September marked the end of a quarter in which financial markets found a balance between growth, inflation and monetary policy. The combination of a gradual economic slowdown, inflation that continues to moderate and a Federal Reserve that is moving towards a less restrictive stance, outlined a favorable scenario for risk assets. In this context, all the main stock market indexes closed with gains during the month; emerging markets led the way with a 7.2% advance, while in the United States the Nasdaq extended its bullish streak, accumulating close to a 25% return over the last twelve months.

In equities, the trend for the month was concentrated in the technology sector, which advanced around 7.5% and reaffirmed its position as the main driver of the market. The biggest gains came from companies linked to semiconductors, software and media, while more defensive sectors such as consumer staples and utilities lagged in the face of rotation into higher growth assets.

In fixed-income markets, rates declined, reflecting a moderate preference for longer duration. This dynamic benefited longer-term instruments, while high-yield corporate bonds retained their relative attractiveness, with yields above 7% per annum. Appetite for credit risk remained stable, supported by expectations of an orderly economic landing and a monetary policy that is gradually approaching neutral levels after a prolonged period of tightening.

One of the issues that generated most attention during the month was the partial shutdown of the U.S. government, resulting from the lack of a budget agreement in Congress. Although essential services continue to operate, the temporary suspension of various agencies and programs generated some concern regarding data and transparency; however, the markets reacted with moderation, assuming that the event will be transitory and without significant consequences for the economy, as has happened on previous occasions.

In commodities, gold rebounded more than 10% in September, reaching new all-time highs and consolidating its role as a safe-haven asset in an environment of greater risk concentration in equity markets, exacerbated geopolitical uncertainty and greater diversification by central banks beyond U.S. treasury bonds. For its part, Bitcoin extended its upward trend and accumulated a return of around 25% so far this year, supported by flows into alternative assets and expectations of its institutional adoption. Both assets are showing solid trends.

In Mexico, the economy showed a mixed performance; GDP grew 0.6% quarter-over-quarter in the second quarter and 1.2% year-over-year (last twelve months), reflecting a moderate but sustained expansion. Headline inflation was around 3.7% in September, while core inflation remained above the Bank of Mexico's target, maintaining a prudent tone in the conduct of its monetary policy. Even so, the central bank cut the reference rate by 25 basis points to 7.50%. The Mexican peso remained stable in a range of 18.3 to 18.5 pesos per dollar, while the Mexican Stock Exchange reached new all-time highs driven by renewed interest in a market that still looks attractive in terms of valuation after years of relative lag. By the end of the year, we expect two more 25 basis point cuts by the Bank of Mexico to end the year with the benchmark rate at 7.00% and, without fundamental pressures on the peso, we expect it to hover around 18.50 pesos per dollar.

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