Welcome to Link Financial Advisory's monthly market recap for May 2025. As part of your trusted advisory team, I’m here to break down the key events and trends that shaped the U.S. and global stock markets this month. Whether you’re managing a 401(k), inheriting assets, or seeking a second opinion on your personal portfolio, understanding these dynamics can help you make informed decisions. If you'd prefer, you can read our official monthly recap by using this link, or you can digest this in video format by using this link. If you're ready to dive into what drove the markets in May, what challenges arose, and what it all means for your long-term strategy, then let's focus below on what helped, what hurt, and your key takeaways moving forward.

What Helped the Stock Market

May 2025 was a standout month for U.S. stocks, with all major indices posting impressive gains. The S&P 500 rose by 6.15%, the Dow Jones Industrial Average by 3.94%, and the Nasdaq Composite by a remarkable 9.6%. Several Several positive factors fueled this rally:

• Strong Corporate Earnings: Technology giants like NVIDIA led the charge, reporting blockbuster earnings driven by surging demand for AI chips. This not only boosted the tech-heavy Nasdaq but also lifted the broader market as investors gained confidence in corporate profitability.
• Trade Policy Progress: A 90-day tariff suspension between the U.S. and China, announced in April, continued to ease tensions and support market sentiment. This pause reduced fears of economic disruption and encouraged investment in U.S. equities.
• Positive Economic Data: The April jobs report, released in early May, showed 177,000 jobs added and a steady unemployment rate of 4.2%. Additionally, inflation cooled to 2.3% in April, nearing the Federal Reserve’s target and reassuring investors about the economic outlook.

What Hurt the Stock Market

Despite the overall gains, several challenges created pockets of volatility:

• Ongoing Trade Uncertainty: Late in the month, reports of stalled U.S.-China trade talks resurfaced, causing brief sell-offs. While the tariff suspension provided relief, the lack of a long-term agreement kept investors on edge.
• U.S. Credit Rating Downgrade: On May 19, Moody’s downgraded the U.S. credit rating, citing concerns about fiscal stability. This unexpected move added uncertainty, prompting some investors to reassess their exposure to riskier assets.
• Weak Q1 GDP Data: The second estimate of Q1 2025 GDP, released on May 28, showed a slight 0.2% annualized decline. Although markets largely shrugged it off, this data point raised questions about the economy’s growth trajectory.

Global Market Highlights

Internationally, markets delivered mixed but generally positive results:

• Europe: The FTSE 100 and Euro Stoxx 50 saw gains, supported by the European Central Bank’s rate cuts in April and a rebound in industrial activity. These developments made Europe a bright spot for global investors.
• Asia: Japan’s Nikkei 225 benefited from a weaker yen, which boosted exporters, while China’s markets faced headwinds from ongoing trade concerns.
• Emerging Markets: Emerging markets continued to show resilience, buoyed by stimulus measures in China and attractive valuations. For U.S. investors, these regions offer diversification opportunities, though they come with higher volatility.

Long-Term Perspective

While monthly fluctuations grab headlines, it’s crucial to keep the bigger picture in mind. The S&P 500 has proven its resilience over time:

• 1-Year Return: Up 12.9%
• 5-Year Return: 93.8% total return (14.5% annualized)
• 10-Year Return: 179.9% total return (12.9% annualized)
• 20-Year Return: 401.3% total return (10.4% annualized)

A $10,000 investment in the S&P 500 in May 2005 would be worth approximately $50,170 by May 2025, showcasing the power of staying invested through market cycles.

Investor Takeaways

Markets will always have their ups and downs, but a few timeless principles can help you navigate them:

• Diversify Your Portfolio: Spread your investments across asset classes and regions to balance risks and rewards. Global trends, like Europe’s recovery, offer opportunities beyond U.S. borders.
• Stay Informed, But Don’t Overreact: Keep an eye on economic signals and policy shifts, but avoid making knee-jerk decisions based on short-term noise.
• Focus on the Long Term: History shows that markets reward patience. A disciplined, long-term approach is your best defense against volatility.
• Communicate with Your Advisor: Life changes—like a new job or retirement plans—can impact your strategy. Regular check-ins ensure your plan stays aligned with your goals.

Conclusion

May 2025 reminded us that markets are shaped by a complex mix of corporate performance, policy decisions, and global events. While the month brought strong gains, it also highlighted the importance of staying vigilant and adaptable. As always, I’m here to help you make sense of it all. If you’re a C-suite executive managing a 401(k) plan, inheriting assets, or simply seeking a second opinion, reach out to discuss how we can tailor your strategy for the road ahead. Together, we’ll keep your financial future on track. You can reach me at 406-369-3396, Robert@LinkFinancialAdvisory.com or by visiting www.LinkFinancialAdvisory.com.