May 2025
Summary
U.S. equities recovered nicely from the turmoil of April, and international and emerging stocks continued to shine in 2025. Bond returns were negative as Treasury rates crept higher in May. Credit spreads retraced much of April’s widening to return near historical tightening. The Federal Reserve maintained the status quo on policy interest rates in the face of declining inflation in April, citing lingering tariff uncertainty as the primary reason for caution.
Equities
Domestic equity markets enjoyed a reprieve in May after being battered for much of the year. Large cap U.S. stocks gained 6.4% for the month, pushing 2025’s year-to-date return back into postitive territory at +1%. Small caps also bounced back 5.3%, while non-US markets were positive once again in May. Both developed and emerging equities posted returns north of 4%.
Fixed Income
Treasury yields shifted higher in May, with declining bond prices more than offsetting interest income and pushing total returns for investment grade bonds negative for the month. The longer end of the curve came under additional pressure as the consequences of additional deficit spending outlined in 2025’s budget bill began to materialize late in the month. Credit benefited from a retracement of April’s widening, moving back to pre-tariff levels, and high yield outperformed. The Federal Reserve held short rates steady even as CPI eased slightly in April, with uncertainty on the future of U.S. trade policy giving the Board pause.
1 – Russell 1000, 2 – Russell 2000, 3 – MSCI EAFE, 4 – MSCI Emerging Markets, 5 – Bloomberg US Agg, 6 – Bloomberg US Long Gov/Credit
7 – Bloomberg US Corporate High Yield, 8 – Bloomberg Gold Subindex, 9 – Bloomberg Commodity
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