May Market Recap
After three consecutive months of declines, US equities bounced back with their best month of the year. Stocks didn’t just end their losing streak, they gained enough to offset nearly all their year-to-date losses. All three of the major benchmarks ended May within 1% of where they started the year.
Big Tech and high-growth sectors benefitted most. Ten of the 11 sectors in the S&P 500 produced gains. Technology (+10.8%) led the way for the second straight month. Communication Services (+9.6%) and Consumer Discretionary (+9.4%) also delivered big returns. Health Care (-5.7%) was the only sector to finish lower.
Benchmark Returns: May 2025 | YTD 2025
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Dow Jones
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S&P 500
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NASDAQ
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+3.94% | -0.64%
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+6.15% | +0.51%
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+9.56% | -1.02%
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Tariff concerns had already abated by the time May began, and investors seemed to grow more comfortable with the economic uncertainty as the month wore on. Investor sentiment surveys had shown more bears than bulls for 15 consecutive weeks dating back to mid February. Those surveys flipped in favor of optimism by late May.
Some formal trade deals certainly helped. On May 8, the US and the UK announced a trade agreement that will exempt key British industries (cars, steel, and beef among them) from President Donald Trump’s reciprocal tariffs.
On May 12, the US and China agreed to a temporary truce that reduced tariffs on US goods to 10% (down from 125%) and tariffs on Chinese goods to 30% (down from 145%). These reductions will remain in place for 90 days (until mid August) while the two nations continue dialogue on a more permanent trade deal. Stocks soared on the US-China news, with the S&P 500 rising 3.3%.
Bond yields also increased following the positive US-China developments. Ten-year US Treasury yields climbed as high as 4.63% on May 22 (their highest mark since February) and ended the month at 4.42%. We foresee several reasons why yields are likely to fall in the coming months. Investors who have favored money market funds for their conservative dollars would be wise to consider bonds instead.
The Federal Reserve announced no changes to interest rates following its May 6-7 meeting and consensus projections now suggest two 0.25% rate cuts by year-end. The first of those is likely to come in either July or September. To its credit, the Fed has remained patient with regards to monetary policy and potential rate cuts.
With first-quarter earnings season nearly complete, S&P 500 companies have grown earnings by 13.3% compared to a year earlier. That is nearly twice the consensus of 7.1% growth projected as of March 31. It’s also the second consecutive quarter with earnings growth greater than 10% (following 18% year-over-year growth in Q4 2024).
First quarter GDP was revised in May to show a 0.2% contraction (read: “negative growth”), slightly better than initial reports suggesting -0.3%. We will find out in late July whether the US economy is in a recession and it will be interesting to quantify some of the economic impact from tariffs.
Some have speculated that tariffs could actually boost GDP in the short-term since consumers may have purchased more goods in an attempt to avoid higher prices once tariffs are implemented. So far, US consumer spending has remained steady, increasing 0.2% month-over-month based on the most recent data.
International stocks lagged US equities in May but their year-to-date performance remains superior. Non-US Developed equities gained 4.8% last month and are up 17.5% so far this year. Emerging Markets rose 4% in May and have increased 8.9% year-to-date.
A Republican-led tax bill passed the US House of Representatives in late May but still faces hurdles in the US Senate. If eventually signed into law, the bill would make permanent most of the 2017 income tax and estate tax cuts originally passed during Trump’s first term as president. In doing so, it would add roughly $4 trillion to the US debt, according to the Congressional Budget Office.
Ben Marks
Chief Investment Officer
Brett Angel
Senior Wealth Advisor
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
Marks Group Wealth Management performs in-house analysis on companies. Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings. The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice. Additional information is available upon request.
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The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price to-book ratios and higher forecasted growth values.
Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
MSCI EAFE Index consists of the following developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
VIX-The Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. It is calculated and disseminated on a real-time basis by the CBOE, and is often referred to as the fear index or fear gauge.
