US stocks rallied over the course of the month, posting their strongest monthly gain in two years. Easing trade tensions and progress on de-escalating tariffs improved investor sentiment and sent stocks higher in May and into the black on the year. Corporate earnings reports broadly beat expectations, inflation was cooler than expected, and unemployment remained steady, alleviating the swelling recession fears felt earlier in the year.
On the fixed income side, yields increased amid rising fiscal concerns in the US, driving bonds down in May. A credit rating downgrade of government debt, combined with concerns over deficit spending sparked by the administration’s new tax bill put upward pressure on yields. During their May meeting, the Federal Reserve held rates steady, as expected, citing that the threat of inflation rising is still prevalent.
International stocks continued their impressive run, posting strong gains in May. Trade negotiations progressed as the UK and US struck a deal, and a temporary agreement was put in place between the US and China. Additional trade conversations continue to evolve, giving investors added confidence on global trade moving forward. Fiscal stimulus expectations in Europe, and a weakening dollar helped fuel the gains. The European Central Bank held interest rates steady, and bond performance was muted.
Looking ahead, updates on the administration’s major tax bill and upcoming Federal Reserve meetings will remain in focus, while developments in global trade and tariffs—and their broader economic impact—are expected to be key market drivers as we approach the midway point of an eventful year.
| Index Performance | |||
| US Stocks (Russell 3000) | |||
| International Stocks (FTSE AW ex US) | |||
| US Bond Mkt. (BBgBarc Int. Gov/Cred) | |||
| Cash (ICE BofA ML 3-Mo T-Bill) |