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Financial Market Commentary

Monthly Market Commentary

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These monthly market commentaries share a synopsis of the U.S. financial markets with intelligent insights.

Latest Commentary:

May 2025 Market Recap

Despite a strong rally in U.S. stocks in May, uncertainty still looms.  Optimism surrounding paused tariffs and potential trade resolutions lifted markets, but caution remains due to rising interest rates, a growing U.S. deficit, and a fresh debt downgrade.  Equity gains were driven by tech-heavy sectors, while high-yield bonds were the only bright spot in fixed income.  Global markets, particularly Germany, outperformed U.S. stocks year-to-date.  As summer begins, investors are encouraged but should be prepared for volatility. 

Domestic Equity

  • US stocks continued the "tariff pause rally" that started in April as investors expect less trade policy impacts on corporate earnings and consumer spending.
  • Large and midcap growth indices, led by many of the 2024 winners which bounced from March lows, were the best performing segments in May.

International and Global Equities

  • Non-US developed markets lagged US large caps but maintain sizeable outperformance on a YTD basis. German equities have outperformed the US by 30% this year.
  • With tariffs paused or being re-negotiated, many developing markets bounced back and delivered competitive stock returns in May.

Fixed Income Markets

  • US fixed income markets were hit by rising interest rates as investors focused on fiscal spending, the level of US debt, and another US debt downgrade. Rates rose roughly 20bps across the yield curve.  High-yield bonds were the lone bright spot, benefitting from the equity market rally.

Specialty Markets

  • Commodity indices were mixed with gold hitting new highs, gas and oil prices moving higher, while some agricultural commodities fell on trade concerns. REITs moved higher in May.

Sectors

  • Driven by some of the Mag 7 names, the IT, Communication Services, and Consumer Discretionary sectors were the top performers in May. Health Care was the only negative sector for the month.

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June 4, 2025

Dear Valued Investor,

As June begins, markets continue to navigate a complex landscape shaped by trade policy shifts, an uncertain economic and earnings outlook, and bond market headwinds. Several key developments in recent weeks may have implications for markets:

Trade Policy in Flux: The May 28 court ruling blocking most of President Trump’s tariffs has introduced some additional uncertainty for investors. The administration has other legal avenues to pursue if needed and will likely be able to maintain tariffs at levels consistent with prior expectations. Rising tensions with China surrounding critical mineral exports and Taiwan in recent days serve as a reminder for investors that geopolitical risk remains elevated.

Solid Earnings Results, but Caution Ahead: First quarter earnings season delivered broadly positive results, with nearly 80% of companies exceeding analysts’ expectations. Mega-cap technology companies (the so-called Magnificent Seven) drove nearly half of the 13% S&P 500 earnings per share growth. While the results were strong, they may not be enough to sustain the recent market rally given limited visibility into the economic and profit backdrop for the second half of the year.

Stock Valuations May Reflect too Much Optimism: Markets continue to price in limited impact from tariffs, highlighting the fragility of the latest rally. That doesn’t mean the broad market can’t reach new highs this year, but it will likely take some pleasant surprises to help overcome tariff-driven pressures on inflation and profit margins. It would help investor sentiment if trade uncertainty cleared up so the focus could shift toward the tax bill currently in Congress. Whatever your view is on tariffs, there is no doubt that tariff revenue — if preserved — will be helpful in getting the 2017 tax cuts extended.

Bond Market Headwinds Persist: The Treasury market is facing several headwinds. The prospects of tariff-driven inflation, our lack of fiscal restraint, reduced demand from foreign buyers, higher non-U.S. yields, and a resilient U.S. economy are just some of the factors putting upward pressure on yields. Ultimately, Treasury yields are primarily a function of growth and inflation expectations, so until the economic data softens, Treasury market volatility is probably here to stay.

As we move further into the summer months, key catalysts to watch include inflation data, further developments in trade negotiations, central bank commentary, and progress on the tax bill. Meanwhile, corporate America’s sales and profit margins will garner increasing support from artificial intelligence in the quarters and years ahead. We encourage long-term investors to watch for opportunities to add equities on dips, though periodic bouts of market volatility are to be expected until there is greater clarity on trade.

Thank you for your trust along your financial journey.

Sincerely,

 scott headshot
 
Scott Krase
Wealth Manager
SKrase@CGOFinancial.com
630.810.9100
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Investment Advisory Services offered through Global Retirement Partners, LLC DBA Connor & Gallagher OneSource, an SEC registered investment advisor.

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Disclaimer:

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. Connor & Gallagher OneSource doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, Connor & Gallagher OneSource makes no representation as to its completeness or accuracy.
 
*Securities offered through LPL Financial, Member FINRA & SIPC.  Investment advisory services offered through Global Retirement Partners, LLC DBA Connor & Gallagher OneSource, an SEC registered investment advisor.  Connor & Gallagher OneSource and Connor & Gallagher Benefit Services are separate entities from LPL Financial.

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