May 2025 Stock Market: Economic Impact & June Buy/Hold Picks

At GLHR Investing, we’re unpacking the U.S. stock market’s performance in May 2025, analyzing how economic factors shaped its trajectory and forecasting what’s next for June. With Trump’s tariffs, 3% inflation, and a 60% recession risk, the S&P 500 (SPY) at $513.88 is down 4.8% year-to-date, reflecting a volatile month. How did the economy drive these moves, and which stocks should you buy or hold next month? Here’s a comprehensive analysis of May’s end-of-month market, economic influences, and actionable June 2025 predictions.

May 2025 Stock Market Performance (End-of-Month Outlook):
- S&P 500 (SPY):
  - Price Movement: SPY started May at ~$518.40 (April 30 close, adjusted) and closed May 23 at ~$513.88, down ~0.87% for the month, based on real-time data and prior analyses. Weekly data shows a 2.61% drop for the week ending May 23, with intraday volatility (e.g., $508.55–$520), per X post. The month saw a 2.4% plunge on May 6 (tariff threats) and a ~1% recovery by May 9 (U.S.-UK trade deal), per prior analyses.
  - Key Trends: May’s performance was weaker than its historical “decent” average (small positive returns, 2015–2024), per Trade That Swing. The VIX averaged ~35, down from April’s 40.86, but signaled persistent fear, per web data. SPY’s 15.6% YTD drop nears bear market territory (17.6% from February’s $613.23 peak), per prior analyses.
  - Sector Performance:
    - Defensive Sectors: Utilities (SPLRCU) and consumer staples (SPLRCS) gained ~1–2%, driven by safe-haven demand, per Morningstar. Gold rose 3% to $3,300/ounce, per prior analyses.
    - Cyclical Sectors: Technology (SPLRCT) fell ~2%, with NVIDIA (-3%) and Tesla (-5%) hit by tariff costs and chip supply fears, per web data. Consumer discretionary (XLY) dropped ~1.5%, reflecting retail spending cuts (13%), per prior analyses.
  - Other Indices:
    - Nasdaq 100 (QQQ): Down ~2%, underperforming SPY due to tech exposure, per X post.
    - Russell 2000 (IWM): Down ~3.47% for the week ending May 23, with a 19% YTD drop, signaling small-cap weakness, per X post.
    - Dow Jones (DJIA): Down ~2.47% to 41,603.07, more resilient than small-caps, per X post.
  - Sentiment: X posts described a “mixed” market, with @grok noting tariff-driven volatility and @sallore102 citing a fragile recovery, per prior analyses. The Fear & Greed Index at ~50 (neutral) reflects caution, per web data.
- End-of-Month Outlook: SPY is projected to close May 26–30 at $510–$520, assuming no major tariff escalations, based on weekly trends (-2.61%) and historical May stability, per Trade That Swing. A late-month rally is possible if trade talks (e.g., U.S.-China, May 10–11) progress, per Schwab.
How the U.S. Economy Affected the Stock Market in May 2025:
- Tariffs and Trade Disruptions:
  - Impact: Trump’s 50% China tariff threat (May 6) and ongoing probes (semiconductors, minerals) intensified trade war fears, slowing U.S. port activity (e.g., Los Angeles) and raising import costs 5–20%, per web data. The April 8 tariff pause (ends July 7) and U.S.-UK trade deal (May 8) provided temporary relief, lifting SPY ~1% by May 9, per prior analyses.
  - Market Effect: Tech and retail stocks (e.g., NVIDIA, Nike) fell 1.5–3% due to supply chain disruptions, while domestic manufacturing (e.g., Nucor) held steady, per web data. The $5 trillion global equity sell-off since April 2 underscores tariff volatility, per prior analyses.
- Inflation and Interest Rates:
  - Impact: Inflation at 3% (March) with 6.7% expectations and Fed rates at 4.25–4.5% (no cuts, per CME FedWatch) increased borrowing costs, per web data. Powell’s May 7 warning of 4% inflation (tariff-driven) spooked markets, with a 2.4% SPY drop on May 6, per prior analyses.
  - Market Effect: High rates pressured growth stocks (tech, down 2%), while defensive sectors (utilities, staples) gained, per Morningstar. The 10-year Treasury yield at 4.28% (up from 4% in April) reflected deficit fears, per Schwab.
- Recession and Consumer Sentiment:
  - Impact: A 60% recession probability and -0.3% Q1 GDP growth (Atlanta Fed) signaled slowdown, with consumer sentiment at a 12-year low (50.8), per web data. Retail spending fell 13%, curbing demand, per prior analyses.
  - Market Effect: Cyclical sectors (consumer discretionary, industrials) lagged, with XLY and XLI down 1.5–2%, while safe-haven assets (gold, utilities) rose, per web data. Small-caps (IWM, -19% YTD) underperformed, per X post.
- Fiscal Policy and Deficits:
  - Impact: The $3.7 trillion tax bill draft (May 6), extending TCJA rates and adding cuts, could widen deficits by $1 trillion, per web data. Moody’s U.S. credit downgrade (Aa1, May 19) and a $1.9 trillion fiscal 2025 deficit raised yield fears, per X post.
  - Market Effect: SPY fell 1% on May 19 (downgrade news), with Treasury yields spiking (30-year at 5.09%), per X post. Financials (XLF) and consumer stocks were hit, per web data.
Prediction for June 2025: Market Outlook and Stock Recommendations:
- Market Forecast:
  - SPY Projection: Expected to trade between $500–$530, with a base case of $510–$520, per Schwab and Morningstar. A trade deal (e.g., U.S.-China, ongoing) or strong Q1 earnings (8.1% S&P 500 growth) could push SPY to $525–$530, a 2–3% gain. Tariff escalations (July 7 pause end) or weak consumer data (May 30 PCE inflation) could drive it to $500, a 2–3% drop, per Trade That Swing.
  - Volatility: VIX likely to remain ~30–35, with potential spikes if tariffs resume, per J.P. Morgan. Historical June election-year gains (1.3% S&P 500 average) may be muted by trade uncertainty, per Forbes.
  - Economic Catalysts:
    - Trade Talks: U.S.-China negotiations (May 10–11, ongoing) and potential Canada/Japan deals could ease tariffs, lifting SPY 3–5%, per Schwab.
    - Fed Policy: The June 17–18 FOMC meeting is unlikely to cut rates (88% chance of 4.25–4.5%), but signals of future cuts could boost growth stocks, per CME FedWatch.
    - Earnings: Late Q1 reports (e.g., Costco, May 29) and early Q2 guidance (July) will shape sentiment, with 8.1% growth expected, per Fidelity.
    - Economic Data: May 30 PCE inflation and consumer confidence (May 16, 30) could sway markets. High inflation (e.g., 2.7% CPI) or low sentiment may trigger sell-offs, per NerdWallet.
- Stocks to Buy:
  - Nucor Corporation (NUE):
    - Why Buy: ~$160, yield 1.3%. Up 10% YTD, benefits from 25% steel tariffs, boosting domestic pricing, per prior analyses. Q4 2024 revenue rose 8%, per web data.
    - Rationale: Tariff-driven reshoring supports 20–30% revenue growth by 2027, per Goldman Sachs. Undervalued (forward P/E ~12), per Morningstar.
    - Risk: Steel price volatility (down 10% recently), per prior analyses.
  - Verizon Communications Inc. (VZ):
    - Why Buy: ~$43.71, yield 6.2%. Down 12% from May 2024, undervalued (forward P/E 8.8), per prior analyses. Q4 2024 added 1.7 million subscribers, per web data.
    - Rationale: Domestic focus and essential services dodge tariffs, with sustainable dividends (payout ratio ~50%), per Motley Fool. Defensive in a recession, per Morningstar.
    - Risk: High debt ($120 billion) and 5G costs, per web data.
  - Pfizer Inc. (PFE):
    - Why Buy: ~$22.11, yield 7.6%. Down 30% from May 2024, undervalued (forward P/E ~10), per prior analyses. Strong cash flow ($8 billion) supports dividends, per web data.
    - Rationale: Healthcare’s recession resistance and 108 clinical programs signal recovery by 2026, per Motley Fool. Minimal tariff impact, per web data.
    - Risk: Patent cliffs and import cost fears, per web data.
  - Vistra Corp. (VST):
    - Why Buy: ~$140, yield 2.1%. Up 261.3% from April 2024, but stable in May, per prior analyses. Q4 2024 revenue grew 15%, per web data.
    - Rationale: Tariff-immune utilities and data center demand ensure growth, per Morningstar. Defensive with upside, per web data.
    - Risk: Overvalued (165% above fair value), per Morningstar.
  - Walmart Inc. (WMT):
    - Why Buy: ~$80, yield 1%. Up 15% YTD, domestic sourcing (50%) mitigates tariffs, per prior analyses. Q4 2024 revenue rose 5%, per web data.
    - Rationale: Consumer trade-down (13% spending drop) boosts sales, per Bankrate. Stable in recessions, per Morningstar.
    - Risk: Overvalued (1-star rating), per Morningstar.
- Stocks to Hold:
  - Walgreens Boots Alliance, Inc. (WBA):
    - Why Hold: ~$9.90, yield 10.1%. Down 45% from May 2024, high yield but risky (payout ratio ~70%), per prior analyses. Turnaround struggles persist, per web data.
    - Rationale: High yield compensates for risk, but store closures and tariff costs (healthcare imports) limit upside, per Motley Fool. Hold for income, monitor Q2 2025 earnings, per Seeking Alpha.
    - Risk: Potential dividend cut if turnaround fails, per web data.
  - United Parcel Service, Inc. (UPS):
    - Why Hold: ~$34.17, yield 4.8%. Down 20% from May 2024, sustainable dividends (payout ratio ~65%), per prior analyses. Tariff disruptions and labor costs weigh, per web data.
    - Rationale: Healthcare logistics and SMB focus signal recovery by 2026, per Motley Fool. Hold for income, await trade deal relief, per Schwab.
    - Risk: Continued volume declines, per web data.
  - Kraft Heinz Company (KHC):
    - Why Hold: ~$34.04, yield 4.7%. Down 18% from May 2024, sustainable dividends (payout ratio ~60%), per prior analyses. Tariff costs on ingredients cut margins, per web data.
    - Rationale: Undervalued (forward P/E ~11) with recovery potential if trade deals ease costs, per Motley Fool. Hold for income, monitor consumer spending, per Bankrate.
    - Risk: Generic brand competition, per web data.
  - Healthpeak Properties, Inc. (DOC):
    - Why Hold: ~$20.00, yield 6%. Down 14% from May 2024, sustainable dividends (payout ratio ~65%), per prior analyses. Housing slowdown (6.65% rates) pressures REITs, per web data.
    - Rationale: Recovery potential by 2026 as rates stabilize (6.3%), per Motley Fool. Hold for income, await housing rebound, per prior housing analysis.
    - Risk: Tariff costs on construction, per web data.
  - Enbridge Inc. (ENB):
    - Why Hold: ~$48.42, yield 5.7%. Flat YTD, stable dividends (payout ratio 60–70%), per prior analyses. Energy volatility and tariff fears (pipelines) limit gains, per web data.
    - Rationale: Long-term contracts ensure cash flow, with 12% Q1 2025 FFO growth, per Motley Fool. Hold for income, monitor energy prices, per web data.
    - Risk: Regulatory shifts, per web data.
Investor Considerations:
- Market Outlook:
  - Bullish Case: Trade deals and 8.1% earnings growth could drive SPY to $525–$530 (2–3% gain), with domestic and defensive stocks outperforming, per Goldman Sachs.
  - Bearish Case: Tariff escalations or weak consumer data could push SPY to $500 (2–3% drop), with tech and retail lagging, per J.P. Morgan.
- Strategy:
  - Allocation: Allocate 5–10% to buy picks (NUE, VZ, PFE, VST, WMT) for income and growth, and hold 5–10% in WBA, UPS, KHC, DOC, ENB for dividends, per Morningstar.
  - Hedging: Add 3–5% in gold (GLD, +3%) or utilities (XLU, +1%) to counter volatility, per prior analyses.
  - Timing: Buy on dips (SPY near $500) for value, per Trade That Swing. Dollar-cost average to manage VIX spikes (~35), per Schwab.
  - Monitor: June 17–18 FOMC meeting, May 30 PCE inflation, and trade talks (U.S.-China, Canada) for market signals, per NerdWallet.
- Risks:
  - Tariff reinstatement (July 7) could trigger 5–10% SPY drops, per Schwab.
  - A 60% recession risk and rising yields (4.5–5%) may pressure cyclicals, per J.P. Morgan.
  - High valuations in defensive sectors (e.g., WMT overvalued) risk pullbacks, per Morningstar.
Why It Matters: May 2025’s stock market, down ~0.87% (SPY $513.88), was shaped by Trump’s tariffs, inflation fears, and recession risks, contrasting with May 2024’s 4.2% gain. June’s outlook hinges on trade deals and earnings, with domestic and defensive stocks (NUE, VZ, PFE) offering stability and income. In a volatile market (15.6% YTD drop), strategic buys and holds can balance risk and reward. At GLHR Investing, we’re here to guide you through this economic turbulence, optimizing your portfolio for 2025’s challenges.