Fund Return 2025 - 2026

Fund return to 31 August 2025

Investment Commentary

Provided by Mercer - CERS Investment Adviser

Market Developments

Global equity performance was positive in August, led by US and non-US developed stock stocks. Non-US developed stocks had solid local currency returns, with a weaker dollar against developed markets being an additional tailwind for unhedged US investors. EM stocks also had positive returns but underperformed US and non-US. Small cap outperformed large cap stocks, while value outperformed growth as measured by the Russell 3000, both driven by rate cut expectations after Powell’s Jackson Hole speech.

Bond markets had positive returns, as yields fell for most maturities in the US and coupons remain high. Outside the US, yields rose slightly. Powell’s Jackson Hole speech cemented the outlook for a rate cut in September, while the possibility of a Fed governor being ousted amid mortgage fraud allegations highlighted uncertainty about the future makeup of the Fed board. Inflation risks from short-term factors and Fed independence uncertainty contributed to a sell off in long dated bonds towards the end of the month.

Global reciprocal tariffs came into effect, in addition to punitive tariffs of 50% imposed on India for purchasing Russian oil. President Trump also announced there will be 100% tariffs imposed on chips manufactured outside of the US. The US extended its trade truce with China for another 90 days. The US agreed to a deal with Nvidia and AMD, allowing them to export semiconductors to China. The US government also purchased a strategic stake in Intel. President Trump and President Putin held talks in Alaska to discuss the conflict in Ukraine. There was no announced deal to a ceasefire, but both agreed the talks were constructive and should continue.

Economic data was mixed but generally positive for the month. Services PMIs came in just below expectations due to seasonal factors. Retail sales increased 0.5% for July on a month over month basis and was in line with expectations. Jobless claims increased over the month, indicating a slowing labour market. Non-farm payrolls were positive but sharply lower than in previous months. US GDP growth for Q2 was revised upwards to 3.3% Overall, the US economy still appears to be robust even if the labour market is starting to cool.

Headline inflation in the US remained 2.7% year-over-year in July, below expectations. Core prices rose to 3.1% over the trailing year, above expectations. Headline inflation in other developed markets was mixed; it increased to 3.8% in the UK, the highest since Jan 2024 and remained at 2.0% in the Eurozone while it decreased to 3.1% in Japan. In the Jackson Hole speech, Fed Chairman Powell delivered a dovish outlook, noting employment concerns as he suggested the Fed may shift their policy stance. The Bank of England cut rates by 25bps following a 2-round vote in their August meeting.

The US dollar weakened slightly against developed market currencies in August after it strengthened last month. Real asset returns were strong with Global REITs outperforming broad equities. Oil prices decreased -7.6% and Gold ended the month meaningfully higher as yields decreased.

Outlook

As of Q3 2025, we expect most central banks to continue to loosen policy. The Fed is likely to focus more on slowing growth rather than rising inflation, with the precise timing of cuts a function of labour market data. The ECB is nearing the end of its cutting cycle, but may cut one more time in 2025, especially if the euro remains strong. We expect the BoJ to raise interest rates again, ultimately taking rates above 1%. In China, monetary policy is expected to remain accommodative, but with any new policy loosening largely coming from fiscal rather than monetary policy.

We think equities are vulnerable due to elevated economic uncertainty, weaker economic growth, higher inflation in the US in the near term and stretched valuations.

Bond yields may remain rangebound unless the Federal Reserve clearly indicates that it will meaningfully cut interest rates. Credit spreads are likely to widen modestly if, as we expect, weaker economic growth leads to higher default rates.

We think the US dollar will continue to fall, with its valuation still high and global investors possibly looking to reduce their large dollar holdings.

 Investment Update - August 2025 - received and updated 17.09.2025.

Notes

• Scheme Year to date performance is the period from 1 June 2025 to the most recent month shown.
• Performance shown is net of annual management charge.
• The investment choices offered by the Trustee will be regularly reviewed and may be varied from time to time.
• Before you choose a fund we recommend that you speak to a financial adviser. 
• If you require further information please contact the CIRT Team at [email protected]