September was a strong month for financial markets, supported by falling US interest rate expectations, easing trade tensions, and continued enthusiasm around artificial intelligence. Sentiment was further boosted by the US Federal Reserve’s first interest rate cut of the year.
Weaker-than-expected US labour market data led to a decline in rate expectations ahead of the September 17th FOMC meeting, driving outperformance from growth assets relative to value. Against this backdrop, the OCM portfolio suite extended its positive year-to-date performance.
Strong momentum across equity and fixed income markets since the April 2nd ‘Liberation Day’ sell-off has underpinned robust returns so far in 2025. However, as we enter the final quarter of the year, risks remain elevated. This week’s news of a US government shutdown highlights the potential for renewed volatility in the months ahead.
US Federal Reserve Cuts Interest Rates
Despite concerns that tariff implementation could reignite inflationary pressures, a series of weaker US labour market releases prompted the Federal Reserve to resume its rate-cutting cycle, shifting focus back towards its dual mandate of price stability and maximum employment.
While markets briefly priced in the possibility of a 0.50% cut, stronger economic data closer to the meeting saw the FOMC opt for a more cautious 0.25% reduction. Policymakers also signalled a measured approach to further easing, with only one member dissenting in favour of a larger cut. Updated economic projections indicated a median expectation for two additional cuts later this year, as Chair Powell highlighted rising risks linked to a gradually increasing unemployment rate.
The outlook has since been clouded by a partial US government shutdown, which is likely to delay key economic data releases. While this may increase short-term volatility, we believe portfolios remain well positioned through diversification and a focus on high-quality assets. The absence of timely data may also raise the likelihood of further rate cuts as the Fed seeks to avoid falling behind the curve.
US Government Shutdown
For the third time under President Trump, political deadlock has triggered a partial US government shutdown. Historically, such events have had limited lasting economic impact, and we do not expect this episode to materially weaken growth unless it becomes prolonged.
Markets have largely brushed off the news, with US equities edging higher as technology optimism continues to support sentiment. While there is some risk of temporary labour market disruption, federal workers typically receive back-dated pay, meaning consumption is unlikely to be significantly affected.
UK Autumn Budget Looms
UK equities have continued to lag developed market peers as investors await November’s Autumn Budget. Chancellor Rachel Reeves faces a challenging backdrop of moderating growth, persistent inflation, and global uncertainty as she seeks to balance the public finances.
Recent commentary from the Labour Party conference suggests further tax rises are likely, with business confidence remaining subdued following last autumn’s £40bn tax increase. With limited fiscal headroom, further tightening now appears increasingly probable.
OCM Portfolio Performance and Positioning
The OCM portfolio suite built on recent momentum during the month, with US, Japanese, and Emerging Market exposures contributing positively. Expectations of further monetary easing and continued AI enthusiasm supported growth assets, pushing US markets to fresh record highs.
Within the Long Hold Growth models, exposure to natural resources—particularly gold—was a key contributor. Gold has reached multiple record highs this year, supported by safe-haven demand, central bank buying, and ongoing macroeconomic uncertainty. While recent gains have increased short-term risk, we continue to view gold as a long-term diversifier rather than a tactical return driver.
Looking ahead, we are comfortable maintaining elevated cash levels within the OBI VM portfolios. Strong year-to-date performance allows us to remain selective without taking excessive risk. Cash provides both downside protection and flexibility to deploy capital should opportunities arise, particularly with valuations across equity and fixed income markets remaining close to record highs.
Past performance cannot be used as a guide to future performance and the value of your investment will fall as well as rise in value. You may not get back all your investment and the final value of your investment will depend on the performance of your portfolio. The actual performance of an individual client’s portfolio may differ due to different funds being used and being restricted in relation to certain asset allocations. Performance figures quoted include fund manager charges but exclude adviser, discretionary, custodian and switch charges. Unless stated, income is reinvested into the portfolio. The information contained in in this document is for information purposes only. It does not constitute advice or a recommendation or an offer or solicitation for investment. OCM Wealth Management Limited is authorised and regulated by the Financial Conduct Authority (FCA Registration No: 418826) OCM Asset Management is a trading name of OCM Wealth Management Limited
