4 ETF Areas Up At Least 25% in May

The market rebounded strongly in May, reversing April losses, driven by easing trade tensions (tariffs reduced from 145% to 30% on Chinese goods and 50% tariff hike on EU goods postponed), resilient economic data (CPI rising just 2.3% year over year and 177,000 jobs added), and robust tech earnings (S&P 500 companies showing an 11.4% increase in profits). The S&P 500 gained about 4%, the Dow Jones 2.3%, the Nasdaq 6.3%, and the Russell 2000 2.3%; however, the S&P 500 is now trading at over 22 times projected 2025 earnings, and uncertainty around tariff policies persists, creating potential risks.

Analysis

Wall Street experienced a significant recovery in May, with the S&P 500 adding approximately 4%, the Dow Jones 2.3%, the Nasdaq 6.3%, and the Russell 2000 2.3%, reversing April's tariff-induced losses and delivering the S&P 500's strongest post-pullback returns in over three decades. This rally was fueled by easing trade tensions, evidenced by the U.S. temporarily reducing tariffs on Chinese goods from 145% to 30% and China lowering retaliatory duties from 125% to 10% for a 90-day period, coupled with President Trump postponing a 50% tariff hike on EU goods. Resilient economic data further supported sentiment, with May consumer confidence improving, April's CPI rising just 2.3% year-over-year (the lowest since February 2021), and the economy adding 177,000 jobs in May while unemployment held at 4.2%. Strong first-quarter earnings also played a crucial role, with 477 S&P 500 companies reporting an 11.4% increase in profits and a 4.4% rise in revenues; notably, 74.2% exceeded EPS expectations, and the technology sector showed particular strength with revenue beats surpassing the five-year average. Despite these positive developments, risks persist, primarily from uncertainty over U.S. tariff policies and elevated market valuations, as the S&P 500 now trades at over 22 times projected 2025 earnings. The rally saw broad participation, with standout performances from ETFs in semiconductors like SPCY (up 42.6%) and LAYS (up 37.4%), Ethereum-linked ETFs such as ETHW and ETHV (both up 39.6%), income-focused funds like CVNY (up 28.5% with a 32.30% annual yield but 99 bps fee), and the Global X Uranium ETF (URA, up 26.5%).

Key Decisions for Investors

• While the market's May rally, driven by positive trade news, strong economic data, and robust tech earnings, has been rewarding, investors should remain mindful of the S&P 500's elevated valuation at over 22 times projected 2025 earnings, which may require sustained positive catalysts.
• Closely monitor U.S. trade policy developments, as the temporary nature of current tariff reductions on Chinese goods and the postponed EU tariffs introduce an element of uncertainty that could trigger future market volatility.
• Consider strategic allocations to outperforming sectors such as technology, particularly semiconductors (driven by firms like NVDA, AMD, and SMCI), and thematic areas like Ethereum (ETHW, ETHV) and uranium (URA), while carefully evaluating the specific risk-reward profiles of high-yield instruments like the CVNY ETF, noting its 32.30% yield is accompanied by a 0.99% expense ratio and concentration risk in underlying assets like CVNA.
• Maintain vigilance on key economic indicators like CPI inflation, employment figures, and consumer confidence, as their continued strength is crucial for supporting the prevailing market sentiment and underpinning the narrative of economic resilience.