Executive Summary

Global financial markets recovered strongly during May 2025 as trade tensions between the United States and China eased, corporate earnings remained resilient and investors reduced expectations of an immediate global recession. The improvement followed the exceptional volatility generated by April's reciprocal-tariff announcements.

The United States and China agreed to suspend most of their newly imposed tariffs for 90 days following negotiations in Geneva. The United States reduced its additional tariff on many Chinese goods from 145% to 30%, while China lowered its corresponding rate on US imports from 125% to 10%.

The agreement did not resolve the broader trade dispute, but it substantially reduced the immediate threat to international commerce. Companies gained additional time to adjust inventories, negotiate contracts and reconsider supply-chain arrangements.

US equities rallied sharply. The S&P 500 recorded its strongest monthly gain since November 2023, while the Nasdaq Composite rose even more strongly as semiconductor, cloud-computing and artificial-intelligence companies recovered from their April lows.

The Federal Reserve maintained its target range at 4.25%–4.50%. Policymakers stated that uncertainty surrounding the economic outlook had increased and that the risks of both higher unemployment and higher inflation had risen.

The Bank of England reduced Bank Rate from 4.50% to 4.25%. The vote revealed considerable disagreement, with some policymakers preferring a larger reduction and others supporting no change.

The European Central Bank did not hold a monetary-policy meeting during May. Markets continued to anticipate another reduction in June as eurozone inflation moderated and trade uncertainty affected regional growth.

Government bonds generally weakened as recession concern declined. US Treasury yields also responded to continued fiscal borrowing and the downgrade of the United States sovereign credit rating by Moody's.

Bitcoin reached a new record above $110,000 as institutional fund inflows, improving risk appetite and expectations of supportive US regulation strengthened demand. Gold retreated from April's record as investors returned to equities and other risk assets.

Key Themes During May

• The United States and China agreed to a 90-day tariff suspension.
• US and global equities recovered strongly.
• Technology and semiconductor shares regained market leadership.
• The Federal Reserve held rates at 4.25%–4.50%.
• The Bank of England reduced Bank Rate to 4.25%.
• Government bond yields rose as recession fears eased.
• Moody's downgraded the United States sovereign credit rating.
• European defence and infrastructure investment remained important themes.
• Bitcoin reached a new record above $110,000.
• Private-market transaction confidence improved.

Global Economic Overview

The global outlook improved during May as the immediate risk of a severe US–China trade disruption declined. Nevertheless, tariffs remained substantially higher than at the beginning of 2025, and businesses continued to face uncertainty about the arrangements that would apply after the temporary pause.

United States

US economic data remained mixed but broadly consistent with continued expansion. Consumer spending and service activity remained resilient, while business surveys reflected uncertainty surrounding tariffs, federal policy and future input costs.

The labour market continued to generate employment, although hiring had moderated from the exceptional pace recorded earlier in the economic cycle. Household expectations for inflation remained elevated because of concern about tariffs and prices.

Federal Reserve

The Federal Reserve maintained its policy range at 4.25%–4.50% at its 6–7 May meeting. The decision was unanimous.

Policymakers stated that the economy continued to expand at a solid pace and that unemployment remained low. However, they noted that uncertainty had increased and that the risks of higher inflation and higher unemployment had both risen.

Chair Jerome Powell explained that the Federal Reserve was well positioned to wait for greater clarity before changing rates. The trade environment created conflicting risks that made immediate action difficult to justify.

US–China Trade Agreement

The temporary Geneva agreement reduced the effective tariff burden between the two economies and created a negotiating period of approximately three months.

The agreement improved financial conditions and reduced the likelihood of immediate shortages or severe disruption. However, the remaining tariffs were still considerably higher than those in place before the 2025 escalation.

Strategic disputes involving semiconductors, critical minerals, industrial subsidies and national security remained unresolved.

US Fiscal Outlook

Congress continued debating a major tax and spending package. Investors assessed whether extended tax reductions and additional expenditure would increase already substantial federal deficits.

Moody's removed the United States from its highest sovereign-credit category, citing persistent deficits and rising interest costs. The downgrade reinforced concerns about Treasury issuance and long-term borrowing costs.

Eurozone

Eurozone growth remained modest. Lower interest rates and improving real wages provided support, while tariffs and subdued manufacturing limited momentum.

Inflation continued moving towards the European Central Bank's target, strengthening expectations of another policy reduction in June.

Germany

Friedrich Merz became German chancellor following the formation of a coalition government. The new administration inherited an economy affected by weak industrial activity, high energy costs and limited investment.

Germany's approved infrastructure and defence programmes improved the medium-term outlook for construction, engineering, transport and military suppliers.

United Kingdom

The Bank of England reduced Bank Rate from 4.50% to 4.25%. Five Monetary Policy Committee members supported the quarter-point reduction, two favoured a larger half-point move and two preferred no change.

The divided vote demonstrated uncertainty about the outlook. Global tariffs threatened growth, while domestic wages, regulated prices and higher employer taxes continued to create inflation pressure.

Japan

The Bank of Japan maintained its short-term policy rate near 0.5%. Officials reduced growth projections as US tariffs created risks for exports and industrial production.

Wage growth and domestic inflation continued to support eventual normalisation, but trade uncertainty reduced the urgency of another increase.

China

China's economy benefited from the tariff pause, but property weakness and subdued household demand remained significant challenges.

Authorities reduced selected interest rates and reserve requirements to support credit and domestic activity. Policymakers also continued programmes designed to stabilise housing and encourage consumption.

Global Outlook

The tariff suspension reduced immediate recession risk but did not restore the pre-2025 trading environment. Businesses continued to delay some investment until future tariff levels became clearer.

Government borrowing, geopolitical conflict and fragmented trade policy remained important threats to inflation and financial stability.

Equity Markets

Global equities advanced strongly during May as the tariff pause reduced recession fears and encouraged investors to rebuild positions in technology, industrial and consumer companies.

United States

The S&P 500 gained approximately 6%, while the Nasdaq Composite rose by around 9.5%. The Dow Jones Industrial Average also advanced, although its lower technology weighting limited its relative performance.

The rally reversed the losses recorded during March and April. Technology, communication services, consumer discretionary and industrial companies were among the strongest performers.

Technology and Semiconductors

Semiconductor shares recovered as the US–China tariff pause reduced concern about an immediate collapse in global trade. Strong corporate earnings also confirmed continued demand for artificial-intelligence infrastructure.

Nvidia reported another substantial increase in data-centre revenue. The company continued to face restrictions affecting sales to China and recognised costs connected with limits on the export of selected processors.

Cloud providers maintained large capital-expenditure programmes covering processors, data centres, networking, cooling and electricity infrastructure.

Financials

Banks and investment firms advanced as recession risk declined and expectations of stronger transaction activity improved. Higher long-term yields offered potential support to lending margins.

The fiscal outlook and commercial-property exposure remained sources of caution.

Consumer Discretionary

Consumer companies recovered as the tariff pause reduced the likelihood of immediate price increases and product shortages. Retailers continued diversifying suppliers and accelerating inventory where possible.

Europe

European equities advanced more moderately than US markets. Banks, defence contractors and industrial businesses remained supported by earnings and expectations of fiscal investment.

Exporters benefited from reduced trade tension but continued to face uncertainty regarding future US tariffs.

United Kingdom

UK equities produced positive returns. The Bank of England's rate reduction supported domestic companies, while financials and industrial groups benefited from improved global sentiment.

Higher employment taxes remained a challenge for retailers, hospitality businesses and other labour-intensive sectors.

Japan

Japanese equities recovered as tariff fears eased and the yen weakened. Automobile and technology exporters regained part of their April losses.

China and Hong Kong

Chinese and Hong Kong equities advanced following the tariff agreement. Technology platforms, consumer businesses and exporters benefited from reduced near-term uncertainty.

Property developers remained constrained by weak sales, excess inventory and limited household confidence.

Emerging Markets

Emerging-market equities generally advanced as global risk appetite improved. Asian exporters benefited particularly from the reduction in immediate trade pressure.

Indicative May Performance

Fixed Income Markets

Sovereign bonds generally weakened during May as the tariff pause reduced recession expectations. Fiscal borrowing and sovereign-credit concerns also placed upward pressure on long-term yields.

US Treasuries

The 10-year Treasury yield rose during May as investors reduced expectations of near-term Federal Reserve cuts. Stronger risk appetite and concern about government deficits added to the increase.

Longer maturities were affected by the Moody's downgrade and congressional debate over tax and spending legislation.

European Government Bonds

German Bund yields increased as investors anticipated substantial defence and infrastructure borrowing. Expectations of another ECB cut limited the rise among shorter maturities.

UK Gilts

UK gilts produced mixed returns following the Bank of England's reduction. The divided vote and persistent inflation reduced expectations of rapid additional easing.

Japanese Government Bonds

Japanese yields remained elevated as markets continued to anticipate gradual Bank of Japan normalisation, although trade risks delayed expectations of the next increase.

Corporate Credit

Investment-grade and high-yield credit rallied as spreads narrowed. The improved trade outlook reduced expected default risk and reopened financing markets.

Private Credit

Private-credit activity improved as sponsors resumed transactions paused during April. Direct lenders continued to offer execution certainty while syndicated markets recovered.

Borrowers remained exposed to high base rates, and underwriting continued to require downside scenarios for renewed tariff escalation.

Foreign Exchange

Currency performance reflected improved risk appetite, shifting rate expectations and continued concern about US fiscal policy.

US Dollar

The dollar stabilised after its April decline but remained below its early-year highs. Reduced recession risk provided support, while fiscal and sovereign-credit concerns limited gains.

Euro

The euro remained comparatively firm despite expectations of another ECB cut. German fiscal expansion and the dollar's weaker structural tone provided support.

Sterling

Sterling traded firmly against the dollar even after the Bank of England reduced rates. The divided policy vote indicated that future easing could remain gradual.

Japanese Yen

The yen weakened as risk appetite recovered and expectations of an immediate Bank of Japan increase declined.

Chinese Renminbi

The renminbi strengthened modestly following the trade agreement. Domestic rate reductions and continuing economic support limited the advance.

Commodities

Commodity markets produced mixed returns as improved trade sentiment supported industrial demand while increased oil supply expectations weighed on energy.

Oil and Energy

Oil prices recovered from their early-May lows but remained under pressure. OPEC+ continued accelerating the return of production, while demand forecasts remained uncertain.

Gold

Gold declined from April's record as investors returned to equities and the immediate demand for defensive assets moderated.

Central-bank buying, government debt and geopolitical uncertainty continued to support the longer-term outlook.

Copper and Industrial Metals

Copper recovered as the tariff truce improved expectations for manufacturing and trade. Long-term demand remained connected to electricity, renewable energy and data centres.

Iron Ore

Iron ore remained constrained by weak Chinese property activity despite broader economic support.

Agricultural Commodities

Agricultural markets remained sensitive to tariffs, weather and export conditions. Soybeans and other US products faced continuing uncertainty regarding Chinese demand.

Digital Assets

Digital assets advanced strongly during May as improving risk appetite, institutional inflows and regulatory developments supported demand.

Bitcoin

Bitcoin reached a new record above $110,000. Spot ETF inflows and demand from corporate and institutional investors contributed to the advance.

The asset increasingly traded as a high-liquidity global risk investment while also attracting interest as an alternative to sovereign currencies and debt.

Ethereum

Ether advanced as investors anticipated network improvements and a more favourable US regulatory environment. Performance nevertheless remained below Bitcoin over longer periods.

Institutional Adoption

Public companies continued exploring Bitcoin treasury strategies, while banks and asset managers expanded custody and tokenisation services.

Risk Considerations

• Prices remained sensitive to global liquidity and risk appetite.
• Corporate treasury demand could reverse during market stress.
• ETF flows remained concentrated among a limited number of products.
• Leverage increased as prices reached new records.
• International regulation remained inconsistent.

Private Equity

Private-equity sentiment improved as public markets recovered and the tariff pause created greater confidence in corporate forecasts and financing.

Deal Activity

Sponsors resumed selected transactions postponed during April. Healthcare, domestic services, software, infrastructure and specialist manufacturing remained active sectors.

Financing

Syndicated lending and high-yield markets reopened more fully as credit spreads narrowed. Private lenders remained competitive for complex or time-sensitive deals.

Higher long-term government yields limited the overall improvement in acquisition-financing costs.

Supply-Chain Analysis

The tariff pause did not eliminate the need for detailed supply-chain due diligence. Investors continued to assess product origin, alternative suppliers and the ability to pass increased costs to customers.

Exits

Recovering equity markets improved the IPO outlook. Trade sales and sponsor-to-sponsor transactions also became more achievable as valuation confidence returned.

Secondaries

Secondary activity remained strong. April's volatility created opportunities to acquire mature fund interests and continuation assets at more attractive prices.

CE Global Private Equity Observations

• The tariff pause restored some transaction confidence.
• Supply-chain resilience remained central to underwriting.
• Public-credit markets became more accessible.
• Higher long-term yields limited financing relief.
• Improved public markets supported exit preparation.

Artificial Intelligence & Technology

Technology shares recovered during May as strong earnings and reduced trade tension restored confidence in artificial-intelligence investment.

Semiconductors

Advanced processor demand remained strong, although export restrictions continued to affect sales to China. Manufacturers adapted products and supply chains to changing rules.

Cloud Computing

Cloud providers maintained substantial capital-expenditure plans. Demand remained strong for computing, data-management and generative-AI services.

Enterprise Adoption

Businesses expanded practical applications involving coding, customer support, marketing and research. Lower-cost models improved the potential return on implementation.

Data Centres and Electricity

Power availability, grid connections and equipment supply remained important constraints. Utilities and infrastructure providers continued revising investment plans to accommodate data-centre demand.

Technology Risks

• US–China technology restrictions remained unresolved.
• Tariffs could return after the negotiating period.
• Capital expenditure remained exceptionally high.
• Model efficiency could change processor-demand forecasts.
• Electricity and planning constraints could delay projects.

Sector Spotlight

Corporate and Sovereign Debt Management

May's sector spotlight examines debt-management services following the US sovereign-rating downgrade and renewed concern about refinancing costs.

Corporate Refinancing

Companies continued replacing debt issued during the low-rate period with more expensive facilities. Treasury and risk-management teams sought to extend maturities and diversify funding sources.

Interest-Rate Hedging

Volatile yields increased demand for swaps, caps and other instruments designed to manage borrowing costs. Hedging strategy required careful treatment of collateral and counterparty exposure.

Private Credit Solutions

Private lenders provided unitranche loans, asset-backed finance and structured capital where conventional bank or bond financing was less suitable.

Liability Management

Highly leveraged companies increasingly used exchange offers, maturity extensions and preferred equity to address near-term obligations.

Private-Market Opportunities

• Debt advisory services
• Treasury-management software
• Asset-backed lending
• Private-credit servicing
• Restructuring and turnaround advice
• Interest-rate-risk technology

Investment Perspective

Higher and more volatile borrowing costs increased demand for specialised debt-management expertise. The strongest providers combined technical capability, trusted relationships and recurring client needs.

Regulatory Update

Regulatory activity during May focused on trade negotiations, fiscal policy, digital assets and artificial intelligence.

US–China Trade Negotiations

Businesses needed to distinguish temporary tariff reductions from permanent policy changes. Customs documentation and country-of-origin controls remained essential.

Technology Export Controls

Restrictions affecting advanced processors and semiconductor technology continued to evolve. Companies required detailed end-user and destination screening.

Digital Assets

US lawmakers continued considering stablecoin and market-structure legislation. Financial institutions prepared for clearer rules while maintaining existing custody and compliance controls.

Artificial Intelligence

International companies continued implementing European AI obligations while monitoring changes to federal policy in the United States.

Private Markets

Managers needed to ensure that valuation recoveries reflected genuine improvement rather than temporary public-market volatility.

Compliance Priorities

• Monitor the expiry and negotiation of tariff suspensions.
• Maintain accurate customs and origin documentation.
• Review semiconductor export-control exposure.
• Prepare for developing digital-asset legislation.
• Continue staged EU AI Act implementation.
• Apply consistent private-asset valuation governance.

Looking Ahead

Markets entered June with improved risk appetite but continued uncertainty regarding trade negotiations, government borrowing and central-bank policy.

US–China Negotiations

Investors would monitor whether the 90-day pause produced a lasting trade arrangement. Technology controls and critical-mineral access remained difficult areas.

Federal Reserve

The Federal Reserve was expected to maintain rates in June. Updated projections would indicate whether officials still anticipated reductions during 2025.

European Central Bank

The ECB was expected to deliver another quarter-point cut in June. Markets would focus on whether policy had reached a neutral level.

Bank of England

The Bank of England was expected to proceed cautiously after May's divided decision. Wage growth, inflation and tariff developments would determine the next move.

US Fiscal Policy

Congressional negotiations over tax and spending legislation would affect deficit projections and Treasury yields.

Corporate Earnings

Companies would continue updating tariff estimates, sourcing plans and capital expenditure. Technology businesses would face continuing scrutiny of AI returns.

Digital Assets

Bitcoin's record increased institutional interest but also raised the probability of profit-taking and leveraged volatility.

Private Markets

Improved financing and public valuations could support transactions and exits. Investors would continue requiring conservative assumptions around tariffs and interest rates.

CE Global Private Equity Perspective

May demonstrated that policy de-escalation could reverse market losses rapidly. However, a temporary tariff pause should not be mistaken for a permanent return to stable global trade.

Businesses with diversified suppliers, recurring revenue and strong balance sheets remained best positioned. Companies requiring constant refinancing or depending upon a single import route remained vulnerable.

CE Global Private Equity believes that opportunities remain across debt-management services, efficient technology, healthcare, domestic infrastructure and supply-chain solutions.

Disciplined valuations, moderate leverage and liquidity remain essential while negotiations and fiscal policy continue to influence markets.

This market review is provided for general information and discussion purposes only. It does not constitute investment, legal, tax or other professional advice, nor an offer or solicitation to purchase or sell any security, financial instrument or investment product. Market values can rise or fall, and past performance is not a reliable indicator of future results.