May Markt Review

May market review

May was a
pivotal month for markets, shaped by two forces: Tariff policy and tax and
spending legislation.

On the trade
front, investor uncertainty eased as President Donald Trump’s “Liberation Day”
tariffs seemed to lose traction. Several key developments contributed,
including a 90-day tariff pause with China, the signing of a US-UK trade
agreement and progress on negotiations with other partners, including Europe.
However, reminding us of the uncertainty surrounding trade policy, on May 30,
Trump said that China had violated the temporary truce. Trump also announced
that effective June 4, he was doubling the tariffs on steel and aluminum to
50%, raising the prospect of an escalating trade fight between the US and the European
Union.

On the
fiscal side, the narrow passage of the “One Big Beautiful Bill” in the House of
Representatives increased the likelihood of the 2017 tax cuts being extended.
It also opened the door to potential additional tax relief measures, such as
adjustments to state and local tax deductions and no tax on tips or Social
Security, and introduced incentives for business investment, all of which
helped lift market sentiment.

However,
Raymond James Chief Investment Officer Larry Adam cautioned that the biggest
risk tied to this momentum is the potential for larger budget deficits. These
could lead to a temporary spike in interest rates, which would create a
headwind for equities, fixed income and the broader economy.

The S&P
500 ended May with 80% of constituent stocks sitting above their 50-day moving
average – the best reading since the fall of 2024. For the total domestic
market, 62% of 2025 losses have been recovered with 58% of large-cap stocks
hitting four-week highs last month and industrials touching all-time highs.

Adding to
the month’s momentum was a strong earnings season, with corporate profits
clocking in at 14% – double the expected 7% – with mega-cap tech stocks once
again leading the way. The picture in the bond market was less rosy as US
Treasuries snapped a four-month winning streak and the Bloomberg Treasury Index
turned negative for the first time this year.

The market’s
immediate reaction to Moody’s downgrading of US Treasuries from Aaa to Aa1 last
month was minimal, reflecting bond buyers’ steady faith in US creditworthiness.
But as with equities, fixed income appears to be sensitive to tariff headlines,
and yields rose across most of the Treasury curve by about 25 to 30 basis
points in May.

The
bottom line

Markets
often sway with the headlines, especially when political noise dominates the
news cycle, however, Adam notes that history generally rewards patience more
than trying to predict and time short-term market movements. We’ll continue to
stay alert to tariff and inflation developments, which are key drivers of rate
volatility.

Pendle Hill
Advisors is proud to contribute to the Montgomery County News with our weekly
curated financial news and topics. If you have any questions about the markets,
your financial plan, or anything, please feel free to reach out to our office
for a no cost initial consultation.

Kent Pendleton, AAMS®

Financial Advisor, RJFS

Pendle Hill Advisors LLC

14375 Liberty St, Ste 109 | Montgomery,
TX 77356

T 936-297-8267

Kent.Pendleton@raymondjames.com | www.raymondjames.com/pendlehilladvisors

Material
created by Raymond James for use by its advisors. Securities offered
through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment
advisory services are offered through Raymond James Financial Services
Advisors, Inc. Pendle Hill Advisors is not registered broker dealers and is
independent of Raymond James Financial Services.

Investing
involves risk, and investors may incur a profit or a loss. All expressions of
opinion reflect the judgment of the Raymond James Chief Investment Officer and
are subject to change. There is no assurance the trends mentioned will continue
or that the forecasts discussed will be realized. Past performance may not be
indicative of future results. Economic and market conditions are subject to
change. Diversification does not guarantee a profit nor protect against loss.

The Dow Jones
Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ
Composite Index is an unmanaged index of all common stocks listed on the NASDAQ
National Stock Market. The S&P 500 is an unmanaged index of 500 widely held
stocks. The MSCI EAFE (Europe, Australasia and Far East) index is an unmanaged
index that is generally considered representative of the international stock
market. The Russell 2000 is an unmanaged index of small-cap securities. The
Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark
that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable
bond market. An investment cannot be made in these indexes. The performance
mentioned does not include fees and charges, which would reduce an investor’s
returns.