Current Insights, Monthly Market Commentary
May Market Update: Things Are Looking Up
May was a really good month for the markets. After months of uncertainty and volatility, things finally started to calm down and move in the right direction.
U.S. Markets Had Their Best Month in a While
The big story is that U.S. stocks had their strongest performance since November 2023. The S&P 500 jumped over 7%, while the tech-heavy NASDAQ surged more than 10%. Even smaller company stocks and the Dow had solid gains.
What changed? A few things came together at once. Trade tensions with China started cooling off, and we saw some real progress on resolving those tariff disputes with the UK that have been dragging on since 2018. When businesses don’t have to worry as much about trade wars and supply chain headaches, investors get more optimistic.
May’s Winners:
- Dow Jones: +5.5%
- S&P 500: +7.9%
- NASDAQ: +11.6%
- Russell 2000: +5.2%
The Fear Factor Dropped Big Time
Remember how nervous everyone was in April? The fear index (VIX) had spiked over 150% as people worried about tariffs and global instability. In May, that fear dropped by more than 20%. When people aren’t panicking, money flows back into stocks.
Oil prices also stabilized around $60.79 per barrel – still down about 20% from last year, but at least it wasn’t swinging wildly anymore.
It Wasn’t Just a U.S. Story
Markets around the world joined the party. All 37 developed market indexes tracked by MSCI posted gains, with most rising more than 4%. Even emerging markets did well, with 43 out of 46 countries seeing their stock markets rise.
Global Market Performance – May 2025
| Index | Returns |
| MSCI EAFE | +3.97% |
| MSCI EUROPE | +3.70% |
| MSCI FAR EAST | +4.41% |
| MSCI G7 INDEX | +5.83% |
| MSCI NORTH AMERICA | +6.40% |
| MSCI PACIFIC | +4.26% |
| MSCI PACIFIC EX-JAPAN | +4.79% |
| MSCI WORLD | +5.69% |
| MSCI WORLD ex USA | +4.15% |
Source: MSCI. Past performance cannot guarantee future results
Tech and Industry Led the Charge
Nine out of eleven sectors had a good month, with four sectors gaining more than 9%. That’s a huge turnaround from April when things were much more mixed.
Information Technology led the way with a 12.24% gain, followed by Industrials at 10.08%. Even Consumer Discretionary bounced back strong after a rough April.
Sector Performance Comparison
| S&P 500 Sector | April 2025 | May 2025 |
| Information Technology | +1.61% | +12.24% |
| Energy | -12.81% | -2.01% |
| Health Care | -2.96% | -4.66% |
| Real Estate | -0.48% | +2.04% |
| Consumer Staples | +2.73% | +1.99% |
| Consumer Discretionary | -0.52% | +9.44% |
| Industrials | +0.79% | +10.08% |
| Financials | -0.99% | +5.31% |
| Materials | -1.19% | +4.16% |
| Communication Services | +0.84% | +9.34% |
| Utilities | +1.11% | +2.48% |
Source: FMR
The Economy Is Still Bumpy
While markets were celebrating, the economic data was more mixed. The economy actually shrank by 0.2% in the first quarter, mainly because we imported way more stuff than we exported. Corporate profits also took a hit, dropping by $118 billion largely due to those tariff costs.
Consumer spending growth slowed to just 1.2% – the weakest in three years. People are being more careful with their money, which makes sense given all the uncertainty.
People Are Feeling a Bit Better
Consumer confidence stopped falling for the first time in four months, though people are still pretty worried about the future. The pause on some China tariffs helped improve business expectations mid-month.
Inflation expectations are still high at 6.6% for the next year, but at least they’re not jumping as dramatically as before.
Housing Market Gets a Boost
New home sales jumped 10.9% in April, which was encouraging. The median price was $407,200 – up slightly from March but still below last year’s levels.
Manufacturing Pullback
Businesses are being more cautious about big purchases. Orders for durable goods fell 6.3% in April, with transportation equipment taking the biggest hit.
Source: US Census Bureau, May 27, 2025
Other Notable Numbers
E-commerce: Online sales stayed flat at $300.2 billion in Q1, though they’re still up 6.1% from last year.
Consumer Credit: Hit $5 trillion for the first time, though growth is slowing down.
Trade Deficit: Rose to $140.5 billion in March, up 92.6% from last year.
Bottom Line
May showed us what markets can do when some of the big worries start to fade. Trade tensions cooling off, volatility dropping, and broad-based gains around the world all painted a much brighter picture than we’ve seen in months.
That said, the underlying economy is still working through some challenges – slow growth, high inflation expectations, and businesses being cautious about spending. The key question is whether the improved market sentiment can translate into real economic momentum as we head into summer.
Sources: census.gov; bea.gov; realtor.com; federalreserve.gov; msci.com; fidelity.com; nasdaq.com; wsj.com; morningstar.com