Market Overview
Equity markets worldwide advanced in September, as investors digested the latest shift in the global monetary landscape.
In a month that saw several key central banks update the direction of their interest-rate-policy paths amid mounting global economic uncertainty, the U.S. Federal Reserve (Fed)’s policy meeting in mid-September was the main event for stock markets around the world. The Fed, which over the past several months had been seeking to strike a balance between the competing pressures of a weakening U.S. labour market and persistent inflationary pressure, lowered interest rates by 25 basis points (bps)—its first reduction in 2025—citing the rising “downside risks to employment.” The U.S. central bank also forecast two more rate cuts this year, but in an acknowledgment of the “challenging situation” in which it currently finds itself, warned that it may change course quickly. Notably, the Fed’s latest policy decision received a lukewarm reaction from investors—while expectations of a rate cut sparked a market rally in the weeks leading up to the September policy meeting, the rally quickly fizzled after the Fed warned that future reductions were not guaranteed. In the closing days of the month, global stock markets swung between gains and losses, as investors digested mixed domestic economic data and their potential ramifications for further rate cuts. The yield on the benchmark 10-year U.S. Treasury note ended September at 4.15%, 8 bps lower than a month earlier.
Across the Atlantic, the European Central Bank (ECB) held interest rates steady at its policy meeting in September, citing the eurozone’s improving outlook for economic growth and inflation. The ECB’s upbeat assessment of the economic climate in the common currency bloc dampened expectations that additional rate cuts were on the horizon, even as concerns lingered about the impact of U.S. tariffs. In July, the European Union and the U.S. reached a trade deal to lower the import taxes on European goods from the initially proposed 30% to 15%, which is still significantly higher than the 2.7% rate that was in place before the U.S. tariff announcement. In the U.K., the Bank of England (BOE) held interest rates steady and warned that the country was “not out of the woods yet” in terms of rising inflation. The BOE’s latest action came as data released during the month indicated that year-over-year domestic inflation in August grew at nearly twice the rate of the BOE’s 2% target. Elsewhere in Europe, Norway’s central bank lowered interest rates 25 bps and hinted that it might not ease its monetary policy as much as expected; Sweden’s central bank lowered rates 25 bps and suggested that its monetary easing cycle had reached an end; and Switzerland’s central bank held interest rates at zero after six consecutive reductions despite a slowing domestic economy that has been weighed down by high U.S. tariffs. In September, the yield on the 10-year German Bund, Europe’s principal safe-haven asset, fell 1 bps, ending the month at 2.72%.
Meanwhile, in Asia, the Bank of Japan (BOJ) held interest rates steady, as the latest inflation reading indicated that core price growth in Japan fell for a third consecutive month in August, though it remained above the BOJ’s 2% target. In China, the People’s Bank of China left a key interest rate unchanged, as resilient export growth and a surging Chinese stock market allowed monetary policymakers to withhold further stimulus.
The conclusion of the latest earnings season provided investors with a mixed picture of how company profits have held up amid a challenging macro environment. In the U.S., 82% of the companies in the S&P 500 Index topped consensus estimates, outperforming the long-term average of 67%. The second-quarter earnings growth rate increased 12.0% from a year earlier. In Europe, 44% of the companies in the STOXX 600 Index posted better-than-expected earnings, below the 54% that do so in a typical quarter. The second-quarter earnings growth rate increased 5.1% from a year earlier. In Japan, 54% of the companies in the TOPIX posted positive earnings surprises, lagging the 55% beat rate over the past four quarters. The second-quarter earnings growth rate decreased 16.4% from a year earlier. In Hong Kong, 61% of the companies in the Hang Seng Index registered better-than-expected earnings, outpacing the 55% beat rate over the past four quarters. The second-quarter earnings growth rate contracted 0.9% from a year earlier.
Against this backdrop, equity markets in both the developed and developing worlds gained in September, with the latter outperforming the former. In the U.S., the S&P 500 gained, as risk appetites were buoyed by optimism that the Fed will continue to lower interest rates. In Europe, the STOXX 600 underperformed, as the Continent’s limited exposure to companies leveraged to artificial intelligence (AI) took a toll on performance due to the ongoing enthusiasm for the technology. In Japan, the TOPIX rose but lagged the broader global index, as risk appetites were curbed by political uncertainty stemming from Prime Minister Shigeru Ishiba’s resignation and data indicating that Japan’s exports to the U.S. fell 13.8% in August from a year earlier. In China, the Hong Kong-based Hang Seng Index rose sharply, thanks largely to domestic investors seeking higher returns amid ongoing weakness in the country’s property sector and plummeting interest rates on deposits.
Information technology was the best-performing sector in the month, as the stock prices of chipmakers rallied on renewed enthusiasm for artificial intelligence. Consumer staples was the worst-performing sector, as a risk-on market environment led investors to rotate away from defensive stocks and toward economically sensitive ones.
Outlook
Increased uncertainty surrounding the U.S. economic outlook and key policy measures, including specifically tariffs, continue to sow volatility in markets and have interrupted what had previously been, in our opinion, a clearer line of sight towards decelerating inflation and strong likelihood of success achieving an economic soft-landing. On the other hand, greater likelihood that the U.S. Federal Reserve will begin to cut interest rates sooner rather than later – possibly as early as this month – has refreshed a tailwind for companies in industries that typically exhibit a high degree of sensitivity to cost of capital.
While markets continue to wrestle with considerable uncertainty, we expect Infrastructure to continue to exhibit critical defensive qualities and remain an invaluable diversification component for investment portfolios given the essential nature and real asset characteristics of the asset class. In contrast to businesses and industries where valuation is underpinned primarily by revenue growth and often highly competitive profit margins, critical infrastructure derives considerable valuation support from its high fixed cost of investment and high visibility, high margin cash flows collected over long periods of time [to recoup the initial capital outlay].
This important combination of characteristics tend to lend itself to superior defensive positioning, in our view, against global trade uncertainty, inflationary pressure, economic recession and market volatility. On the risk side of the ledger, however, we include typically above-average levels of balance sheet leverage and sensitivity to interest rates.
From a sectoral standpoint, we see a number of multi-year critical infrastructure investment trends likely to continue largely undeterred by recent tariff and trade uncertainty. Electrification and the growing demand for power to accommodate the Artificial Intelligence (AI) / Data Centre development surge serves as an example, in our view. Utilities were a key positive contributor to performance during 2024 and have been as well in 2025. While we maintain a favourable sector outlook for utilities and foresee scope for upward earnings revision, valuations have also re-rated higher, and we do not expect the same pace of returns for utilities to continue in the U.S. On the other hand, we continue to find very compelling valuations and opportunities in utilities outside the U.S.
Outside of the utilities sector, we believe U.S. midstream energy, namely oil & gas storage and transportation, continues to offer a compelling combination of attractive valuation and improved capital allocation discipline. And while increased uncertainty regarding global trade and the risk of global recession now weighs more heavily on energy prices and the sector earnings outlook generally, the vast majority of the cash flows associated with the portfolio’s midstream holdings are fee-based and enjoy strong support from take-or-pay contracts and spread differentials at key access points.
Elsewhere within the portfolio, we see an abundance of opportunities stemming from large-scale investment in transportation infrastructure, information technology and energy development & security, leading to increased demand for materials, capital goods and industrial equipment.
We believe the portfolio remains well-positioned to take advantage of these opportunities in real asset infrastructure businesses as well as key enablers, including materials, services, and technologies, that will both facilitate and benefit from increased investment in infrastructure.
The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.
Information and opinions presented have been obtained or derived from sources believed by Lazard Asset Management LLC or its afflliates (“Lazard”) to be reliable. Lazard makes no representation as to their accuracy or completeness. All opinions expressed herein are as of the published date and are subject to change.
Allocations and security selection are subject to change. The performance quoted represents past performance. Past performance is not a reliable indicator of future results. Mention of these securities should not be considered a recommendation or solicitation to purchase or sell the securities. It should not be assumed that any investment in these securities was, or will prove to be, profitable, or that the investment decisions we make in the future will be profitable or equal to the investment performance of securities referenced herein. There is no assurance that any securities referenced herein are currently held in the portfolio or that securities sold have not been repurchased. The securities mentioned may not represent the entire portfolio.
Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one’s home market. The values of these securities may be affected by changes in currency rates, application of a country’s specific tax laws, changes in government administration, and economic and monetary policy. Emerging markets securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal standards. The securities markets of emerging markets countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting companies in these countries.
Securities and instruments of infrastructure companies are more susceptible to adverse economic or regulatory occurrences affecting their industries. Infrastructure companies may be subject to a variety of factors that may adversely affect their business or operations, including additional costs, competition, regulatory implications, and certain other factors.
Certain information contained herein constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “intent,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events may differ materially from those reflected or contemplated in such forward-looking statements.
Published on October 16, 2025.