Global Markets Overview: May 2025

The first 100 days of the Trump presidency capped a highly volatile month for financial markets. By the end of April, US and global equities were flat to modestly higher, while US government bond yields — both short-term (three month) and longer-term (10-year) — were little changed, despite persistent and high uncertainty. The US dollar fell 4.3% over April. While start-of-month to end-of-month moves were generally small, performance over April was very volatile and unfolded in two distinct phases. Watch our May Global Markets Overview video to explore this further:

• Early April saw a wave of risk aversion following President Trump's April 2 tariff announcement and subsequent retaliatory measures from China. Investor concern over US and global growth prospects rose, and risk premiums widened across asset classes. At one point, US equities had fallen over 20% from their February 19 peak. Unusually, US long-dated bonds and the dollar also sold off, raising concerns about their traditional diversification benefits amidst equity market declines.
• The second phase began after Trump's April 9 announcement of a 90-day pause on all reciprocal tariffs above a 10% baseline (ex-China). Imminent recession fears eased, triggering a sharp equity rebound. In recent weeks, optimism around trade negotiations and the lack of further escalation have supported risk assets like equities, despite ongoing intraday volatility. Positive earnings — especially from large-cap tech firms focused on software and services — and sustained AI capex commitments helped lift technology stocks, which had been among the hardest hit earlier in the year. Separately, 10-year US Treasury yields fell from their April highs and recent US Treasury auctions cleared smoothly, as concerns over Treasuries' defensive role in portfolios eased.

While near-term investor risk aversion and acute market risk has subsided for now, we think investors should be prepared for the possibility of renewed financial market volatility and risks of new declines in growth sensitive assets, as near-term risks of recessions in the US and other economies have risen. However, in the event of an economic downturn, we anticipate that any sharp market selloffs would be followed by swift rebounds, as central banks retain substantial policy space to cut interest rates and support growth. We also continue to see US Treasuries and other country sovereign bonds as effective short-term hedges.

Video transcript

Global Markets Overview: May 2025

[MUSIC PLAYING]

TESSA MANN: Hi, everyone, and welcome to this month's global markets overview. Our chart of the month comes from slide 2, where we break down the sharp two-phase dynamics that dominated markets through April. April was a month of two parts. Early in the month, markets were hit hard following President Trump's April 2 tariff announcement. This triggered immediate retaliation from China and reignited fears of a global trade war.

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Contact

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David Hoile

Global Head of Asset Research at WTW

David is the Global Head of Asset Research at WTW, responsible for economic and capital market research. He also is a member of the Investment Assumptions Committee, who help guide investment policy globally.

email Email phone +44 20 7170 2144

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