Welcome to the September 2025 issue of Quarterly Market Commentary from Burlington Financial Solutions.
The summer months (June to August 2025) showed a complex and changing picture. After a volatile second quarter shaped by US trade tariff announcements, markets stabilised in July and August as negotiations offered temporary relief. A key theme was the fragile balance between solid economic activity and geopolitical and fiscal tensions.
Central banks appeared to be nearing the end of aggressive rate-cutting cycles, while fiscal policy and government debt sustainability moved centre stage — influencing bond yields and sentiment. This article summarises the main regional themes from the full commentary. Figures and levels are as described in the original publication for that period; markets evolve daily, so treat them as context, not live prices.
Global overview
Across regions, corporate earnings in the US and Europe were broadly positive versus muted expectations, and business surveys pointed to optimism in places. At the same time, a cooling labour market in the US, questions around Federal Reserve independence, sticky UK inflation, and political stress in parts of Europe created offsetting worries.
US equities, especially technology, continued to benefit from artificial intelligence (AI) enthusiasm, though commentary also noted emerging debate about near-term revenue from AI pilots. The US dollar showed some weakness; emerging markets broadly gained from that and from progress on trade talks, with country-specific issues (for example tariff exposure) driving divergence.
United Kingdom
The UK faced a volatile summer: inflation proved stickier than hoped, the Bank of England sounded cautious even as it cut rates, and gilt yields reflected unease about the fiscal outlook.
Inflation (CPI) was 3.8% year-on-year in July (the commentary’s highest reading since January 2024, and above June’s 3.6%), with energy and supply chain factors cited alongside elevated core inflation.
On 7 August 2025, the Monetary Policy Committee reduced Bank Rate by 0.25 percentage points to 4% — the lowest in over two years — but policymakers stressed vigilance on inflation, signalling that further cuts were not taken for granted. Wage growth remained strong (average earnings excluding bonuses rose 7.8% year-on-year in the period referenced), complicating the inflation picture.
GDP grew 0.2% in Q2; unemployment was 4.2% in July. House prices fell 1.5% year-on-year in August (the largest annual decline since 2012 in the commentary), with mortgage rates and affordability weighing on demand.
Equities: the FTSE All-Share made modest gains but lagged many peers. The FTSE 100 briefly surpassed 9,000 in July, helped by large-cap, internationally exposed names in defensive sectors such as healthcare and consumer staples. The FTSE 250 (more domestic) faced headwinds in areas such as retail, construction, and financials. Sterling weakened to a six-month low versus the dollar in August.
Gilts: long-dated UK government borrowing costs drew attention — for example 30-year gilt yields were discussed in the context of multi-decade highs, with 10-year yields also higher, reflecting fiscal concerns and global rate dynamics. Corporate credit saw wider spreads in places, while investment-grade demand held up for stronger issuers.
Politics and fiscal: measures on cost of living (including welfare and energy support) sat alongside debate over fiscal discipline. The Office for Budget Responsibility was cited warning that extra spending could push the deficit above 5% of GDP in the current fiscal year — feeding gilt pressure.
Eurozone
The region mixed resilient activity and earnings in some areas with political and fiscal stress — France in particular moved into the spotlight.
HICP inflation was 3.2% year-on-year in June (down from 3.5% in May), while core remained elevated (e.g. 3.8%). GDP rose 0.1% in Q2 (slower than Q1). Manufacturing PMIs improved in August in places, while services remained under pressure.
The ECB held its main rate at 2% in July, signalling a pause near the end of its easing cycle, with Lagarde emphasising caution on inflation.
France: political and fiscal tension included debate over a large consolidation package, debt at record levels relative to GDP in the narrative, and a deficit well above the EU’s 3% reference. French equities underperformed; French versus German 10-year spreads widened. German bunds benefited from safe-haven flows, with yields relatively stable.
MSCI EMU equities rose over the summer, supported by earnings and a US trade arrangement described as a 15% baseline tariff with sector exemptions, reducing worst-case trade-war fears. Healthcare and financials were among the stronger sectors in the commentary.
United States
US indices delivered strong June–August returns (the commentary described the best summer for major indices since 2020 in those terms). Technology and AI narratives led; roughly three-quarters of S&P 500 companies were said to have beaten expectations in Q2 earnings season.
CPI inflation moderated (e.g. 3.1% year-on-year in June vs 3.8% in May; core around 3.5% in July). The labour market cooled: non-farm payrolls around 150,000 in the month cited vs a 250,000-type run-rate earlier; wage growth slowed toward 4.2% year-on-year; unemployment remained low (e.g. 3.7%).
Fed communication was interpreted as dovish enough for markets to price a high chance of a September cut, while longer Treasury yields rose on fiscal and term premium worries — 10-year yields around 4.3% in August, described as the highest since 2011 in the piece. The curve steepened (e.g. 2s10s moving toward -0.5% in August from -0.8% in May).
Politics and institutions featured in the narrative (debates over Fed and data independence). Fiscal figures cited included a wide budget deficit and national debt in the trillions of dollars, with Congress divided on responses.
Japan
Japan was a standout: Nikkei 225 and TOPIX outperformed many global peers. Q2 GDP (annualised) was positive (e.g. 1.8% in the commentary), helped by exports and domestic demand. Machinery orders rose (e.g. 4.5% in July).
CPI moved up (e.g. 2.8% year-on-year in June; core 2.4%). The Bank of Japan kept ultra-loose settings but raised inflation forecasts, fuelling speculation about future tightening. 10-year JGB yields rose (toward 0.7% in August in the text — a multi-year shift versus the long low-yield era). The yen was volatile (e.g. around 145 per dollar in July before a partial recovery).
A favourable US–Japan trade deal was highlighted for sectors such as autos and electronics. Foreign buyers of Japanese equities were notably active.
Asia (ex-Japan) and China
Asia ex-Japan benefited from an extended US–China truce that delayed further tariff steps until November, supporting trade and sentiment.
China: Q2 GDP around 4.8% year-on-year; industrial production and retail sales improved; CPI was muted (e.g. 0.8% in July). The PBoC cut the loan prime rate by 10 basis points in August and added property-sector liquidity measures. Industrial policy around semiconductors (including ambitions to scale domestic chip production) supported tech sentiment. Shanghai Composite gains (around 9% over the summer in the commentary) were led by technology and consumer discretionary.
Taiwan and South Korea outperformed on AI-linked demand (e.g. Taiwan index up about 12%, KOSPI about 10% over the period described).
India lagged: US tariffs (described as 50% on exports in August, linked to Russia trade relationships in the narrative) hit sentiment; Nifty 50 fell about 3% over the summer, with bond yields rising (e.g. 10-year around 7.5% in August).
Emerging markets
MSCI Emerging Markets rose (about 7% over the summer in the commentary), ahead of some developed markets, helped by trade progress and a weaker dollar, but with wide dispersion.
Brazil featured positively (GDP, commodities, central bank tightening to address inflation — e.g. 50bp hike in July; Bovespa up around 8%). Mexico was noted as vulnerable to US trade and demand. Middle East exposure (e.g. Saudi Arabia) faced oil and geopolitical headwinds in the narrative.
Global bonds — fiscal theme
A dedicated global bonds section stressed the shift from pure monetary policy to fiscal risk: higher government yields in the US and UK, steepening US curve, peripheral Eurozone spreads under political stress, and resilient corporate performance where balance sheets were strong. US fiscal debate referenced legislation colloquially described as affecting the debt outlook.
Looking ahead
The commentary concluded that cautious optimism coexists with macro and political undercurrents. Themes likely to remain relevant include central bank guidance, inflation data, geopolitics, and the balance between corporate strength and sovereign funding costs. Diversification and staying informed were emphasised as foundations for long-term decisions.
If you would like to discuss how global market developments relate to your own objectives and risk tolerance, please contact us.
Important information
This publication does not constitute financial, investment, tax, or legal advice and should not be relied upon as such. The value of investments and the income from them may go down as well as up; you may not get back the amount invested. Past performance is not a reliable indicator of future performance.
Information is based on our understanding of taxation legislation and regulations at the time of writing; any levels, bases, and reliefs from taxation may change. Tax treatment depends on individual circumstances and may change in the future. For guidance, seek professional advice.
Although efforts are made to provide accurate information, there is no guarantee it remains accurate when you read it or in the future. You should not act solely on this content; consider your own situation and obtain appropriate professional advice where needed. We do not accept responsibility for loss arising from reliance on this summary.
Figures, index levels, and yields quoted reflect the September 2025 Quarterly Market Commentary (covering developments through August 2025 where stated) and are not updated in this web version.
Burlington Financial Solutions — Suite 1a & 1b, Turnpike Gatehouse, Alcester, B49 5JG.
Telephone: 07542 647868 / 07836 342944 · Email: chrisfd@burlington-fs.co.uk · Web: https://www.burlington-fs.co.uk