBX40, registered declines of 0.8% and 0.6% respectively (in BGN). Despite the indices declines in September, the total number of trades remained roughly the same as in August, while total turnover doubled compared to the previous month, disproving expectations of any seasonal slowdown in trading. Among the more notable companies on our borse, the biggest drop for the month was done by the technological champion Shelly Group AD, whose share price fell by 9%, while the best performing stock was that of pharmaceutical giant Sopharma AD, whose price rose by 8.3%. One new company has emerged on the BSE after IPO Growth AD's shares officially began trading in September. The company raised through an initial public offering (IPO) the maximum announced threshold of BGN 11.55 million, and the offering was oversubscribed. IPO Growth  was established jointly with the BSE and eight leading investment intermediaries to support new IPOs and follow-on offerings on the Bulgarian capital market. This was the second successful IPO on the exchange's main market in 2025.
Source: Bloomberg, BSE