Volatility Eases, but Sector Divergence Widens
Market Recap for the Week of May 11, 2025
Last week brought us a more stable stock market, with significantly less volatility than we’ve seen over the past month. The most notable economic event was the Federal Reserve’s press conference on Wednesday. During the announcement, the Fed chose to keep the federal funds rate between 4.25% and 4.50%, meaning no rate cuts for President Trump (much to his dismay).
Jerome Powell provided insight into the potential effects of the new tariffs, noting that the impact on inflation could be short-lived. However, this would depend on the size of the tariffs and how quickly they begin to affect prices. Although anecdotal, I’ve already heard from individuals about price increases and layoffs at their respective companies due to the tariffs. Looking across different sectors of the stock market, we’re seeing a wider divergence in year-to-date (YTD) performance. The top-performing sector has been Utilities, with a roughly 6.5% YTD gain, while Technology and Consumer Discretionary stocks are the worst performers—both down more than 5% YTD. The overall S&P 500 index remains negative for the year, but only by a few percentage points.
“The Fed held rates steady, easing market volatility, but tariffs are already fueling price hikes and layoffs across sectors.”
Chart of The Week
The chart of the week is one we’ve seen before, but it remains an excellent reminder—especially after a period of volatility. The black bars represent the total return for the S&P 500 index in any given year, while the red dots show the maximum intra-year decline. Take the current YTD data, which shows a red dot at -19%, meaning that at the worst point this year, stocks were down nearly 20%. In other words, a $100,000 investment in stocks would have dropped to $81,000. Yet, if the year were to end today, an investor who bought U.S. stocks at the beginning of the year would have only a 4% loss—reducing their $100,000 investment to $96,000. As the chart illustrates, intra-year declines are incredibly common, yet markets often recover to end the year with positive returns. Of course, this is not a guarantee; years like 2022, 2018, and 2008 saw declines that weren’t recovered by year-end. However, more often than not, stocks do end the year positively. In fact, despite an average intra-year drop of 14%, the market has delivered a positive annual return in 34 out of the past 45 years—about 75% of the time.
The commentary in this blog is for informational purposes only and should not be taken as personalized investment advice
Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management.
Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough during the year. For illustrative purposes only. Returns shown are calendar year returns from 1980 to 2024, over which the average annual return was 10.6%.
Guide to the Markets – U.S. Data are as of May 8, 2025.
