Tariffs, Truces, and a 22% Turnaround

David Halseth
Jun 1
2 min read

For the week ended 5/31/2025.

Back in Action – and So Are the Markets

Welcome back after the Memorial Day respite. Hopefully you enjoyed a moment of calm before diving back into the chaos we affectionately call the capital markets. So, let’s get right to it.

Not long ago, the S&P 500 was getting tossed around like a beach ball at a toddler’s birthday party, thanks to tariff tantrums, uneven earnings, and a healthy dose of geopolitical whiplash. At one point, the index had dropped a sobering 21.4% from its February highs. But lo and behold, since then it staged a remarkable comeback: up 22%, with nearly a quarter of that gain happening in May alone. It was the best month since late 2023, and yes, we’ll take the win – even if the year-to-date gain is a modest 1.1%.

Of course, not all is well in marketland. Many of the same risks that sent investors scurrying for cover in April are still lurking behind the curtains. Just last week, the U.S. accused China of violating the latest tariff agreement, putting the whole “truce” narrative at risk of collapse. And don’t even get me started on the bond market. Once again, fixed income posted losses last month, no surprise when you consider that a third of the big-three rating agencies finally stripped the U.S. of its AAA rating.

And what’s Washington’s response? Naturally, the House passed a budget with a cool $3 trillion in additional spending over the next decade that won’t be covered by tax revenue. But sure, tell me again how public bonds are a sound long-term investment strategy…

Now for some good news: inflation seems to be taking a breather. The Fed’s preferred gauge of consumer prices, the PCE index, rose just slightly in April, bringing the year-over-year rate down to 2.1%. With the Fed’s official target at 2.0%, we’ll call that “close enough for government work.” Optimists, rejoice – if only for a minute.

Looking ahead, this week brings the usual parade of economic indicators, including manufacturing and services PMIs (because who doesn’t love acronyms?) and the biggie on Friday: the May jobs report. Payroll numbers and the unemployment rate could either confirm recent optimism or send the market right back into fetal position.

Until then, enjoy the early days of summer and whatever brew keeps your spirits up and your spreadsheets balanced.