May Monthly Market Review
- Anthony Walters
- 17 hours ago
- 4 min read
Welcome to our Monthly Market Review for May 2025, where global equity markets bounced back in, led by optimism surrounding a temporary pause in U.S. tariffs and interest rate cuts across major economies. While some countries surged ahead—Austria and Taiwan among them—ongoing trade disputes, legal uncertainty, and sector-specific headwinds kept investors on their toes. This month’s report explores the key macroeconomic developments and market movements shaping portfolio performance.
Markets rally despite Stop-Start tariffs
Bank of England cuts rates again
US tariffs in state of flux
Austria steams ahead in May
The Balanced portfolio Index (+2.17%) made strong gains in May as a temporary delay to the proposed tariffs by the US, came into effect. However, a federal appeals court quickly reinstated the tariffs temporarily, pending further legal review.
This legal uncertainty continues to cause significant confusion for importers and the global market.
Inflation and Interest Rates.
UK.
In May 2025, the Bank of England cut interest rates by 0.25% to 4.25%, marking its fourth reduction in a year. The decision, made in a narrow 5–4 vote, reflected concerns over slowing inflation and the economic impact of new U.S. tariffs. Inflation has eased, but global trade tensions—especially between the U.S. and China—have introduced uncertainty into the UK’s economic outlook. Governor Andrew Bailey emphasised that while the path for rates is likely downward, the pace remains uncertain due to unpredictable global conditions.
U.S. Federal Reserve.
The U.S. Federal Reserve held interest rates steady at 4.50%, amid rising concerns over inflation and unemployment. Fed minutes revealed policymakers feared inflation could remain persistently high due to proposed tariffs, while also anticipating a weakening job market. Chair Jerome Powell reaffirmed the 2.00% inflation target, acknowledging the outdated nature of the Fed’s previous framework and emphasising the need for clearer communication in a volatile global environment. The Fed faces a delicate balancing act as inflation risks remain elevated and economic uncertainty grows.
European Central Bank (ECB).
In May 2025, eurozone inflation fell to 1.90%, dipping below the ECB’s 2.00% target for the first time in over a year, driven by lower energy and services costs.
In response, the European Central Bank, which has already cut rates seven times since June 2024, is widely expected to lower rates again this month, from the 2.40% present rate.
Despite this, policymakers remain cautious due to potential inflationary pressures from global trade tensions and geopolitical risks.
Market performance.
In developed markets, Austria gained over 14%, as Europe continued to benefit from a potential reordering of world trade. The highly concentrated Austrian index, containing only three companies, was driven higher by Erste Group Bank, itself gaining over 18% in May on the back of a corporate trading update.
Despite the optimism for European equities, Austria’s neighbour Switzerland fared less well, gaining only 0.80% as performance among constituents like Nestle was muted.
In emerging markets, Taiwan and Greece gained over 11% on the strength of a global rally in Tech and financials respectively. Financials themselves, comprise over 50% of the Greek index.
The Saudi Arabian Index fell over 5% in May 2025, primarily due to a sharp decline in oil prices, which dropped to a four-year low. This raised concerns about reduced government revenues and the broader economic impact for the kingdom.
Sector performance.
Tying in with the theme in Developed and Emerging Markets, the tech and financials sectors made the most headway in May as the ‘tariff pause’ gave cause for optimism in the global outlook for growth.
The healthcare sector underperformed last month, due to a mix of political, regulatory, and corporate pressures. The US administration has intensified efforts to cut drug prices by aligning them with international benchmarks, unsettling pharmaceutical firms and pharmacy benefit managers (PBMs), placing healthcare profits at risk.
Summary.
Markets rebounded strongly in May, thanks to the temporary pause in US tariffs, giving welcome relief to the rest of the world and glimmers of hope that things will remain the same.
However, legal challenges have added to the uncertainty. A U.S. trade court initially ruled that many of the “Liberation Day” tariffs were unlawfully imposed. Yet, a federal appeals court reinstated them temporarily, pending further review. Plaintiffs, mainly small businesses, are pushing for a full suspension during the appeal process, while the administration signals readiness to escalate the case to the Supreme Court.
Other duties—like the recently doubled 50% tariffs on steel and aluminium—remain firmly in place, escalating trading tensions between the US, EU and Asia.
This mix of paused, active, and contested tariffs is creating confusion for importers and global markets, especially ahead of key shipping seasons. The outcome of ongoing legal battles could reshape U.S. trade policy in the months ahead and have a knock-on effect for global trade. The outcome remains unknown, and this speaks to the importance of globally diversifying equity exposure within portfolios.
Sources.
The ‘Balanced portfolio benchmark’ is the UT Mixed Investment 20-60% Shares Sector.
Bank of England cuts rates in split decision before US tariff deal by David Milliken, Suban Abdulla and William Schomberg, 8th May 2025.
Speed of UK rate cuts ‘shrouded in uncertainty’ after tariffs, Bank boss says by Kevin Pratt, 3rd June 2025.
Fed saw inflation, jobless, stability risks at May meeting, minutes show, by Howard Schneider, 28th May 2025.
Fed Chair Powell reveals new inflation target, by Anushka Basu, The Street/Yahoo Finance, 2nd June 2025.
Fed minutes: Uncertainty 'elevated' as risks of higher inflation and unemployment rise, by Christopher Rugaber, AP/Yahoo Finance, 28th May 2025
Saudi Stocks Set to Be World’s Worst in May After Oil-Price Drop, by Tugce Ozsoy, Bloomberg, 28th May 2025
Healthcare worst-performing S&P 500 subsector year to date: Mizuho expert, by Anjalee Khemlani, Yahoo Finance, 14th May 2025
Taiwan trims 2025 GDP growth forecast, cites US tariff uncertainty, by Reuters 28th May 2025
European stocks to scale new heights in 2026, trade tensions temper loftier hopes: Reuters poll, by Lucy Raitano, Reuters 29th May 2025
Global stocks hit record high on optimism for resilient economy, by Sagarika Jaisinghani, 4th June 2025
