September: The Worst Month For The Markets But Is It An Opportunity?

This episode analyzes the convergence of September's historical market weakness, multi-year high bond yields, and sticky inflation, which together heighten the risk of stagflation despite ongoing AI-driven US economic growth. Alongside these macro headwinds, it highlights Vanguard's ultra-low-cost global ETF launch and examines the sharp operational turnaround and surging profitability at UK small-cap lender Funding Circle.

• Vanguard FTSE Global All-Cap UCITS ETF (VALL): Offering exposure to ~10,100 stocks across 48 markets with an Ongoing Charges Figure (OCF) of just 0.07%—less than a third of the classic index fund’s 0.23%. Assets under management have surged from under $50m at launch to $645m in just two weeks.

• 1. September Seasonality & The Correlation Trap:
  
  

  • The S&P 500 averages -1.1% in September with a win rate of only ~45% since 1928, marked by asymmetric tail-risk downside.

  • High long-term correlation between the S&P 500 and UK indices (+0.60 to +0.80 with the FTSE 100; +0.50 to +0.70 with the FTSE 250) means US turbulence spills directly into UK portfolios.

• 2. The Sovereign Bond Sell-Off & Collapsing Equity Risk Premium:
  
  

  • Benchmark 10-year yields across the US, UK, and Europe sit near pre-2008 highs, driven by heavy debt issuance, quantitative tightening, and revived term premiums.

  • Higher risk-free rates pull capital from equities into fixed income and compress the Equity Risk Premium below 100 bps.

• 3. Sticky Inflation & The Stagflation Dilemma:
  
  

  • Persistent services inflation and European natural gas spikes limit central banks’ flexibility.

  • If rising yields curb growth while inflation holds firm, markets face a stagflation bind—exposing an economy where AI capex has generated roughly three-quarters of early 2026 US GDP growth.

• Funding Circle (LSE: FCH):
  
  

  • Strong HY 2026 trading update ahead of full interims on September 8: revenue up 50% to ~£138m, profit before tax surging to ~£23m, and an unrestricted cash balance of £136m.

  • High cash generation from the core Term Loans segment funding rapid 71% transaction growth in FlexiPay and Card, alongside ongoing capital returns via a £25m share buyback program.