Equity markets performed strongly in September, with US and European markets posting monthly gains in excess of 3%, extending the rally started mid-April. EM equities outperformed again last month to reach +27.6% annual return, vs. 13.7% for the S&P 500. Although U.S. macro data in September was mixed, the resilience of economic activity in the face of tariff increases and elevated global uncertainty remains evident. Key mid-term risks (Q1 2026) include a potential reacceleration of inflation and ongoing weakness in the labor market, though the probability of a near-term recession remains low. Against this relatively decent backdrop, the Federal Reserve’s resumption of its rate-cutting cycle at the September FOMC meeting eased monetary conditions and fueled a sharp rally in risk assets, particularly high-beta equities and U.S. mega-cap stocks. Additional support from fiscal expansion—such as reduced costs for large technology firms’ massive AI-related capital expenditures—and forthcoming financial deregulation should help offset the drag from fading share buybacks in Q4, which had been a major driver of equity market performance in September. The “Goldilocks” market environment is still very much intact. At the time of writing, the U.S. administration has announced a government shutdown, which could lower Q4 GDP forecasts and trigger layoffs if no furlough programs are implemented for civil servants. Provided the shutdown does not extend beyond a few weeks, the impact on U.S. equities and the dollar should remain limited. In contrast, China has unveiled a new RMB 500 billion investment stimulus plan, while Eurozone activity is accelerating as public spending initiatives roll out. This environment suggests investors may increasingly reallocate towards Eurozone and Asian equities in an opportunistic shift.

The Fund was up +0.7% (A, USD) in September, in-line with its short-term rate + 3% annual objective. The persisting low equity volatility regime resulted again in yields below 10% p.a. for the new EMTNs replacing the auto-called ones. Also, given the elevated valuations of US equities, it was decided to reinforce short-term maturities in the Fund’s portfolio to avoid a strong negative mark-to-market impact in case of a temporary equity selloff and volatility spike. As of 30/09, the Fund’s running yield was at +9.1% p.a. (USD, gross) with +20.0% downside protection on the income notes allocation and 5.1-month average maturity.