May 2025 Investment Summary

A positive month for the Passive range with returns ranging from +0.67% for Passive 1 to +2.74% for Passive 5.
*P Acc share class with data sourced from FE analytics as at 31 May 2025.

May 2025 was a positive month for markets and the portfolios, in absolute terms.

Most major equity markets recovered this month, following tariff de-escalation between the US and China, with a 90-day pause on new tariffs improving optimism. Emerging Markets continued to perform well, supported by a weaker US dollar, with Taiwan and Korea two of the strongest performers due to their role in the global tech supply chain. The FTSE 100 rose 3.8%, as markets were boosted by UK-US and UK-EU trade deals, with performance across the board improved and specifically within technology, industrials and consumer cyclical sectors. The Stoxx 600 gained 5.1% after advancements in US-EU trade talks helped ease recession fears, top performing sectors included industrials, information technology and financials with healthcare continuing to lag. The S&P 500 increased 6.3% and Nasdaq climbed 9.6% with technology, communications and consumer discretionary sectors the top performers, the largest fall came from healthcare. US/ China trade tensions improved over the month with both countries reducing tariffs for the next 90 days by 115%.

The US market’s tech sector led the rally, in what was US stocks biggest monthly rally since late 2023 with the S&P now in a technical bull market (up 20% from April lows). The Federal Reserve held interest rates in May, as Fed chair Jay Powell stated the central bank was in no “hurry” to change rates as it assesses the effects of tariffs and the “right thing to do is await further clarity”. 10 year US Government bond yields increased through the month, due to concerns over budget deficits, inflation and more hawkish Fed stance. A US debt downgraded rating from Moody’s further compounded the investor sell off in sovereign bonds. Yields closed at 4.41%, from 4.17% and reached highs of 4.58%.

May’s US labour market data showed payrolls increased by 139,000, beating forecasts in a sign of a slowing but robust jobs market, however this month’s lower figures adds pressure on Donald Trump as he contends with voter frustration over the economy. Unemployment held steady at 4.2%. US consumer confidence recovered from its lowest level since May 2020 and five consecutive monthly falls. Households were encouraged by the Trump tariff pullbacks, pauses and negotiations and specifically the US-China tariff deal.

Middle East tensions remain. The Israeli military struck two ports in Yemen in retaliation to Houthi missile fire towards Israel, with Prime Minister Netanyahu stating the attacks would continue until the Houthis backed down. The conflicts impact remains limited on the global economy, with lower oil prices more attributable to trade tensions and increased production from Saudi Arabia.

The economic environment has been resilient so far. The recent stumbling blocks posed to tariff implementation on the scale initially laid out, has offered a temporary reprieve for world leaders and policymakers. We expect markets to remain volatile as the legality of tariff imposition moves into the spotlight, meaning nations may pause or pivot on their efforts to strike trade deals with the US.

WS Prudential Risk Managed Passive - Tactical asset allocation activity

We maintain a small equity overweight of +1.5%, made up of a basket of US, Asia and GEM. We hold overweight positions in US Treasuries, UK Gilts and Real Estate (REITs), with underweights in US and European Corporate bonds.