S&P 500 Posts Best May Performance in 30 Years as Wall Street Bets on Tariff Relief
By Amalya Dubrovsky, Karen Friar, and Allie Canal
Updated May 30, 2025, 11:24 PM
After a month of volatility and mixed signals, the U.S. stock market wrapped up May on a high note, with the S&P 500 logging its best performance for the month of May since 1990. Investors remained optimistic, fueled largely by expectations around potential tariff relief between the United States and China despite ongoing trade tensions.
Strong Monthly Gains for Major Indexes
The S&P 500 rose over 6% throughout May, marking the strongest monthly gain since November 2023. The Dow Jones Industrial Average added around 4%, while the Nasdaq Composite surged nearly 10%, buoyed by gains in the technology sector.
On Friday, despite a bit of a pullback in the final session, the Nasdaq dipped 0.3% after an early sharp drop of more than 1.6%, while the S&P 500 hovered close to the flat line. The Dow closed slightly higher by about 0.1%. This modest end-of-day drift came after the market had recovered from earlier losses.
Tariff Uncertainty and Inflation Data
Market participants navigated through a landscape featuring tariff uncertainty and signs of cooling inflation. The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, showed inflation easing in April. The core PCE rose in line with expectations on both monthly and annual bases, providing some reassurance to investors concerned about persistent inflation pressures.
Despite these encouraging inflation figures, trade tensions remained a key source of volatility. The Trump administration indicated plans to broaden tech restrictions on China, targeting subsidiaries of companies already on the U.S. Entity List to close loopholes used to bypass earlier curbs. This proposed move would require U.S. government licenses for certain transactions involving these entities, escalating tech sector uncertainty.
Trade Talks Hit a Snag Amid Ongoing Tensions
Recent comments from President Trump on social media accused China of violating their recent trade deal, mere weeks after reaching a partial tariff truce. Treasury Secretary Scott Bessent characterized trade talks as somewhat “stalled,” emphasizing that a direct call between Trump and Chinese President Xi Jinping would be necessary to resume meaningful progress. Disputes continue over technology restrictions, including chip export controls and visa policies.
The renewed tensions come amidst legal challenges to Trump’s tariffs. A U.S. appeals court recently paused a trade court injunction blocking the tariffs, granting the administration until early next week to file a legal challenge. Officials are reportedly exploring alternative ways to implement the tariffs amid the evolving legal landscape.
Market Outlook
While tariffs and trade remain significant headwinds, investors remain hopeful that some resolution or easing of restrictions lies ahead. The market’s strong monthly performance reflects a cautious optimism that tariff relief could provide a tailwind for economic growth and corporate earnings.
Financial experts caution that the next days will be critical to watch for developments in trade policy and related court rulings, as they have the potential to sway market direction in the near term. Meanwhile, inflation data continuing to soften supports the view that the U.S. Federal Reserve may proceed with a more measured approach to interest rates.
Summary
- S&P 500 gains over 6% in May, best since 1990
- Dow Jones and Nasdaq also post strong monthly increases
- Inflation cools in April, easing pressure on the Fed
- U.S. plans expand tech restrictions on China despite tariff detente
- Trade talks between U.S. and China remain stalled
- Market remains cautiously optimistic on tariff relief prospects
Investors and observers will be closely watching the evolving trade dispute and economic data as summer approaches, hoping the momentum seen in May will extend into the remainder of 2025. —
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