Our Monthly Business Commentary

May, 2025

Since the beginning of May, both the U.S. stock market and the broader economy have shown notable resilience and growth, driven by several key factors. A significant contributor has been the easing of trade tensions between the U.S. and China, marked by a 90-day reduction in tariffs. This development has bolstered investor confidence, leading to substantial global market rallies. For instance, as of May 15th, the S&P 500 has rebounded over 18% from its April lows, aided by a surge in tech stocks and easing inflation concerns.¹

Although times have been tough over the last six months, the technology sector has been the standout performer. Companies like Nvidia, Tesla, and AMD have experienced significant gains, propelling the Nasdaq to rise for six consecutive days after the tariff reduction was announced. This momentum is partly attributed to the U.S. government’s decision to lift certain restrictions on AI technology exports, further fueling investor optimism.^1,2

On the economic front, indicators such as consumer spending and job growth have remained robust. The Federal Reserve has maintained steady interest rates, citing steady growth, low and stable unemployment, and a declining inflation rate moving toward the Fed’s 2% target. Additionally, retail investors have played a significant role in the market’s recovery, with substantial inflows into equities during the rebound from the market’s low. These combined factors have contributed to the positive trajectory of both the stock market and the economy since early May.^3,4

The bottom line: While recent data shows inflation easing toward the Fed’s target, the full impact of newly implemented tariffs has yet to materialize. These tariffs may raise consumer prices and potentially dampen spending in the coming months. Market expectations for rate cuts have diminished, with only a 36% chance of a July cut and a 37% chance of 50 basis points in cuts for the year, as of May 15^th. Despite these headwinds, the S&P 500 has shown resilience, erasing its 2025 losses. Investors should remain vigilant, as the interplay between trade policies, inflation, and monetary policy will shape the economic trajectory in the coming months.

Sources:

1. Wall Street Journal, https://www.wsj.com/livecoverage/stock-market-today-tariffs-trade-war-05-14-2025
2. Investopedia, https://www.investopedia.com/dow-jones-today-05142025-11734440
3. Reuters, https://www.reuters.com/business/feds-barr-says-economy-solid-footing-trade-dispute-clouds-outlook-2025-05-15/
4. Market Watch, https://www.marketwatch.com/story/the-retail-buy-the-dip-move-paid-off-what-that-crowd-of-investors-is-doing-now-according-to-jpmorgan-29276dbf

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