Market Update: May 27, 2025
Economic data included gains in both manufacturing and services PMI measures, as well as in new home sales, while existing home sales fell back. The index of leading economic indicators continued to deteriorate, although it still doesn’t point to recession at this time.
Equities declined in the U.S., but fared better overseas, in keeping with 2025 year-to-date trends. Bonds similarly lost ground domestically with higher long-term interest rates, while foreign were mixed. Commodities were also mixed, with gains in metals offset by declines in energy.
U.S. stocks fell back last week, with every sector ending in the negative. More defensive consumer staples and communication services fared slightly better, with minimal declines, while energy and technology suffered the sharpest losses upwards of 3-4% (the latter led downward by Apple, as specific tariffs on phones were threatened). Real estate fell by over -3% as well, due to interest rate movements.
Later in the week, concerns over Congress’ tax plan and higher deficits caused financial market concern, related to higher interest rates, and Friday’s announcement of the administration’s new trade focus on Europe, with hints at perhaps a 50% blanket tariff kept a dark cloud over sentiment (although that was postponed over the weekend until early July).
Foreign stocks were helped by a nearly -2% decline in the U.S. dollar, with net gains in the U.K. and Japan, as well as a lesser increase in Europe. Economic data was mixed for the continent, which raises odds of perhaps easier central bank policy looking ahead. Amazingly, it’s been nearly a decade since the Brexit vote, but it appears that the U.K. and Europe are in the midst of establishing closer ties, including trade and defense, which appeared to help sentiment. Emerging markets were little-changed in a more normal mixed week on net, as gains in China and Mexico (along with central bank key rate cuts), offsetting weakness in Brazil and Turkey.
Bonds fell back domestically, along with rising U.S. Treasury yields at the longer end of the yield curve. Investment-grade and high yield corporates fared slightly worse than governments, while floating rate bank loans experienced minimal change for the week. Foreign unhedged bonds fared well, however, along with a substantial drop in the value of the U.S. dollar, while emerging markets had mixed results. In particular, Japanese long-term yields rose to their highest levels in decades, with expectations for higher inflation related to a greater demanded term premium.
Commodities gained for the week, helped by a falling dollar, with gains in precious metals, agriculture, and industrial metals offsetting declines in energy. Crude oil fell by near a percent last week to $62/barrel, with continued concerns over weaker Chinese demand yet high supplies, exacerbated by OPEC+ leanings towards increasing production even further.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.