Monthly Summary

Monthly Summary May 2025

May 2025 proved to be a month of significant market transitions, with divergent trends across asset classes driven by shifting monetary policy expectations, geopolitical developments, and evolving economic fundamentals.

Equity Markets: Sustained Rally Amid Technical Momentum

The stock market demonstrated remarkable resilience throughout May, building on the strong momentum established in late April. The S&P 500 climbed 2.85% in the final week of April, while the Nasdaq 100 surged 3.45%, setting the stage for continued gains into May7. Technology (+4.29%), industrials (+4.17%), and communication services (+4.0%) sectors led the advance, reflecting reduced risk aversion among investors7.

The market's performance was characterized by a "V-shaped" recovery pattern, with nine consecutive winning sessions recorded by early May7. This technical strength was supported by robust earnings reports from key players including NXP Semiconductor, Microsoft, and Meta Platforms, alongside persistent rumors of progress in trade negotiations7. However, analysts warned of potential for this pattern to evolve into a "W" formation if trade optimism were to shift negatively7.

Fixed Income: Yields Stabilize in Elevated Range

Bond markets experienced notable volatility in the lead-up to May, with December 2024 proving particularly eventful due to hawkish Federal Reserve positioning and persistent inflation trends2. The 10-year Treasury yield rose 40 basis points in December, contributing to significant yield curve steepening with the 2s/10s spread widening by 31 basis points2.

Morgan Stanley's analysis suggested that U.S. Treasury yields would likely remain in a broad 4%-5% range throughout 2025, which would represent a significant improvement over 2024's mediocre bond performance2. The firm noted that current developed market yield levels appeared close to fair value, with limited room for bond rallies unless central banks cut rates by at least 50 basis points during the year2.

Foreign Exchange: Dollar Weakness Continues

The U.S. dollar extended its downward trajectory through May, weakening 8.5% year-to-date by early May3. This decline was attributed to a Q1 GDP contraction of 0.3%, as businesses and consumers frontloaded imports ahead of new U.S. tariffs3. Despite concerns about the dollar's reserve currency status, it maintained a commanding 57.8% share of global currency reserves3.

The euro emerged as one of the strongest performers, rising 10% over two months leading into May3. This strength was driven by the European Union's announcement of a €500 billion defense spending package equivalent to 3.8% of Eurozone GDP, alongside improved manufacturing data and capital inflows from the U.S.3. EUR/USD was expected to stabilize within the 1.1575 to 1.1200 range during May3.

Sterling reached a multi-month high of 1.3424 against the USD in April but faced pressure from weakening domestic data, with both manufacturing and services PMIs declining3. The Canadian dollar held firm despite U.S. protectionist pressures, with USD/CAD declining 4% in April, though economic headwinds persisted with unemployment rising to 6.7%3.

Cryptocurrency: Challenging Seasonal Patterns

The cryptocurrency market in May 2025 challenged the traditional "Sell in May and go away" adage, with Bitcoin showing positive correlation to stock indices4. As of May 30, Bitcoin rose 1.2% to $67,500 alongside a 0.3% gain in the S&P 500, demonstrating the increasing interconnectedness between crypto and traditional markets4.

Institutional participation remained robust, with Bitcoin ETF holdings rising 7% and Ethereum volume spiking 15% to $12.3 billion4. This institutional bridging between traditional and crypto markets created new dynamics, with traders able to leverage correlations to identify trading opportunities rather than relying solely on seasonal patterns4.

Precious Metals: Gold Under Pressure

Gold faced significant headwinds in May 2025, with analysts forecasting substantial declines throughout the month5. The precious metal plunged nearly 3% in early May as the USD Index completed an inverse head-and-shoulders bottom pattern5. This technical breakdown occurred after gold had entered an extremely overbought condition and parabolic upswing before breaking below the parabolic trend5.

The decline was attributed to gold's overextended technical position and the completion of the dollar's bottoming pattern, which provided the catalyst for the precious metal's correction5.

Industrial Metals: Copper Outlook Improves

Goldman Sachs revised its copper forecasts upward for Q2/Q3 2025, raising price targets to $9,330-$9,150 per tonne from previous estimates of $8,620-$8,370 per tonne6. This upgrade reflected de-escalating global trade tensions and resilient demand from China6.

The bank expected high U.S. imports to deplete ex-U.S. stocks during Q2, tightening London Metal Exchange forward spreads and discouraging speculative short positions6. However, Goldman anticipated a significant slowdown in global copper demand in the second half of 2025, with potential supply deficits emerging in 2026 that could push prices above $10,500 per tonne by end-20266. Benchmark LME copper traded near monthly highs at $9,538 per tonne by mid-May6.

Technical and Macro Outlook

The convergence of technical momentum in equities, currency realignments, and commodity sector rotations suggested markets were navigating a complex transition period in May 2025. While risk assets benefited from improved trade sentiment and robust corporate earnings, the sustainability of these trends remained contingent on central bank policy paths and the resolution of ongoing geopolitical uncertainties.

Citations:

Answer from Perplexity: pplx.ai/share