By Craig McAvinue – 6 September, 2025
Know what you own and know why you own it
September and therefore quarter three has come to an end, and the upward trend in markets continues…
A fairly benign month for the USD, with only small movements against other currencies. The greenback remains relatively low and down across the board for the year so far
Data from Google Finance
The market expectations around the Fed’s continued interest rate cutting continues to encourage investment. Trump makes no secret of his desire for lower rates and whilst technically speaking the Federal Reserve is supposed to be independent, as with most things Trump, undoubtedly he has some influence on this.
There was talk of the rate cut being as high as 0.5%, though in the end just 0.25% was decided on. The extra 0.25% is expected in the next meeting at the end of the month and as borrowing costs and earnings on cash go lower, the stock markets continue to be a popular home for savings.
Tech and specifically AI are sectors that continue to drive these gains. The tech heavy Nasdaq saw its best September for 15 years with over 5% gains.
Whilst there is still plenty of growth opportunity in this exciting sector, there is also the potential for profit taking and market adjustments. Should that happen it would likely be the tech / AI sector where we see some volatility. Though with a longer term view any short term drops and volatility can be soon forgotten.
A stand out performer on the above is “EM”, Emerging Markets, showing 33% gains for 2025 until 30 September, 2.5 x the S&P. For reference the MSCI EM50 is where this data is derived from.
Although we are talking about a much smaller pool of number companies (1/10) than the S&P 500, the high levels of concentration are also a factor. Just four companies, Taiwan Semiconductor, Tencent, Ali Baba and Samsung account for nearly half (47%) of this index.
As I have referenced many times with comparing the Magnificent Seven’s impact on the S&P 500, this no longer makes investing in these markets the passive play it used to be and in theory higher risk. Strong performers by these top constituents (in both) will disproportionately lift the indexes..
It’s no surprise that these leading Asian businesses are tech leaning also.
One of these companies, Taiwan Semiconductor accounts for 22%.. With a market cap of approximately US$1.4 trillion, that would make them the seventh largest company on the S&P at current valuations, edging Tesla out of the exclusive club by the odd $100m or so.
Tencent, Ali Baba and Samsung are household names. Samsung of course being the flagship company of South Korea, I was surprised to learn that this was still considered an Emerging Market.
Considered one of the most advanced countries in terms of education, innovation and technology and is also the tenth largest economy in the world. So by most social and economic measures, South Korea is developed but due to quirks in how index providers classify markets (especially around market access and currency), MSCI still keeps it in the “Emerging Markets” basket. That’s why you’ll often see it grouped alongside countries like Brazil, India, and South Africa, even though its economy is much closer to Japan or Germany.
Aspects like the above need a little more scrutiny when looking at what you buy.
So with quarter four now underway, the period which has historically outperformed the other quarters by double on the S&P 500, will we see the repeated trends, the traditional Santa Clause Rally and closing out a bumper year for 2025…..though perhaps we need to look a little closer about what is actually owned…
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