Investment Market update: June 2025

Find out how markets fared in May 2025 as they continued to rebound from the downturn triggered by US trade tariffs.

5 min read

Following a downturn in April triggered by the announcement of US trade tariffs, markets performed strongly across the board in May. Find out what’s behind these developments and how they could affect you.

Whilst this article primarily focuses on May 2025 market news, there are references to events and market performance from previous months.

In the US, inflation fell to 2.3% in April 2025 – its lowest level since February 2021 – down slightly from 2.4% in March. The decline was largely driven by falling energy prices¹.

Despite the ease in inflation, analysts see little chance of an interest rate cut at the Federal Reserve’s June meeting and place the odds of a July cut at less than 25%².

The US economy shrank at an annualised rate of 0.2% in Q1 of 2025³. Amid uncertainty sparked by President Donald Trump’s proposed tariffs, the US growth outlook has been downgraded to just 1.6% for 2025, down from 2.2% projected in March⁴.

After posting losses in April, the S&P 500 led global equity markets in May with a 6.3% gain, driven largely by a strong performance in the information technology sector. Despite this rebound, the index remains the weakest performer in the year-to-date, up just 1.1%⁵.

UK inflation rose to 3.5% in the 12 months to April, up from 2.6% in March. The main price increases came from housing and household services, transport, and recreation and culture, while clothing and footwear saw significant falls⁶.

The Bank of England cut the base rate from 4.5% to 4.25% in May, but it remains to be seen how they will respond to this latest rise in inflation in their upcoming June meeting⁷.

The UK economy is estimated to have grown by 0.7% in Q1 2025, up from 0.1% in the previous quarter. Growth was largely driven by a rise in the services sector and a 1.1% increase in production⁸.

In May, the UK FTSE All-Share was the weakest performer among major equity markets, gaining 4.1%, with consumer staples, healthcare, and utilities lagging behind other sectors. However, the index has grown 8.6% in the year-to-date and remains a strong performer⁹.

Europe

Eurozone inflation slowed to 1.9% in May, down from 2.2% in April. This is the first time inflation has dipped below the European Central Bank’s 2% target since September 2024, raising expectations of a cut in interest rates later this month¹⁰.

The Eurozone economy grew by 0.3% in Q1 2025, slightly below the initial 0.4% estimate but marking a fifth straight quarter of expansion. Growth was driven by stronger domestic demand due to easing inflation, lower borrowing costs, and renewed optimism following Germany’s move to lift fiscal constraints¹¹.

The MSCI Europe ex-UK Index performed well in May, rising 4.9% across the month. In the year-to-date, the index is the strongest performer of major global markets with a gain of 11.2%¹².

Asia

In China, inflation fell by 0.1% in April, matching market expectations and marking a third straight month of deflation. The decline reflects continued trade tensions with the US, weak domestic demand, and ongoing uncertainty around employment¹³.

Japan’s inflation rate held at 3.6% in April, unchanged from March and marking its lowest level since December¹⁴.

Japan’s TOPIX rose 5.1% in May, ranking as the third-best monthly performer, while the MSCI Asia ex-Japan gained 5.3%, placing second. In the year-to-date, the TOPIX has increased by 1.8%, and the MSCI Asia ex-Japan has grown by 8.1%¹⁵.

What this means for you

Global markets performed well and continued to recover after the downturn last month. This highlights the importance of maintaining a long-term focus and tuning out the noise that drives short-term fluctuations.

With inflation remaining above target levels in several regions and many central banks moving to lower interest rates, the market likely offers the best chances of keeping pace with inflation over time.

Please note: This guide is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content of this guide was accurate at the time of writing. While information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may affect the accuracy of the guide. `

Sources:

FP2025-279

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