Fund Commentary
Financial markets had a challenging time in September as escalating tensions in the Middle East sent oil prices surging. The rising energy prices renewed inflation concerns weighing on investor sentiment and central banks started tightening. Globally, equities declined and bonds also fell as yields climbed to multi-decade highs.
Fixed income had a torrid month as inflation, government borrowing and corporate financing all contributed to the rise in yields. The US 10-year Treasury yield broke 5% before reaching 5.29%, its highest since 2007. AI-related borrowing added to the pressure, with US hyperscalers issuing more than $200 billion of long-term bonds this year. Investment grade bonds fell as spreads widened modestly, while high yield fared a little better on higher income and shorter duration. The sell-off was global: long-dated UK gilt yields reached their highest levels since 1998, German 10-year yields rose to a 17-year high and Japanese 10-year yields reached their highest level since 1996.
US stocks fell as the bond sell-off gathered pace and oil jumped on fading hopes of an end to the conflict with Iran. Having flagged inflation as the Fed’s foremost challenge at Jackson Hole, chair Kevin Warsh oversaw a unanimous vote on the 16th to lift rates by 0.25%, the first increase since July 2023, with the median projection pointing to one more hike this year. Strong data backed the Fed’s stance, with inflation unchanged at 3.4%, payrolls surprisingly up 162,000 in August and unemployment steady at 4.1%.
As the political conference season drew to a close in the UK, attention is turning to Chancellor John Healey’s first Budget on the 28th October which will be the first major fiscal event under Andy Burnham’s leadership. Healey has promised fiscal discipline within the borrowing rules, but higher borrowing costs have eroded around half of his £23.6 billion buffer. Inflation rose to 3.1% but the Bank of England bucked global trends and held rates for a sixth consecutive meeting. They warned though that they would likely need to hike if the conflict persists. The 30-year gilt yield touched 5.95%, its highest since 1998 and the BoE paused its bond sales until April 2027. UK equities fell but held up better than some markets, helped by their greater exposure to energy and commodities.
European equities weakened on worries over the European Central Bank’s hiking cycle, growth and higher energy costs. As expected, the ECB raised rates by 0.25% to 2.5%, its second rise this year, after August inflation hit 3.3% on the flash estimate (later revised to 3.2%), with energy inflation at 14.3%. French assets remained under pressure amid fiscal concerns. Bund yields reached a 15-year high of 3.54% and the French spread over Bunds widened to 119 basis points, its widest since the euro area debt crisis.
Japanese equities led developed markets on strong earnings, buybacks and governance reform. The Bank of Japan raised rates by 0.25% to 1.25%, a 31-year high, though the split 7–2 vote weakened the yen, and 10-year government bond yields topped 3% for the first time in three decades.
Asian and emerging markets were pressured by geopolitical uncertainty, high oil prices, rising US yields and a strong dollar, with foreign investors pulling back from Indian equities in the first week of September, though emerging market chipmakers remain well placed to benefit from the AI build-out. Chinese economic conditions remain bumpy, with firmer exports and technology investment offset by weak domestic demand and continuing property-sector concerns. El Niño is also a live risk, with the World Meteorological Organization and NOAA putting the chance of conditions lasting through November at around 90% or higher, threatening crops and food prices.
As for commodities, Brent crude oil jumped to $108 after Iran backed drone attacks shut Saudi Arabia’s East-West pipeline before easing back a little by month-end. Agricultural prices remained firm but gold gave back part of its August advance as higher yields and a stronger dollar outweighed its safe-haven appeal.
All performance figures are in GBP unless otherwise stated..
Monthly data as at: 30/09/2026.
