Simon’s Market Minute
September was a tricky month for the global economy, with rising oil prices adding to inflation concerns and pushing government borrowing costs higher around the world.
The ongoing conflict in the Middle East remained a major influence. Oil moved back above $100 a barrel during the month as disruption to key supply routes continued, although prices eased again towards month end. The International Energy Agency warned that global oil supplies may not return to normal until 2027, highlighting just how significant the disruption has become.
Here in the UK, the Bank of England voted to keep interest rates unchanged at 3.75%, although Governor Andrew Bailey warned that higher energy costs could lead to further rate rises. Inflation concerns also pushed government borrowing costs sharply higher, with long term gilt yields reaching levels not seen for almost 20 years. Politics also provided plenty of headlines at the Labour Party conference. Prime Minister Andy Burnham announced plans to reform the State Pension Triple Lock from April 2030, while also setting out plans for a new National Care Service offering free personal care.
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Across the Atlantic, the Federal Reserve increased interest rates for the first time in three years as it tried to bring inflation back under control. US government borrowing costs also continued to rise, with long term Treasury yields reaching their highest levels in more than 20 years. Despite this, technology shares were relatively resilient. Strong demand for AI hardware helped companies such as Dell and Broadcom report impressive growth, while the US tech market actually finished September slightly higher.
Elsewhere, the European Central Bank also increased interest rates in response to inflation, while Japanese government borrowing costs continued to rise. The US and China held their latest summit in Washington, where they agreed to extend their trade truce by another two months, providing some welcome stability between the world’s two largest economies.
Overall, September was another reminder of how quickly higher energy prices can feed through into inflation, interest rates and financial markets. Despite some difficult headlines, most major stock markets remain in positive territory for the year, reinforcing the importance of looking beyond short-term volatility and remaining focused on the longer term.
Written by Director, Simon Warne
Based on our understanding of legislation and events at the time of publication. This review should not be considered advice and we would always recommend taking advice from a qualified professional before making any investment decisions.
