Markets kicked off May with strong momentum, marking the S&P 500’s longest winning streak since 2004. Despite a small dip in Q1 GDP (-0.2% revised), business investment in equipment surged 22.5% year-over-year—an encouraging signal for future growth. Inflation came in at a manageable 1.8% for the quarter, while M2 money supply growth remains subdued, opening the door for possible Fed rate cuts later this year. Still, the risk of a recession hasn’t vanished, as the effects of tighter money supply continue to unfold.

 

The Fed held interest rates steady in May, stressing the importance of watching incoming data amid high policy uncertainty—much of it driven by frequent changes to U.S. tariffs. Customs revenue has jumped 78% year-to-date, and the U.S.-China agreement to reduce tariffs for 90 days helped ease global concerns, sending the Economic Policy Uncertainty Index down sharply after a record peak in April. 

 

Earnings season brought mostly good news, with S&P 500 profits up over 7% from last year, even though overall corporate profits declined slightly. Moody’s downgraded U.S. debt to Aa1, but markets largely shrugged it off, as they did after prior downgrades from S&P (2011) and Fitch (2023). Meanwhile, consumer income has been climbing steadily in 2025—up 0.8% in April alone—driven by both private sector wage gains (4.5% year-over-year) and new government transfer programs like Social Security adjustments and premium tax credits.

 

While some investors are cautious amid ongoing tariff uncertainty and talk of a possible slowdown, market performance has remained strong. The Dow rose 4% in May, the S&P 500 gained 5.6%, and the Nasdaq jumped 8.7%. Year-to-date gains are more modest but still positive. As always, it’s wise to stay focused on long-term goals—remembering Warren Buffett’s reminder that markets reward the patient, not the panicked.

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