Month-End Summary

The Resilient Market: The Force was Strong in May

Markets rebounded strongly in May—learn why staying invested through volatility can keep your plan on track and help you capture long-term growth.

Coley Neel, CFA®

Chief Investment Strategist
June 13, 2025
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Please forgive the nod to Star Wars, but the month of May 2025 proved to be a dynamic and ultimately rewarding period for US equity markets, particularly after the turbulent start to the year. Following a challenging April, which saw significant market swings, May delivered a robust rebound, reminding us of the market's inherent resilience and its capacity for swift recovery. This is one of the reasons that we continually remind you to remain calm during periods of volatility and uncertainty. Allowing emotions to drive trading decisions during periods of stress can lead to negative financial consequences. Remember, cooler heads often prevail.

The Numbers: A Strong Rebound

For May, the S&P 500 Index surged by an impressive 6.15%. This was an impressive turnaround, marking the strongest monthly performance for the S&P 500 since November 2023. The Nasdaq Composite, which is heavily weighted towards technology stocks, outperformed even further, climbing by an even more significant 9.56% during the same period. Both indices broke a 3-month losing streak, signaling a decisive shift in market sentiment. We may be setting up a scenario where we retest the all-time highs for some of the major indices, which is extraordinary considering where we were at the beginning of April.

Key Drivers of Volatility and the Subsequent Rebound

The market's journey through May was largely influenced by two powerful, interconnected forces: initial trade policy uncertainty and subsequent de-escalation, alongside surprisingly strong corporate earnings. We do note that earnings were relatively strong for 1Q2025, but we still have multiple questions as it relates to guidance for the remainder of the year. We will continue to monitor as we head towards the beginning of 2Q2025 earnings in July.

Initial Volatility Driven by Tariff Concerns (Late April/Early May Hangover):

The volatility that characterized early May was primarily a carryover from late April. On April 2nd, the US administration introduced sweeping new tariff policies (aka, "Liberation Day"). These tariffs, impacting nearly all sectors of the US economy and escalating trade tensions w/ key partners, particularly China, sent shockwaves through global markets. Stock futures tumbled immediately after the announcement, and major US indices plunged further by April 7th, marking some of the worst three-day losses since major historical market crashes. The fear of a potential global recession and its impact on demand for various commodities and goods created widespread panic selling. This period highlighted the market's acute sensitivity to macroeconomic and geopolitical policy developments. While this is not new information, it is important to set the stage for what occurred in May.

Catalysts for the Mid-May Rebound

1. De-escalation of Trade Tensions:

A major catalyst for the market's powerful rebound was the perceived de-escalation of tariffs between the US and China. The administration announced a pause in tariff increases on April 9th, leading to an immediate market rally. Further "walk-backs" and initial trade deals throughout May helped alleviate fears of a full-blown trade war and a global recession. This reduction in trade uncertainty significantly boosted investor confidence, particularly in sectors heavily impacted by tariffs.

China's President Xi Jinping in Beijing, March 28, 2025 and President Donald Trump, in Washington, April 7, 2025. Getty Images/Reuters.

2. Strong 1Q Corporate Earnings:

The 1Q2025 earnings season, which largely concluded in May, proved to be far more resilient than anticipated. Approximately 78% of S&P 500 companies reported positive earnings per share (EPS) surprises, and 64% reported positive revenue surprises. The blended year-over-year earnings growth rate for the S&P 500 was a strong 12.5% to 13.3%, marking the second consecutive quarter of double-digit growth. This strong corporate performance, particularly from leading technology firms and those benefiting from the AI boom (e.g., NVIDIA, Microsoft), provided fundamental support for stock valuations and helped to shift investor attention away from macroeconomic risks. Companies w/ pricing power and/or business models less exposed to tariffs performed particularly well, as one would expect.

3. Moderating Inflationary Pressures:

Signs of easing inflationary pressures, indicated by slight decreases in both CPI and PPI data, also contributed to positive sentiment. We are awaiting the May CPI and PPI data to see if the potential inflationary impact expected by the Trump tariffs is beginning to flow through the system. We should not be surprised if there is not a bump higher in the data, as it will likely not start showing up for 90-180 days from initiation. That said, it has been positive seeing inflationary data move closer to the FOMC-mandated level of 2%.

These are just a few of the key elements that helped lead to the rebound in May. We do realize that there are still many uncertainties as it relates to the economy and the global marketplace. We do, however, feel that if there is an increase in volatility in the coming weeks/months, the degree of reaction may likely be moderated compared to what we witnessed in April.

Your Financial Peace of Mind

Observing such swings in the market, from sharp declines to rapid rebounds, can naturally evoke a range of emotions. It's a powerful reminder of the inherent volatility in financial markets. It is during these periods of uncertainty that the true value of the well-thought-out financial plan that you developed w/ your advisor becomes most apparent. Our primary goal is to ensure your financial peace of mind. We want you to focus more on your life and worry less about your finances. We hope that you are having a great summer and look forward to seeing you soon!

This has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of publication and are subject to change without notice. Past performance is not indicative of future results.

Written by

Coley Neel, CFA®

Chief Investment Strategist

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