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ECONOMIC UPDATE
May 2025 | Monthly Economic Update
Source: FactSet
‘Liberation Day’ tariffs and threats of firing Federal Reserve Chairman Jerome Powell for not cutting interest rates pushed volatility to its highest levels since COVID’s downturn. Markets recovered ground after the ’90 day pause’ on reciprocal tariffs and removal of threats to fire Chairman Powell. A globally diversified moderate risk 60/40 stock bond portfolio gained 1.8% for the month and is now positive for the year helped by international bonds and equities.
Within equities, international stocks fared better as investors looked for opportunities elsewhere. The S&P 500 flirted with a “bear market” (20% drop from its February record high) in April. Despite continued volatility, the index ended the month less than 2% below its April 2 pre-tariff close. As the U.S. market struggled, investors shifted their interest abroad. Developed international equities helped stocks in Europe and Japan and supported by a weaker U.S. dollar.
Within U.S. equities, technology and consumer staples were the strongest sectors in April, while energy and health care were the weakest. Energy was dragged lower by falling oil prices. The technology-focused Nasdaq Composite managed to post a small gain for the month as electronic exemptions from tariffs led to some recovery from earlier losses.
The “Liberation Day” tariff news also affected the bond markets. The yield on 10-year U.S. Treasuries reached a peak of 4.6% before settling at 4.2% by the end of the month, helping U.S. bonds end modestly higher. Interest rate cuts in Europe and a weaker U.S. dollar relative to the yen and euro contributed positively to the return of the global aggregate bond index.
Across other asset classes, gold, widely considered a safe haven investment, reached another record high and gained 25% for the year, the most since 1986.
Source: FactSet
The Monthly Riddle
What begins with an “e” and only contains one letter?
LAST MONTH’S RIDDLE: The strangest creature you’ll ever find: Two eyes in front and many many more behind. What am I?
ANSWER: Peacock
Tip of The Month
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