International Markets Led The Way Last Week - Tariffs Leading To Volatility

By the Link Financial Advisory Team

Published on May 28, 2025

Welcome to our weekly stock market recap, where we unpack the latest trends in equities and fixed income, both domestically and globally. As a trusted Missoula financial advisory team, Link Financial Advisory is dedicated to helping you stay informed—whether you’re refining your personal financial planning, optimizing your 401k through benchmarking, or seeking comprehensive wealth management solutions. The week of May 19-23, 2025, brought a mix of challenges and opportunities, and we’re diving into the details to help you navigate these shifts with confidence.

Market Overview: Volatility at Home, Resilience Abroad

The week of May 19-23, 2025, showcased a stark contrast between domestic and international markets. In the U.S., equities faced a rough patch, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite each shedding 2.5-2.6%. This downturn stemmed from renewed trade tensions and a downgrade of U.S. federal government debt. Meanwhile, international markets held firm, with the MSCI EAFE index climbing 1.2%, signaling resilience amid global uncertainties. Fixed income markets also reacted, with Treasury yields ticking up slightly as investors reassessed their positions.

Domestic Market Deep Dive: Unpacking the Downturn

The U.S. stock market encountered significant headwinds this week, driven by two key events:

• Trade Tensions Resurface: President Trump’s threats of new tariffs—potentially targeting imports from major trading partners—sparked fears of supply chain disruptions and profit margin squeezes. This hit export-heavy sectors like industrials and technology hardest, with companies like Caterpillar and Nvidia seeing sharper declines than the broader market. The S&P 500 closed the week down 2.6%, the Dow Jones 2.5%, and the Nasdaq 2.5%.
• Debt Downgrade Shock: On May 16, Moody’s downgraded U.S. federal government debt from Aaa to Aa1, citing ballooning deficits and a lack of fiscal reform. This move rattled bond investors and briefly pushed equity markets lower, though a modest rebound followed as some saw it as a buying opportunity.
• Bright Spots: Not all was bleak. Healthcare stocks, buoyed by UnitedHealth’s 7% surge after a robust earnings report, and select tech names like Microsoft offered pockets of stability. The S&P 500 even notched a slim gain on Monday, May 19—its sixth consecutive winning session—before tariff fears took over.

For investors focused on personal financial planning, these swings underscore the need for resilience in your portfolio. Our Missoula financial advisory team can help assess how such volatility impacts your 401k or broader wealth management strategy.

International Markets: A Beacon of Strength

While U.S. markets faltered, international equities provided a counterbalance:

• MSCI EAFE Outperforms: The MSCI EAFE index, which tracks developed markets outside the U.S., rose 1.2%. European markets, particularly in Germany and France, benefited from strong manufacturing data, while Japan’s Nikkei held steady amid yen stability.
• Why the Resilience?: Analysts point to a flight to safety as U.S.-specific risks—like tariffs and debt concerns—pushed investors toward global assets. Additionally, solid earnings from tech giants like Taiwan Semiconductor and healthcare firms like Roche bolstered confidence.
• Diversification in Action: This performance highlights the value of spreading risk across borders, a principle we emphasize in our wealth management approach at Link Financial Advisory.

Fixed Income: Bonds Feel the Pressure

The fixed income market wasn’t immune to the week’s turbulence:

• Treasury Yields Edge Up: The 10-year Treasury yield rose 0.1% to 4.51%, reflecting investor caution as trade and fiscal uncertainties loomed. This uptick suggests a preference for cash or riskier assets over bonds.
• Bond ETFs Slip: The iShares Core U.S. Aggregate Bond ETF dropped 0.4%, signaling a pullback from fixed income as yields rose and debt downgrade fears lingered. High-yield bonds, however, saw mild inflows as some investors chased returns.

For those nearing retirement or managing conservative portfolios, these shifts highlight the need for a balanced approach. Our expertise in income producing strategies can help ensure your fixed income allocation aligns with your long-term goals.

Investor Takeaways: Staying the Course

Despite this week’s volatility, history offers reassurance. The S&P 500’s annualized returns—14.3% over 5 years, 13.0% over 10 years, and 10.4% over 20 years—show that staying invested pays off. A $10,000 investment from 20 years ago would be worth roughly $60,480 today, excluding dividends.

Key points to remember:

1. Go Global: Review your strategy to see if global positions will fit within your desired goals. International markets’ strength this week reinforces the case for diversification.
2. Revisit Bonds: Rising yields may warrant a tweak to your fixed income mix - take some time to review your holdings in this asset category.
3. Think Long-Term: Short-term dips are noise; focus on your broader personal financial planning objectives.

At Link Financial Advisory, our Missoula financial advisory team is here to guide you through these decisions, offering tailored wealth management and 401k benchmarking solutions.

Conclusion: Opportunity Amid Uncertainty

The week of May 19-23, 2025, tested U.S. markets but showcased global resilience. Whether you’re adjusting your 401k or refining your wealth management plan, staying informed is the first step. As your local Missoula financial advisory team, Link Financial Advisory is committed to helping you turn market insights into action. Reach out today to explore how we can support your financial journey.

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