Why Stocks Had Such a Strong May 2025

The stock market delivered its most impressive May performance in over three decades, with the S&P 500 surging 6.2%—its best May since 1990. After three consecutive months of declines (AKA “the April blues”), May’s rally was like an underdog sports movie: complete with a breakthrough trade agreement with China, resilient economic data, a fresh wave of AI hype (think “AI, assemble!”), and some successful diplomatic moves that restored investor confidence. By month’s end, markets were not only celebrating Bud Light commercials again—they were back in positive territory for the year.

Market Performance: A Historic Rebound

May 2025 will go down in history as the month when Wall Street channelled its inner Rocky Balboa. The S&P 500’s 6.2% gain wasn’t just its strongest May since 1990; it was the fifth-best May performance since 1928. That rally yanked the index from negative territory into a year-to-date positive finish, closing at 5,911.69. Cue confetti.

• The Nasdaq Composite—our techie superstar—led with a 9.6% monthly gain. That was its best performance since November 2023 and strongest May since 1997. It was like binge-watching a new season of your favorite show and realizing it’s even better than expected.

• The Dow Jones Industrial Average wasn’t left out; it posted a solid 3.9% advance, its biggest May jump since 2020 and its best monthly showing since January. If indices had high school yearbooks, the Dow might have just won “Most Improved.”

For context, April’s declines had put the S&P 500 on the brink of bear-market territory (down 19% between February 19 and April 8). It was like almost stepping on a Lego—painful and nearly career-ending.

Meanwhile, Federal Employees’ Thrift Savings Plan (TSP) aficionados got their own happy ending: the C Fund posted a 6.29% gain—its best since November 2023 (when it jumped 9.12%). Those May returns helped the C Fund notch a 13.47% gain over 12 months and move into positive territory for the year with a 1.05% year-to-date return. If the C Fund were a Netflix series, viewership would spiked.

Trade Breakthrough:
The China Deal That Changed Everything

Mid-May, the U.S. and China dropped a plot twist worthy of a summer blockbuster: a surprise trade agreement. On May 12, both nations announced they’d slash tariffs that had been more punishing than a gym instructor’s “last set.” For the next 90 days, the U.S. would cut tariffs on Chinese imports from 145% to 30%, while China would reduce levies on U.S. goods from 125% to 10%. (Full disclosure: Trump’s 20% fentanyl-related tariffs from February and March stayed in place, like that one friend who never leaves the party.)

Markets reacted as if someone just handed them a redemption card. Dow futures jumped 2%, S&P futures rose nearly 3%, and Nasdaq futures powered up over 3.5% during Asian trading. Investors might as well have been high-fiving each other.

President Trump, speaking at the White House, summed it up: “We’re not looking to hurt China,” adding that upcoming talks would focus on opening Chinese markets to American businesses. It was a pretty big pivot—like Tony Stark suddenly deciding to build a hospital instead of weapons. After months of trade tensions that threatened to derail global growth (picture a financial train wreck in slow motion), this agreement felt like a shiny new rescue rope.

Economic Resilience and Encouraging Data

Even without the China deal, the U.S. economy was showing surprising strength—kind of like a character you thought was dead, only to see them pop up later in the sequel.

• Jobs Report: In early May, the April jobs report showed 177,000 new jobs—well above expectations of 138,000. That was proof the labor market was more resilient than a Marvel superhero.

• Unemployment: Held steady at 4.2%, basically the same level we’ve seen recently. If unemployment rates were a thermostat, it would be in “Goldilocks mode”—not too hot, not too cold.

• Sector Strength: Health care, transportation and warehousing, social assistance, and financial activities were all hiring like there was a “Help Wanted” banner in Times Square. Transportation and warehousing saw the strongest growth since December—likely because businesses were front-loading trade activity before tariffs kicked in.

On the inflation front, the Personal Consumption Expenditures (PCE) index showed prices rising at a modest 2.1% annual rate in April. Core PCE (which excludes food and energy, those drama queens of inflation) eased to 2.5% year-over-year. That calming inflation trend was like a soothing Spotify playlist for investors, easing fears of an aggressive rate hike from the Fed.

Technology Sector Revival and AI Renaissance

Tech stocks were the MVPs of May—think Kobe Bryant in his prime, but in semiconductor form. The AI trade roared back to life, with mega-cap names leading the charge:

• Nvidia surged 6%, proving it’s still the Scarlett Johansson of GPUs—everyone loves it.

• Broadcom added 5%, showing that semiconductor giants can still pack a punch.

• Tesla jumped 5%, because why not? Even Elon’s rockets can’t stop people from buying cars.

• Meta Platforms gained around 3%, reminding us that Facebook’s aunt and uncle are still at the party—even if they’re awkward.

One unexpected hero was Constellation Energy Corporation, whose stock climbed after reporting adjusted operating earnings of $2.14 per share (up from $1.82 a year ago). CEO Joe Dominguez said the company is “powering America’s AI infrastructure,” partnering with big tech names to build out new power agreements. It was like Constellation got invited to the coolest tech prom in town.

Super Micro Computer also played a supporting role, even though it missed Wall Street estimates (revenue of $4.6 billion versus the $5.4 billion forecast). Its launch of Data Center Building Block Solutions (DCBBS) in mid-May showed promise—promising to accelerate AI data center builds and cut costs by up to 20%. It was like unveiling a “build-your-own-AI-hub” Lego set.

Across the board, companies like Palantir (up 8%) and Super Micro Computer (up 16% on key sessions) proved that anyone with even a hint of an AI angle was cool again. Even big tech classics like Amazon, Apple, and Alphabet gained ground. It was like if the Guns N’ Roses reunion tour came back stronger than ever.

Geopolitical Success and Policy Developments

President Trump’s Middle East tour turned into a quasi-commercial for U.S. exports—think “Shark Tank,” but with nations. The three-nation trip produced nearly $2 trillion in investment agreements:

• $600 billion with Saudi Arabia

• $243 billion with Qatar

• $200 billion with the United Arab Emirates

These included huge orders for U.S. military gear and Boeing aircraft—because nothing says “diplomacy” quite like fighter jets and jetliners. The announcement of plans to build the largest AI data center outside the U.S. in Abu Dhabi was like revealing a secret level in a video game—techies nerded out hard.

By choosing the Gulf region for his first state visit (skipping traditional stops in Canada and Europe), Trump sent a signal that it’s all about the Benjamins—er, billions—wherever you find them.

On the home front, Congress passed the “One Big Beautiful Bill Act” (nicknamed by critics the “Reverse Robin Hood Bill”) on May 22 by a close 215–214–1 vote. The legislation extends key parts of the 2017 Tax Cuts and Jobs Act, adds defense spending, and tweaks clean-energy tax credits. Despite some grumbling about its fiscal impact, investors were relieved to see at least some clarity on future tax policy—like finally getting to read the rulebook after playing a confusing board game.

Market Outlook and Persistent Challenges

Despite May’s feel-good montage, market strategists reminded everyone this isn’t “Happily Ever After” just yet. Ameriprise Financial’s Anthony Saglimbene warned it’ll be tough for the S&P 500 to break above 6,000 given current headwinds—and that markets remain “sensitive to trade headlines.” Remember how your phone battery drains faster if you scroll social media? Same thing here: a single tweet about China can send stocks on a roller coaster.

Treasury yields also popped up like an unwanted ad: nearly 48% of surveyed investors said 5% on the 10-year yield would halt the S&P’s advances. The 10-year yield drifted to 4.418% in May as investors fretted over a multitrillion-dollar fiscal package. Then a ratings agency stripped the U.S. debt of its triple-A rating, citing ballooning national debt. Cue panic emoji.

Speaking of debt, the U.S. national debt increased by about $8.4 trillion during President Biden’s tenure (January 2021 to January 2025). There had been hopes for debt reduction under Trump, but Congress’s talk of extending expiring tax cuts and boosting spending suggests continued expansion. Put simply: fiscal rockets are still firing, and bond investors are watching nervously—like referees waiting to call a foul.

Conclusion

May 2025’s exceptional market performance was like an indie band suddenly topping the charts. A breakthrough trade deal with China was the headline act, but resilient jobs data, tame inflation, the AI revival, and diplomatic wins all played vital supporting roles. Together, they created a backdrop for a blockbuster month that restored investor confidence and pumped up equity indices.

Yet, as any seasoned movie critic (or portfolio manager) will tell you, the sequel’s success depends on whether the stars align again: Can trade negotiations stay on track? Will the economy keep humming without the Fed crashing the party? Can fiscal policy avoid another plot twist that throws everything off script? As May fades into memory, markets are bracing for an oversaturated script—where temporary agreements could unravel and new policy challenges emerge. If May was a feel-good montage, the coming months promise a more suspenseful thriller. Stay tuned, grab your popcorn, and maybe keep a stress ball handy—because the next acts are just getting started.