May 2025
Market Update

Monthly Market Summary

• The S&P 500 Index returned -0.9%, outperforming the Russell 2000 Index’s -2.3% return. Technology was the top-performing S&P 500 sector, followed by Consumer Staples, Industrials, and Utilities. Energy returned -13.9% as oil prices fell -18.6%.

• Bonds ended the month unchanged despite intra-month volatility, with the U.S. Bond Aggregate posting a +0.4% total return. Corporate investment-grade bonds produced a -0.3% total return, underperforming corporate high-yield’s +0.1% return.

• International stocks traded higher and outperformed the S&P 500. Developed Markets gained +3.7%, while Emerging Markets returned +0.1%.

Markets Rebound from an Early-Month Selloff as Trade Tensions Ease

Stocks declined in early April after the White House unveiled sweeping tariffs, with the S&P 500 falling over -10% in the first week. However, after the administration paused tariffs and trade tensions eased, the S&P 500 rebounded to finish the month with a loss of less than -1%. Interest rates were volatile in April as the market navigated tariff headlines and economic uncertainty but ultimately ended the month unchanged, with Treasury and corporate bonds flat. Outside the stock and bond markets, gold surged to a record high amid increased market volatility. Elsewhere, the U.S. dollar weakened due to concerns about the direction of U.S. policymaking. As discussed below, Washington policy has had a significant impact on global markets this year.

An Update on This Year’s Biggest Market & Economic Trends

This year’s major market trends have centered around a key theme: rising policy uncertainty. There’s been a notable shift in Washington policy, with the introduction of tariffs leading to increased caution among businesses and consumers. The uncertainty is impacting financial markets, which are focused on how tariffs will affect future economic growth and corporate earnings. Recent economic data indicates that tariffs pulled forward some consumer demand, but forward-looking surveys suggest growth could slow as policy uncertainty delays spending and investment decisions.

2025 has seen a significant change in stock market leadership. The Magnificent 7, a group of leading mega-cap technology stocks, is down over -15% year-to-date after gaining over +60% in 2024. In contrast, defensive sectors are outperforming. Utilities, Consumer Staples, Health Care, and Real Estate have all traded higher this year, even with the S&P 500 down -5.1%. Global stock market leadership has also shifted. International stocks outperformed the S&P 500 in Q1 for the first time since Q3 2023, marking one of their strongest quarters of relative performance since 2000.

The bond market is experiencing increased volatility, with Treasury yields moving sharply in response to tariff developments, fiscal debt concerns, inflation risk, and economic uncertainty. Corporate credit spreads, which tightened to 2007 levels late last year, have widened, causing high-yield bonds to underperform as investors price in a wider range of potential outcomes. Meanwhile, the Federal Reserve’s rate-cutting cycle remains on hold as it balances inflation with the potential for slower economic growth. The market is now forecasting four interest rate cuts in 2025, with the first cut expected in June.

Current Positioning

April brought increased volatility across both equity and bond markets as shifting trends and rising economic uncertainty—driven in part by tariffs news—created a more challenging environment. In response, we positioned part of our equity allocation defensively, maintaining some cash to help manage risk. We kept our international equity exposure, which continued to show relative strength during the month. We remain vigilant in tracking market developments and stand ready to adjust positioning as conditions evolve.

On the fixed income side, volatility persisted. Although we began reducing exposure to bank loans in March, April’s market action prompted us to further de-risk and move into preservation mode via money markets. Encouragingly, we’re now seeing signs of stabilization and may look to re-enter those areas if improving trends continue. One bright spot in April was our allocation to mortgage-backed and asset-backed securities, which performed well amidst the broader turbulence. We’ve recently increased our exposure to that area to take advantage of ongoing resilience.

As always, if you have questions about your risk level, please reach out and schedule a meeting so we can discuss this further. We appreciate the trust and confidence you’ve placed in Copperwynd Financial!

Upcoming Events:

Q2 2025 Economic and Market Update

Wednesday, May 14, 2025 12:00 PM (Arizona) and 1:00 PM Mountain Daylight Time (Utah)

Copperwynd Financial is hosting a virtual discussion for our clients to provide insight into the current economic environment and investment trends. The discussion should last 30 minutes with time remaining for additional questions and answers. Please register at the link provided below.

Register in advance for this webinar:

https://us02web.zoom.us/webinar/register/WN_u4vUSG2RR2KzZiFGkWlLDw

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The S&P 500 Index or the Standard & Poor’s 500 Index is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. The S&P 500 is a float-weighted index, meaning company market capitalizations are adjusted by the number of shares available for public trading. Note: Investors cannot invest directly in an index. These unmanaged indices do not reflect management fees and transaction costs that are associated with most investments.