Last week proved eventful, though largely in line with expectations for financial markets. In the UK, the Bank of England kept base rates unchanged at 4.0% and slowed the pace of quantitative tightening, balancing elevated inflation with a fragile growth backdrop. August CPI remained at 3.8% year-on-year, while food and non-alcoholic beverage prices rose for a fifth consecutive month, leaving annual food inflation at 5.1%. Public sector borrowing of £18.0bn in August, the highest August figure in five years, reinforced fiscal concerns ahead of the Autumn Budget. Against this backdrop, UK equities underperformed their global peers, reflecting subdued domestic sentiment.
In the US, the Federal Reserve delivered its first policy rate cut of 2025, reducing the target range by 25bps to 4.00–4.25%. Chair Powell framed the move as risk management, citing tentative signs of softer labour demand and moderating household spending. More notable than the modest cut was the first policy meeting for Governor Stephen Miran, confirmed earlier in September, who dissented in favour of a larger 50bps reduction and has projected a steeper path of easing through year-end than his colleagues. Powell reiterated the Fed’s independence and stressed that future decisions will remain data-dependent.
Commodities and regional markets responded with a generally positive tone. Gold climbed to fresh record highs as investors sought protection against the prospect of lower real yields. Sentiment across Asia ex-Japan improved, supported by both the Fed’s move and new policy measures from Beijing aimed at shoring up consumption and financial stability. Chinese technology names and Taiwan’s semiconductor sector were particular beneficiaries, with ongoing enthusiasm for artificial intelligence and digital innovation underpinning demand.
Within the T. Bailey funds of funds, UK equity exposure was a modest drag given local underperformance, but this was offset by gains elsewhere. Gold holdings and allocations to Asia ex-Japan contributed positively, while technology strategies such as the Polar Capital Artificial Intelligence Fund and the First Trust Nasdaq Cybersecurity UCITS ETF continued to benefit from interest in digital infrastructure themes. Even so, we remain cautious on US equities and, in particular, crowded AI-related segments where ambitious growth assumptions, high capital intensity, and signs of misallocation suggest expectations may be running ahead of fundamentals.
With fiscal and monetary policy uncertainty likely to dominate investor attention into the final quarter of the year, our focus remains on maintaining diversification, liquidity, and disciplined risk management across the T. Bailey portfolios.
