Global equities continued to rally through September in what is often seen as a weak month for financial markets, with the MSCI World Index gaining +3.3%. The S&P 500 delivered its best September performance in 15 years, climbing +3.7%, while the tech-heavy Nasdaq surged +5.7% as AI enthusiasm showed no signs of abating.
The AI Infrastructure Arms Race
Software company Oracle jumped +40% during the month after OpenAI announced a 5-year deal to buy $300 billion of cloud computing capacity. The deal boosted the wealth of CEO Larry Ellison by $100 billion, briefly supplanting Elon Musk as the world’s richest man.
What was perhaps more interesting were further announcements that Nvidia would be investing up to $100 billion in OpenAI while Oracle would spend $40 billion buying Nvidia chips. The scale of these deals is hard to comprehend. According to the deal, the plan calls for an additional 10 GW of AI datacentre capacity, which would require the generation capacity of five Hoover Dams, enough to power 10 million homes. While this could be described as mutually beneficial to the partners, the cynic might suggest that they’ve discovered a magical money tree.
European markets were more subdued with the MSCI Europe index up just +1.8%, matched by the UK FTSE 100 at +1.8%. Closer to home, Australian Emerging Companies jumped +13.4% on the back of stronger resources while the NZX 50 rose +2.8%, though its longer-term performance continues to lag international peers significantly.
AI fever also caught hold in Chinese technology stocks which rallied during the month with Alibaba soaring +32%, helping drive impressive gains for the Emerging Markets Index (+7.2%). This momentum caps off a solid 12-month period where emerging markets delivered +18.2%, though the 5-year returns of +7.5% serve as a reminder of the volatile journey investors have endured.
The resurgence has been fueled by policy stimulus from Beijing and a growing recognition that valuations had become compelling relative to developed market peers.
Kiwi Dollar Hits Decade Low
The New Zealand dollar continued to weaken, falling -1.6% against the US dollar and -2.8% versus the Australian dollar during September. More dramatically, the kiwi hit 0.8750 versus the AUD. Other than during the depths of the Covid Crisis, this is a level we haven’t seen for a decade, so we took the opportunity to increase our hedges.
Over the past year, the kiwi has declined -8.7% against the greenback. Interestingly, the US dollar itself has weakened significantly this year, falling approximately 10% against major currencies so far, its largest decline in over 50 years. This means the NZD has underperformed even a weak dollar, reflecting New Zealand’s particularly challenging economic outlook. This currency weakness has provided a tailwind for local investors, increasing the value of international investments when converted back to NZD. The flipside however is that at current levels it is likely to be less effective as a natural hedge during times of market turmoil.
Gold’s Historic Rally
Perhaps the standout performer across all asset classes was gold, which posted a remarkable +11.9% monthly gain as it closes in on US$4,000 per ounce. The precious metal has delivered a spectacular +46.4% return over the past 12 months.
Interestingly, when adjusted for inflation, gold has only just passed the January 1980 peak of $850 per ounce, a time of extreme geopolitical events, soaring inflation and oil price shocks. The current rally reflects a potent combination of central bank buying, concerns about fiscal deficits, and investors seeking safe havens amid ongoing geopolitical uncertainty.
Looking Ahead
As we head into the final quarter of 2025, markets face a complex backdrop. The AI-driven rally in technology stocks continues unabated, though questions remain about when the massive infrastructure spending will translate into meaningful profits. Gold’s parabolic ascent and near-record tight credit spreads present an interesting contradiction, suggesting both concern and complacency exist simultaneously in markets. As we are not in the business of making dramatic predictions, maintaining a diversified portfolio across geographies and asset classes remains as important as ever.
If you’d like to discuss how these market shifts impact your portfolio, please get in touch with Mark or Sam.