September Market Update

Introduction

This September monthly view looks back at August’s data and developments, and then looks forward to the months ahead. Policy remained the key driver: Australia’s rate cut added to a broader easing bias, while earnings resilience and stronger trade prints in Asia kept risk appetite intact. At the same time, mixed U.S. services activity, a jump in producer prices, and patchy European demand reminded markets that the path to lower inflation is unlikely to be linear. Against this backdrop, the focus for the coming months is balancing selective growth exposure with the flexibility to respond quickly as conditions evolve.

Macro overview

Australia: The Reserve Bank of Australia lowered the cash rate by 25 basis points to 3.6%, the third easing this year and the lowest since April 2023. The move is designed to support discretionary spending. NAB’s business confidence survey produced a strong reading and now sits just above its long‑run average. However, monthly CPI rose 2.8% in the year to July (versus 1.9% in June and above expectations), highlighting the risk that inflation proves sticky and limits the pace of additional cuts.

United States: Headline CPI increased 0.2% in July and 2.7% over the year, just under market expectations and supportive of rate‑cut hopes. Yet services activity nearly stalled with the ISM Services PMI at 50.1, and wholesale inflation accelerated with PPI up 0.9%—the largest monthly gain in three years—reflecting tariff‑related cost pressures. Taken together, the data nudged expectations toward caution even as markets looked for policy easing.

China: Trade data surprised on the upside. Imports rose 4.1% year‑on‑year in July, defying expectations of a decline and improving from June’s 1.1% rise, while exports climbed 7.2%, beating forecasts and the prior month’s 5.8%. The pickup in both import and export momentum suggests firmer external demand and some stabilisation in supply chains. Retail sales growth of 5.1% underscored the challenge of lifting domestic consumption to higher, sustained levels.

Japan: The economy expanded faster than expected last quarter, led by domestic demand. Business investment rose 1.3% from the previous quarter (vs 0.7% consensus). Even so, factory output fell 1.6% in July and retail sales grew just 0.3% year‑on‑year (below 1.8% consensus), highlighting ongoing volatility linked to global trade dynamics and earlier tariff effects.

Asset class outlooks

Equities

Earnings remained resilient across several regions, particularly in technology, consumer, and infrastructure‑linked areas. In Australia, lower rates should broaden earnings drivers beyond large caps, creating scope in mid‑cap growth and consumer‑exposed names. With valuations demanding in many markets, emphasis remains on balance‑sheet strength, pricing power, and alignment to durable growth themes such as AI infrastructure, healthcare innovation, and the energy transition.

Fixed income

Income remains appealing, but duration needs care while inflation dynamics play out. Short‑to‑intermediate maturities and investment‑grade credit offer a balanced profile; high yield is more vulnerable if growth slows. Policy timing differences across regions may create relative value opportunities as easing cycles diverge.

Alternatives & commodities

Precious metals continue to serve as hedges against inflation and geopolitical uncertainty. Infrastructure tied to renewables, energy storage, and digital networks is supported by policy and multi‑year capex cycles. Ongoing supply‑chain realignment underpins interest in logistics and transport assets. Private market valuations are resetting, creating opportunities for patient, disciplined allocators.

Foreign exchange

The Australian dollar reflects cross‑currents—pressure from domestic easing offset by stronger Chinese import demand. Moves in the U.S. dollar remain closely linked to evolving policy expectations.

Positioning considerations

• Maintain selective growth exposure anchored in structural themes (AI, healthcare, renewables).
• Keep liquidity buffers to deploy on pullbacks and dislocations.
• Diversify fixed income across credit quality and maturity bands, with a bias to higher‑quality issuers.
• Retain inflation hedges via real assets and commodities.
• Adjust tactically as central bank signals and incoming data shift the balance of risks.

Base case – 79% probability

The central view remains constructive. Liquidity, fiscal support, and resilient earnings provide a foundation for risk assets. The RBA’s August cut should add domestic momentum, while easing cycles elsewhere help underpin valuations. Structural growth themes—AI infrastructure, renewable energy, and digital transformation—continue to attract capital. Fixed income offers attractive income and balance. Volatility is likely to persist, but pullbacks are more likely to represent opportunities than sustained trend breaks.

Bear case – 8% probability

Downside risks cluster around weaker global consumer demand, persistent tariff‑driven inflation, and renewed financial‑system stress. Sovereign‑debt concerns or a re‑acceleration in funding costs could tighten lending standards. China’s property fragility remains a watchpoint with potential deflationary spillovers into global trade. Escalating geopolitical tensions or a significant credit event could catalyse sharper market dislocations. In such scenarios, a defensive tilt—elevated cash, reduced cyclical exposure, and a focus on resilient sectors such as healthcare and staples—would be warranted.

Bull case – 13% probability

A stronger outcome would see inflation moderating faster, tariff impacts contained, and productivity gains from rapid technology adoption lifting earnings and margins. Deregulation and targeted fiscal measures could accelerate growth, broadening profit recovery across regions. In that environment, cash buffers could be reduced, cyclical exposure increased, and emphasis placed on markets and sectors most leveraged to an upswing. In Australia, the combination of rate cuts and government spending would reinforce a more supportive backdrop.

Closing perspective

August’s data illustrated both resilience and constraint: policy support and solid external trade on one side; sticky inflation and uneven services momentum on the other. Looking into September and beyond, the medium‑term case for growth assets remains intact, underpinned by liquidity and structural themes. Success continues to rest on a blend of conviction and agility—owning durable growth exposures while staying ready to pivot as the macro picture evolves.

This publication is prepared by Akambo Pty Ltd (ABN 16 123 078 900) AFSL 322056.

The information presented in this publication is general information only, and is not intended to be financial product advice. It has not been prepared taking into account your investment objectives, financial situation or needs, and should not be used as the basis for making an investment decision. Before making any investment decision you need to consider (with your financial adviser) your particular investment needs, objectives and financial circumstances.

Some numerical figures in this publication have been subject to rounding adjustments. Akambo Pty Ltd (including any of its directors, officers or employees) will not accept liability for any loss or damage as a result of any reliance on this information. The market commentary reflect Akambo’s Pty Ltd’s views and beliefs at the time of preparation, which are subject to change without notice.

Past performance is not a reliable guide to future returns.