Welcome back to our monthly recap for May. We hope you all enjoyed your Memorial Day holiday weekend and the unofficial start of summer. After April’s powerful rebound, markets carried that momentum forward, delivering another month of broadly positive returns, albeit at a more measured pace.
In this recap, we will discuss how the markets performed in April, and then, in lieu of our normal topic of the month, I’m going to share some recent, small changes made to our portfolio in May.
The Markets in May
May extended April’s rebound, with positive returns across all major equity indices, though at a more moderate and selective pace. Leadership shifted slightly, with Emerging Markets posting the strongest gain at 9.71%, followed by the Nasdaq at 8.43%. The S&P rose 5.26%, while small caps (Russell 2000) gained 4.37%. Developed international markets (MSCI EAFE) advanced a more modest 3.18%, and the Dow Jones Industrial Average trailed at 2.94%, reflecting comparatively weaker performance in more defensive and value-oriented segments.
The primary driver of May’s performance was a continuation of improving risk sentiment, though without the sharp catalyst that defined April’s rebound. With geopolitical tensions easing following developments in early April and energy markets stabilizing, investors increasingly shifted their focus toward fundamentals, earnings expectations, and global growth trends. Growth-oriented areas, particularly within technology and innovation-driven sectors, continued to benefit from this backdrop, supporting the Nasdaq’s strong follow-through. At the same time, Emerging Markets outperformed as a combination of a more stable U.S. dollar environment and improving global trade expectations supported capital flows into those regions.
While gains were broad-based, May also reflected a more balanced and measured market environment compared to April’s surge. Leadership was less concentrated, and dispersion across indices narrowed, suggesting that markets were transitioning from a sharp recovery phase toward a more sustainable uptrend. Developed international markets lagged somewhat, and the Dow’s relative underperformance highlighted a modest tilt away from defensive positioning. Overall, May reinforced the idea that as macro risks recede, markets tend to refocus on growth opportunities and diversification, with multiple regions and styles contributing to positive outcomes.
US Equity Sectors
May’s sector performance reflected a sharp narrowing in leadership, with gains concentrated heavily in a single area while most other sectors struggled to keep pace. Technology once again led by a wide margin, surging 19.76% and accounting for the majority of the S&P 500’s advance during the month. Outside of Technology, positive returns were modest, with Health Care (+2.38%) and Consumer Discretionary (+2.13%) posting small gains. The rest of the market skewed negative, highlighting a more uneven and selective environment compared to April’s broad-based rebound.
This concentration in Technology was driven by continued investor enthusiasm around growth, innovation, and earnings durability, building on momentum established in April. As macro uncertainty stabilized and interest rate expectations remained relatively anchored, capital continued to flow toward companies with strong earnings visibility and long-term growth potential. At the same time, areas more tied to cyclical growth or interest rate sensitivity faced renewed pressure, suggesting that while overall market sentiment remained constructive, investors became more selective in where they deployed capital.
On the downside, several sectors gave back ground following April’s rally. Energy declined –5.63% as oil prices stabilized and partially retraced prior gains, while Utilities (–5.19%) also lagged amid shifting rate expectations. Consumer Staples (–1.66%), Financials (–1.06%), Real Estate (–0.92%), Industrials (–0.83%), and Communication Services (–0.70%) all posted modest losses, reflecting a cooling in broader participation. Materials (–0.62%) also dipped slightly. Overall, May’s sector returns illustrate a market that continued to move higher at the index level, but with increasingly concentrated leadership, reinforcing the importance of diversification even during periods of positive headline performance.
Bond Performance
May delivered modestly positive but uneven results across fixed income, with most major bond indices finishing the month in positive territory despite continued volatility in yields. Global bonds (ex‑USD, hedged) led performance with a gain of +0.87%, building on April’s strength as international markets benefited from relatively stable currency dynamics and improving global risk sentiment. In the U.S., the Bloomberg U.S. Aggregate Index returned +0.31%, matching the performance of 1–3 month Treasury bills (+0.31%), while shorter-duration government and credit bonds gained +0.16%. The Bloomberg U.S. Treasury Index lagged slightly but still posted a small positive return of +0.11%, marking a notable improvement from April’s mild decline.
Bond market performance in May was shaped largely by a mid-month spike in volatility followed by a late-month recovery, as shifting expectations around growth and inflation continued to influence interest rates. Early in the month, improving risk sentiment and stronger equity markets placed upward pressure on yields, particularly for longer-duration Treasuries. However, as the month progressed, yields stabilized and retraced some of those increases, allowing bond prices to recover and finish higher overall. The backdrop of moderating geopolitical tensions and steadier energy prices helped reduce some inflation concerns, though not enough to fully eliminate uncertainty around the Federal Reserve’s path.
Overall, May reinforced the theme of a gradual stabilization in fixed income markets, but not without continued sensitivity to macro developments. Shorter-duration bonds once again provided consistency, while longer-duration and global exposures benefited from improving conditions later in the month. While returns remained modest compared to equities, the positive performance across nearly all bond sectors reflects a more constructive environment than earlier in the year, with diversification and duration positioning continuing to play an important role in navigating evolving rate dynamics.
Portfolio Changes for May
Instead of the normal Topic of the Month, I wanted to let you know about a couple of small portfolio changes for May.
As most of you unfortunately experienced, Janus Henderson was very aggressive about trying to contact owners of their funds about the Special Meeting and Proxy Vote they held on May 18th. I hadn’t been aware until a few weeks ago that they had been calling, texting, and emailing clients almost daily. This was not only very unprofessional but also disrespectful.
As a result, I decided to remove the 3 Janus funds (JAAA, VNLA, and JMBS) we had in our portfolios. While I have been happy with their performance, there are comparable alternatives available. While removing those, I also removed TLT, which was the long-term treasury fund, primarily because it was such a small allocation, and decided to streamline our bond sleeve, as it wouldn’t have any material impact on overall portfolio performance.
Ultimately, I reallocated the proceeds from JAAA & VNLA to VUSB, a Vanguard ultra-short bond fund with low expenses and solid portfolio metrics. For JMBS & TLT, I allocated the proceeds proportionately between GIBIX & FLHY, which we already held in our portfolios.
The end result is a similar aggregate profile with 3 fewer funds and slightly less credit and interest rate risk. Because these are bond funds, and most of the gains are paid/taxed as dividends each year, there were little to no gains triggered by these trades. In fact, less than 1/3 of all clients realized a taxable gain, and for 95% of clients, the taxable gain was <1%.
Lastly, barring the worst market sell-off in history, the 2 JP Morgan Dual Directional Notes we added at the end of May last year will be called away on June 4th, with a total return of 8.4% for the Nasdaq note and 7.1% for the S&P note. I will be looking at replacements for these, as these had a lot more downside protection than those we added in April, however the ultimate decision will depend on what pricing looks like the week of June 8th.
If you have any questions, I’m happy to discuss 1-on-1 when I’m back from my big summer trip with Hunter the week of June 8th.
Closing Comments
That’s a wrap for May. We appreciate the continued trust you place in us and don’t take that responsibility lightly. While market conditions may shift month to month, our focus remains on helping you stay on track and confident in your long-term plan.
Until next month.