Monthly Market Recap: September’s Surprise Surge

Overview

September was packed with economic shifts. Both the U.S. and China made bold moves to keep their economies buzzing. The U.S. Federal Reserve gave the economy a push with a 0.50% interest rate cut, while China rolled out a massive stimulus package. This included slashing bank reserve requirements, lowering mortgage rates, and pumping liquidity directly into their stock market. Talk about a double punch!

Meanwhile, artificial intelligence (AI) remained the talk of the town. With promises of game-changing innovations, the excitement is real, though the timeline is still a bit fuzzy. One thing is certain: this tech boom will require a lot more energy. And guess what? Nuclear power is standing tall as the front-runner. China is already leading the charge with over 20 nuclear reactors under construction, targeting a capacity of 25 gigawatts. Even Bill Gates is on board—Microsoft struck a groundbreaking deal with Constellation Energy to revive the Three Mile Island nuclear facility, planning to secure all its energy output by 2028. But it’s not all sunshine. Tensions in the Middle East are heating up, pushing oil prices higher and rattling global markets. And as if things weren’t tricky enough, a massive U.S. dockworker strike, which has since been suspended until January, hit 36 major ports on October 1, potentially adding more stress to the global economy. The takeaway? Diversification is key, my friends. Let’s dig into the specifics.

Stocks: A Bright Spot

September was a great month for stocks, especially in China. Large-cap Chinese stocks listed in the U.S. soared over 20%, thanks to China’s bold central bank actions. With Chinese stocks trading at a price-to-earnings (P/E) ratio of 10 (compared to 26 for the S&P 500), we believe there’s still room to grow. The last two decades have shown us that betting against committed central banks is often a losing game.

Closer to home, U.S. large-cap growth stocks jumped nearly 3%, driven by lower interest rates that made growth companies more attractive.

Bonds: Strong Performance, Especially Abroad

In the bond market, lower interest rates boosted the value of bonds, with the Bloomberg Barclays U.S. Aggregate Bond Index returning nearly 3%. However, the real excitement was in foreign-denominated debt. Emerging market bonds priced in local currencies rose over 8%, benefiting from a weaker U.S. dollar as interest rates fell.

Real Assets: Gold Shines Bright

Gold had a golden month, thanks to falling real interest rates. The U.S. finds itself in a "debt trap," where the federal debt is so massive that typical economic growth can't sustain it. We believe the only way out of this trap is through low or negative real interest rates, where inflation outpaces interest rates, allowing the government to repay debt with devalued dollars. Historically, this has created a bullish environment for gold, and this year has been no exception. That said, don’t be shocked if we see a short-term pullback in gold prices—they’ve been on a tear.

Digital Assets: A Crypto Climb

Bitcoin surged over 8%, and Ethereum followed with a nearly 4% gain. What powered this rise? A combination of the U.S. and China easing monetary policies, stronger-than-expected U.S. economic data, and increased institutional involvement. Traditional banks are now offering custody services for Bitcoin and Ethereum, boosting confidence in the digital asset space.