This summer, the U.S. stock market finds itself in a perilous place as it continues to deal with multiple economic headwinds and overhanging geopolitical headline risk. The broadly based S&P 500 index is up a modest 0.5% so far this year. It is doing so by greatest margin behind global peers since 1993, alarming investors. Adding to this uncertainty, U.S. equity futures wobbled following President Donald Trump’s recent pledge to double tariffs on steel and aluminum, further complicating the market’s trajectory.
As a result, May was a remarkably positive month for both U.S. and non-U.S. equities. That marks a return to the best performance since late 2023 and mirrors wider global trends. The U.S. market took a huge hit in May. It took a harsh snap after living in a winning bubble for so long. Amid these challenges, the Magnificent Seven—a group of prominent tech stocks—have accounted for a substantial one-third of the S&P 500’s total weight, demonstrating their influence on market performance.
Even though the S&P 500 hasn’t performed that well here in the U.S., other sectors have held up remarkably. Of note, Industrials have led the way in 2025 — with their year-to-date gains well over 8%. This is the one sector that is booming when the long bond market is crashing. It has undoubtedly fallen into a three-month descent, its worst period since 2023. These types of swings in bond markets are usually driven by a sudden change in investor mood—their belief about what will happen in the economy.
Over in China, recent factory data told a different story. Although the nation’s manufacturing sector showed signs of contraction, there was a silver lining: the official Purchasing Managers’ Index (PMI) ticked up slightly, offering a flicker of hope for recovery. This new expansion has the potential to affect U.S. markets as they start realizing the global economic interdependencies.
Investor sentiment continues to be cautious given the backdrop of historical market performance. History indicates that five of the last eleven multi-year bull markets experienced a drawdown of more than 10% in their third year. This trend should be a real worry for bottom-up analysts and portfolio managers.
Even in the face of these headwinds, the Magnificent Seven have significantly advanced, recovering about 29% from their lows reached in April. True, they’re still down 4.3% year-to-date, a sign of continued volatility. Earnings expectations going forward among these tech giants are sky high. Currently, analysts are expecting growth rates from mid-stream in the 15% range, or twice the growth rate expected for the index as a whole.
As June approaches, historical data suggests that the S&P 500 typically sees an average gain of only 0.2% during this month over the past three decades. This figure should make all investors much more disciplined. They need to be smart about how they plan their routes with the prospect of tariffs rising and volatile economic indicators.