Our multi-asset investment views - September 2025
Last month we noted that markets were priced for perfection on the macro front and decided to turn neutral on equities. Since then, payroll data in the US has deteriorated although broader measures of employment are still positive. Importantly, the employment statistics have led to a repricing of rate cuts from the Federal Reserve (Fed).
We still believe that the risk of recession in the US is low, but we need to recognise that the Fed is leaning more dovish than we had previously expected. This implies lower real (inflation-adjusted) yields which, combined with decent corporate earnings and loose fiscal policy, leads us to re-establish a positive view on global equities with a preference for US and emerging markets.
The recent rally in US Treasuries has pushed valuations into more expensive territory. We continue to favour gold, which benefits from lower real yields but also offers protection against concerns over debt sustainability and central bank independence.
After a very strong run of performance, we are downgrading our view on local emerging market debt. We retain our negative stance on the US dollar.
All in all, we remain positioned for positive nominal growth, driven by the stimulative policies being pursued by the Trump administration. Gold remains an important diversifier, and the US dollar is expected to continue to bear the brunt of concerns over the medium-term implications of the current policy environment.
🟢 Long / positive
🟡 Neutral
🔴 Short / negative
🔼 Up from last month
🔽 Down from last month
Main Asset Classes
🟢 🔼 Equities
We continue to see a low risk of recession in the US. Lower real yields, combined with decent corporate earnings and looser fiscal policy, lead us to upgrade our view on equities to positive.
🔴 Government bonds
We have retained our negative view. The recent rally in US Treasuries, following weaker-than-expected payroll data, has pushed valuations into more expensive territory, while markets continue to underestimate the risk of inflation.
🟡 Commodities
We remain neutral on commodities. Increased supply from OPEC and non-OPEC countries is likely to drive a surplus in energy markets. However, we still favour gold, which continues to benefit from lower real yields.
🟡Corporate bonds (credit)
We have maintained our neutral view. Credit valuations remain expensive, particularly in US investment grade (IG). However, cyclical and technical factors remain supportive.
Equities
🟢 🔼 US
We have upgraded our view to positive. Our expectation for stronger corporate earnings, and the absence of a recession, suggests there is scope for further gains.
🟡 UK
A weakening fiscal position and valuations that appear stretched relative to macroeconomic fundamentals lead us to maintain a neutral stance.
🟡Europe ex UK
Whilst attractive opportunities do exist, particularly in European mid-caps, larger-cap names are acting as a drag on the overall index, so we remain neutral.
🟡Japan
The recent rally has been supported by reduced trade uncertainty and corporate reforms. However, company earnings remain less compelling, so we stay neutral.
🟢 🔼 Global Emerging Markets (EM)1
We have upgraded our view to positive. Emerging markets are showing renewed strength, driven by stabilising growth and a policy shift towards innovation within China.
🟢 🔼 Asia ex-Japan: China
We have upgraded to positive as activity indicators show a gradual improvement, which could support a valuation catch-up as Chinese equities still lag global peers.
🟢 🔼 EM Asia ex China
We have upgraded our view given signs of an export recovery in Korea and Taiwan, driven by tech exports, which provides a stronger case for a broader EM exposure.
1Global Emerging Markets includes Central and Eastern Europe, Latin America, and Asia.
Government bonds
🔴US
Rate cuts may help the budget deficit; however, this risks reigniting inflation. Our models also suggest that US bond valuations are now expensive, leaving us negative.
🟡 UK
Persistent inflation raises the bar for the Bank of England to ease policy. In addition, any cuts in rates will depend on further labour market softening, leaving us neutral overall.
🟡Europe
We remain neutral. Eurozone inflation has settled at target levels. However, the absence of structural policy reforms in Germany risks prolonging weak growth.
🟡 Japan
Although the Japanese government wants to maintain low long-term interest rates, we remain neutral due to persistent inflation concerns.
🟡 US inflation-linked bonds
We maintain a neutral stance, as declines in energy and rental costs are offsetting the impact of higher prices from trade tariffs.
🟡 🔽Emerging markets local currency bonds
We have downgraded to neutral. EM rates are starting to look rich, while negative real yields provide little room for outperformance.
Investment grade credit
🟡 US
Valuations in US IG credit remain expensive; however, cyclical and technical factors remain supportive, leaving us neutral.
🟡 Europe
We remain neutral as valuations are still expensive, although there has been a modest improvement in the region. There appears to be no immediate spillover from the French political gridlock into the sector so far.
🟡 Emerging markets USD
We continue to take a neutral stance, as recent marginal improvements in demand and a more favourable macroeconomic environment are offset by unattractive valuations.
High yield bonds (non-investment grade)
🟡US
We remain neutral, balancing the appeal of stronger carry (or income) and lower interest rate risk against tight valuations, despite a supportive macro environment.
🟡Europe
Valuations remain unattractive. However, European HY credit offers attractive hedged yields, and strong demand is absorbing heavy issuance, leaving us neutral overall.
Commodities
🟡Energy
We remain neutral on energy. Additional buying from China to fill inventories has kept the market balanced. However, further supply increases from OPEC and non-OPEC countries are likely to push the market into a surplus.
🟢 Gold
We continue to favour gold as it benefits from lower real yields. It also offers protection against concerns over debt sustainability and central bank independence.
🟡Industrial metals
There has been a modest rebound as Chinese demand has pushed the market slightly higher. However, we still see no indication of any medium-term boost to demand.
🟡 Agriculture
Global crop conditions remain broadly favourable, and we see no signs of near-term supply shortages, leaving us neutral overall.
Currencies
🔴US $
We remain negative. The US dollar is expected to continue to bear the brunt of concerns over the medium-term implications of the policies being pursued by the US government.
🟡 UK £
While inflation has been persistent, growth and labour market data have weakened, leaving us neutral overall.
🟢EU €
We maintain a positive outlook on the euro, supported by the region’s macroeconomic growth momentum, despite weaker equity market performance.
🔴 CNH ¥
We continue to hold a negative view as the prospect of further fiscal stimulus has faded. Softening external demand has also increased reliance on domestic growth drivers.
🟡 JPY ¥
We remain neutral as political tensions following the recent election have heightened uncertainty. However, at some stage the yen should benefit from the Bank of Japan’s interest rate policy.
🟡Swiss franc ₣
Although the Swiss franc provides a hedge against recessionary risks, we remain cautious given its lower interest rate relative to other currencies.
Source: Schroders, September 2025. The views for equities, government bonds and commodities are based on return relative to cash in local currency. The views for corporate bonds and high yield are based on credit spreads (i.e., duration-hedged). The views for currencies are relative to the US dollar, apart from the US dollar which is relative to a trade-weighted basket.
Marketing material
Please remember that the value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.
Issued by Schroder Unit Trusts Limited, 1 London Wall Place, London EC2Y 5AU. Registered Number 4191730 England.
For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security / sector / country.
Schroder Unit Trusts Limited is an authorised corporate director, authorised unit trust manager and an ISA plan manager, and is authorised and regulated by the Financial Conduct Authority.
