Market Review – September 2025

UK

Challenges ahead for the big banks? The FTSE 100 Index reached a new all-time high during August amid widespread hopes that the US Federal Reserve will implement an interest-rate cut in September. However, the blue-chip index subsided from its highs towards the end of the month amid speculation that the UK government might levy a windfall tax on the banking sector. Over August as a whole, the FTSE 100 Index rose by 0.6%, while the FTSE 250 Index fell by 1.6%.

Base rate cut to 4%: having expanded by 0.7% during the first quarter of 2025, the UK economy grew by a better-than-expected 0.3% in the second quarter, underpinned by activity in the services and construction sectors. The Bank of England (BoE) cut its key interest rate to its lowest level since February 2023 during August. Central bank policymakers voted by five to four for a quarter-point cut, taking the base rate to 4%. The BoE predicted that policies in the Spring Statement are likely to dampen economic growth, and that measures, including higher employers’ National Insurance contributions and minimum wages, will stoke inflationary pressures. Although government borrowing proved lower than expected during July, tax increases are widely expected in the autumn Budget.

Persistent inflationary pressures: the rate cut appeared to provide a boost for consumer confidence, which reached its highest level since late 2024. However, the annualised rate of consumer price inflation rose to 3.8% in July – its highest level since January 2024 and undermining hopes for further monetary easing soon.

22% of UK companies cut dividends in Q2 2024 vs Q2 2023: according to Computershare’s Dividend Monitor, UK dividend payouts fell by 1.4% to £35.1 billion on a headline basis in the second quarter of 2025. On an underlying basis, dividends rose by 6.8% to £33.1 billion on a constant currency basis. 22% of companies cut their dividends during the period year on year.

£10 trillion AUM in the UK: the UK investment management industry registered a new peak of £10 trillion assets under management (AUM) in 2024, according to the Investment Association. The increase reflected strong market performance. For the first time, AUM managed on behalf of retail investors surpassed pension funds for the first time, while assets managed on behalf of overseas investors rose above 50%.

 

Global

US markets hit new highs: hopes of a September interest rate cut in the US provided a boost for global equity markets and drove up the Dow Jones Industrial Average Index to a new closing high. Federal Reserve chair Jerome Powell stoked expectations of a quarter-point cut next month during his speech at the annual Jackson Hole symposium, commenting: “The shifting balance of risks may warrant adjusting our policy stance.” Over August, the Dow Jones Industrial Average Index rose by 3.2%.

Core inflation hits a five-month high: alongside hopes of imminent monetary easing, stronger-than-expected corporate earnings provided a boost for sentiment and helped to offset persistent inflationary pressures and disappointing labour market data. Although the annualised rate of consumer price inflation remained at 2.7% in July, core inflation rose to 3.1%, its highest level for five months. Producer price inflation rose at a monthly rate of 0.9% in July, representing its largest monthly increase since June 2022, as the impact of President Trump’s tariffs started to take effect. Meanwhile, fewer-than-expected new jobs were created in July, and the figures for June and May were revised down.

Tariffs – and the impact of tariffs – are set to remain in the spotlight. The eurozone’s economy expanded at an annualised rate of 1.4% during the second quarter, representing a slight slowdown from first-quarter growth of 1.5%. President of the European Central Bank Christine Lagarde highlighted an “already evident” tariff-related slowdown in economic activity in the eurozone, which is expected to continue into the third quarter. Elsewhere, share prices in France dropped sharply towards the end of August against a backdrop of rising political turmoil. Over August as a whole, France’s CAC 40 Index declined by 0.9%, while Germany’s Dax Index fell by 0.7%.

Nikkei 225 breaches 43,000 points: in Japan, the Nikkei 225 Index hit a fresh all-time high in August, boosted by hopes of a US interest rate cut. The benchmark index rose by 5.5% during the month, breaching 43,000 points. Following July’s trade agreement between Japan and the US, Bank of Japan policymakers said they believe that the country’s economic growth may moderate in the short term but expect growth to recover thereafter. Japan’s economy expanded at a quarterly rate of 0.3% during the second quarter, having grown by 0.1% in the first quarter.

As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344  or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.