“Climb the mountain not to plant a flag, but to embrace the challenge” – David McCullough Jr (American
historian)
A well-known and widely referenced axiom has it that one should sell in May and go away. This particular piece of stock market folklore has its roots in the historically observed phenomenon in which superior returns are (or were) achieved during the early and later months of the year, leaving the torpid summer months free for holidays and seasonal festivities. Empirical evidence suggests otherwise, and May 2025 has lived up to the contrarian thesis. After suffering an early April plunge in knee-jerk response to confrontational US trade policy, the stock market swiftly recovered its footing once it was confirmed that hostile tariff implementation would be delayed allowing time for negotiation. April’s aggressive rebound has carried over into May, as stocks climbed the equally axiomatic “wall of worry” in the face of unrelenting uncertainty. By the month’s end the UK’s benchmark index of leading 100 companies had recovered sufficiently to close in on its 3rd March all-time high.
Gains were not confined to the UK, stock markets around the world made strong headway as it was confirmed, first that UK negotiators and US counterparts had struck a deal, even if the exact terms are still being worked on. This was followed by an even more far-reaching truce with China and President Trump’s ensuing trip to Middle Eastern Gulf states which yielded numerous and highly valuable deals. Yet throughout the month the uncertainty prevailed. A 90-day deadline extension hardly feels long enough for the US administration to secure highly complex arrangements with key trading partners including the EU and near neighbour Canada. Throughout a month punctuated by trade policy flip-flops, investors stoically held the line in anticipation that the “TACO President” (Trump Always Chickens Out) might be forced into a further relent as deadlines approached.
Just as market pricing adjusted to expectations for an uneasy but ultimately favourable trade war outcome, the little-known Federal Court of International Trade (CIT), located in Manhattan, New York stunned everybody by ruling in favour of a legal action brought by small American businesses claiming that operations had been severely harmed by tariffs. The decision to declare most, if not all, tariff policy illegal brought an immediate appeal from the US administration which has been upheld for sufficient time to allow the Supreme Court to adjudicate so, for now, we’re back to square one. Furthermore, there exist alternative workaround solutions, including on specific products and / or sectors to ensure trade policy sticks rendering the CIT’s ruling superfluous.
Another potential option open to the US administration, in the event of an adverse legal ruling, might be to try and persuade Congress to pass legislation enshrining tariff adjustments into law. However, the Republican Party’s majority is extremely slender in both the upper and lower houses (and some Republicans are known to oppose the administration’s trade policy), so this would be no easy task. A task made all the harder by the Trump administration’s desire to drive its keynote reconciliation legislation (“One Big, Beautiful Bill”) onto the statute book. While stock markets have soared, government bond markets have enjoyed no such recovery. Long-term borrowing costs have risen sharply, including in the US, in response to fears over rising national debt levels, a perturbing trend likely exacerbated in the near-term by the Trump-inspired legislation.
Persistent uncertainty makes central banks’ monetary policy decisions extremely difficult. Household and business confidence has been rattled and whilst a popular decision, cutting interest rates while the future is unclear is a risky business for rate-setters not predisposed to a lack of caution. The Bank of England has cut the UK base rate again, from 4.5% to 4.25% but accompanied the decision with a strong hint that it is in no tearing hurry to accelerate the process. The outlook for the UK (and global) economy Is “unpredictable”, it said, and any future rate cuts will be “gradual and careful”. For financial markets, which typically try to price now for future conditions, the “jam tomorrow” promise of lower interest rates in the future is even more beguiling than “jam today”. The European Central Bank and its US counterpart the Federal Reserve are equally well versed with this familiar script, and both are thought likely to ease borrowing conditions again in coming months.
In the light of the above Raymond James remains constructive on prospects for favourable returns from financial assets even if the immediate future is shrouded in uncertainty. The best way of protecting what one has from risks, both systemic and idiosyncratic, is to build broadly diversified investment portfolios that can withstand the test of time whilst simultaneously providing a handy income stream. It was reported recently that Kami Rita Sherpa has summited Mount Everest for an extraordinary and record-breaking 31st time during the spring ascent season. Our wealth managers share the same experience and commitment, with just as great a focus on the relationship between risk and reward. Entrusting the team to be your sherpas will prove essential as we pick our way through the numerous challenges that lie ahead.
The information contained in this article is for general consideration only and any opinion or forecast reflects the judgment of the Research Department of Raymond James & Associates, Inc. as at the date of issue and is subject to change without notice. Past performance is not a reliable indicator of future results.
You should not take, or refrain from taking, action based on its content and no part of this article should be relied upon or construed as any form of advice or personal recommendation. The research and analysis in this article have been procured, and may have been acted upon, by Raymond James and connected companies for their own purposes, and the results are being made available to you on this understanding.
Neither Raymond James nor any connected company accepts responsibility for any direct or indirect or consequential loss suffered by you or any other person as a result of your acting, or deciding not to act, in reliance upon such research and analysis. If you are unsure or need clarity upon any of the information covered in this article, please contact your wealth manager.
Black MondayOn 19 October 1987, the stock markets experienced a dramatic plunge that prompted many firms to shut down their trading desks and turn off their phones to minimize internal losses. Raymond James refused to do the same. Our desks stayed open to help meet clients’ needs, resulting in our first and only unprofitable quarter since the firm went public in 1983. |
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Who was Raymond James?The Raymond in our name is actually from Edward Raymond, owner of a 15-employee mutual fund sales group, Raymond and Associates, along Florida’s west coast. He sold his company to Bob James on 15 July 1964, on condition that the surviving firm be called Raymond, James & Associates. Three days after the sale, Ed Raymond was involved in a near-fatal automobile accident and never joined the firm. Nonetheless, even after Raymond had passed away, Bob James insisted that his name remain on the door – ahead of James’ own. That was a promise he made to Ed Raymond three days before the accident, and Bob James was a man who kept his promises. |
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Bear market of 1974The severe bear market of 1974 threatened the existence of Raymond James, which was bleeding capital by the day. Tom James, his father and other leaders took extreme measures to keep the firm afloat, slashing costs, forgoing pay checks and even attempting to sell the firm for just enough capital to protect client assets and retain as many associates as possible. The story could have ended very differently if not for a sharp upturn and continued rebound in the stock markets late in the year. |
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Taking Raymond James PublicWhen consideration was being given to taking Raymond James public, Tom James penned a letter to shareholders (largely employees at the time). ” … the public offering should be considered as a statement of our independence. While this is a psychological rather than an economic rationale, it is nonetheless very important. We have asserted for some time that we are not interested in becoming a small part of a very large corporation. That assertion results mainly from the inclinations of management rather than the economic benefits associated with either alternative. The public stock offering affords us the opportunity to enjoy a little bit of the best of both worlds. While shareholders will be given liquidity at fair market value, we will still have the ability to control our own destiny.” After 40+ years of Tom’s leadership, upon becoming CEO, Paul Reilly was often questioned about whether the company might ultimately surrender its cherished independence and be acquired by some larger entity. His response: “Not while I’m around.” It’s a theme that continues today. |
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