Monthly Market Update for May 2025: Recovery in Motion
Markets showed impressive strength in May, with major indices bouncing back after a rocky April, even as fiscal policy questions and global uncertainty remained front and center. The S&P 500 moved back into positive territory for the year, reminding long-term investors that staying the course can pay off even during choppy periods.
At the same time, consumer sentiment stayed cautious. Economic fundamentals remained solid, but the bond market saw volatility as investors tried to interpret the long-term impact of rising debt and shifting government priorities.
What Moved the Markets
The S&P 500 delivered a 6.2% gain in May, marking its strongest monthly performance since 2023, while the Dow Jones Industrial Average advanced 3.9% and the Nasdaq surged 9.6%. For the year-to-date period, the S&P 500 stands at +0.5%, the Dow at -0.6%, and the Nasdaq at -1.0%.
The Bloomberg U.S. Aggregate Bond index fell 0.7% during May but maintains a 2.4% year-to-date gain. The 10-year Treasury yield concluded the month at 4.4%.
Global equity markets also showed strength, with both the MSCI EAFE developed markets index and MSCI EM emerging markets index advancing 4.0%.
The U.S. dollar index continued its decline, finishing May at 99.3, approaching three-year lows.
Bitcoin reached a new all-time high of $111,092 during the month before settling at $104,834.
Gold achieved a fresh record high of $3,422 before closing May at $3,288, representing a 24% year-to-date increase.
April's Consumer Price Index data, released in May, revealed consumer prices increased 2.3% year-over-year, the smallest 12-month rise since February 2021.
Employment data showed 177,000 new jobs created in April, with the unemployment rate holding steady at 4.2%.
U.S. Credit Rating in the Spotlight
One noteworthy development: a major credit rating agency downgraded the outlook for U.S. debt. While this didn’t rattle markets in the short term, it underscores growing concern about the sustainability of government borrowing and long-term fiscal health. For investors, it’s a reminder that while the market may appear resilient, structural issues can build over time—and it's important to stay diversified and forward-thinking.
Trade Developments: Progress with Caution
May brought meaningful progress on the trade front. The U.S. finalized new agreements with both the United Kingdom and China, including a 90-day period of reduced tariffs on Chinese imports, which eased fears of major trade disruption. Constructive talks with other key partners also continued.
Still, uncertainty remains. U.S.–China tensions resurfaced as both sides questioned compliance with the new deal, and the administration proposed additional tariffs on steel and aluminum. In Europe, optimism grew after the White House postponed a planned 50% tariff on EU imports, signaling room for further diplomatic resolution.
Adding complexity, the U.S. Court of International Trade struck down certain recently enacted tariffs, citing executive overreach. A federal appeals court temporarily paused that ruling, but the legal back-and-forth reinforces how trade policy continues to evolve—and why markets may react more to direction than headlines.
The takeaway for investors: trade shifts are rarely resolved overnight. May’s rally shows that markets can still move higher even as these debates play out in the background.
Corporate Earnings Offer Support
Amid the policy headlines, it's worth noting that strong corporate earnings played a quiet but important role in market strength. Resilient profit margins and better-than-expected results in key sectors, especially technology and consumer discretionary, helped fuel investor confidence and gave markets a firmer foundation to build on.
Why It Matters
The rebound in May is a powerful reminder that volatility and uncertainty don’t necessarily translate into long-term losses. Markets are forward-looking, and when signs of stability emerge, they can pivot quickly. That’s why disciplined investing, rather than reacting to every headline, remains a cornerstone of long-term success.
As always, if recent market movements have you questioning your plan or if you're preparing for a financial transition, we’re here to help you align your strategy with your values and long-term vision.
1. Standard & Poor's, Nasdaq, Bloomberg. All month end figures are as of May 30, 2025.
2. https://budgetmodel.wharton.upenn.edu/issues/2025/5/23/house-reconciliation-bill-budget-economic-and-distributional-effects-may-22-2025
3. FactSet Earnings Insight May 30, 2025
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