Monday Takeaways: Best May Since 1990 – But Is This Rally Sustainable?

Shah Gilani|June 2, 2025

“Sell in May and go away”?

Not this year.

The S&P 500 just delivered its best May performance since 1990, surging 6.2% while the Nasdaq Composite exploded 9.6% higher.

But here’s what the headlines aren’t telling you…

While earnings held up “exceptionally well” and margins stayed intact, analysts are already slashing Q2 expectations. And with valuations pushing into the low 20s for the S&P 500, we’re entering rich territory.

Plus, there’s the Trump factor – his “TACO” approach to tariffs has markets on edge, even as his negotiating style prevents terrible price pass-throughs.

I’ll break down what’s really driving this rally, why Jamie Dimon’s bond market warnings might be strategic messaging, and how potential “SLR” changes could give banks a major boost.

Click on the image below to watch.

Transcript

Hey, everybody. Shah Gilani here with your Monday Takeaways. Lots of takeaways from last week, and it’s going to be an interesting week as they all seem to be. The big takeaway from last week was the end of the month.

Whatever happened to “sell in May and go away”?

So wow. Sell in May and go away. Are you kidding me? Not last month. It was the best May since 1990. It was the best monthly return, I think, since 2023. So as far as May goes, wow. Spectacular. The S&P 500 was up 6.2% for the month of May. The Nasdaq Composite was up 9.6%, hitting it out of the park. That’s off the lows from the Liberation Day tariff announcement. So will there be momentum? That’s the question. The takeaway from last week from the month ending is likely because there were probably better earnings than expected.

Margins are holding up. What I’ve seen from earnings – and we’re pretty much done for the most part – is pretty darn good. Margins are well intact. Yes, there was talk of tariffs on a lot of earnings calls, but nothing too ridiculous or frightening. Yes, there was some lack of guidance, but the companies that chose not to guide forward were actually few and far between. It’s not like half the companies, or a quarter of the companies, didn’t want to give forward guidance. A lot of them gave good, positive forward guidance.

The takeaway from the earnings picture for the first quarter is earnings held up really well – exceptionally well, I would say. Does that justify the valuation stocks are looking at? Because we’re getting up into the low 20s as far as the S&P 500 goes. Kind of rich, given the fact that analysts are now cutting earnings expectations for Q2, which is something they often do, especially trying to anticipate maybe there’s going to be some reaction to the tariffs. There are going to be higher prices, but who knows what they are thinking – probably a lot of different things. So they start to cut earnings because of the impact from higher tariffs or, I guess, reduced earnings because people aren’t spending because things maybe cost more. Well, analysts are trying to figure this out, trying to game out what it is. They’re talking to the companies. They’re talking to management, and they may be being guided a little cautiously. So they’re cutting their estimates for Q2 earnings.

We know what that is. That’s an easy hurdle for companies to get over, which means if they beat, then the stocks have a nice little pop. So things aren’t bad. The takeaways from last week were we saw what the president had to deal with in terms of being actually confronted with “TACO.”

Trump always chickens out. He didn’t like that. But it’s what’s happened, at least as far as perception goes. You know, he puts on some hard tariffs, then he walks them back. He puts on some hard tariffs, then he takes them off. He puts on some hard tariffs across the board, and then he’s got to pause everything for 90 days. He puts on tariffs on the U.K. at 50%, and then he’s got to pull that back. So there’s a lot of back and forth.

Is it “TACO”? Is it “Trump always chickens out”? No. I think it’s just his negotiating style, and you can’t really fault it because we’re not seeing a terrible pass-through of higher prices. Countries do want to come to the table and try to negotiate. We don’t have any big framework out there yet. We don’t have any baseline for what could result in what could be a good trade agreement that maybe we can use to go to other countries and say, “Well, how about this?” The idea, of course, is free trade for everybody. Good luck with that.

Earnings, again, really good. The month, really good. It was a mixed bag as far as money flows into funds. Money came out of mutual funds, money into ETFs. Net-net was pretty thin on the month – net-net probably less than $2 billion coming in because a lot of money came out of mutual funds. Going into U.S. equities, going into international equities, U.S. equity is still a little bit behind international equities, but not by much.

Trump met with Powell last week. There was no real takeaway from there. I think it was just sort of a sit-down to let him know – let Powell know that, “Yeah, yeah, I’m the boss.” But Powell probably winked and said, “Yeah. Sure you are, but not of me.” Nothing going on there. Nothing burger as far as the Fed basically came out and said, “We were going to do what we have to do. We’re data dependent. That’s what we do. And we’re not only data dependent. We are independent.” So nothing burger.

But can’t blame the president for trying. Many of them have.

One thing that was a bit worrisome – at least I got a bunch of calls from friends: “What did you think of Jamie Dimon on this interview?” And he was very negative talking about an accident going to happen in the bond market. He called it a crack. He was worried about cracks in the bond market.

Let me say this about that. Jamie Dimon – unbelievable banker, runs the biggest bank in the United States, I think, exceptionally well. He’s made a lot of prognostications, most of which have not come true. One of his – I think his way of playing his own management teams is to give them something to worry about. So they’re cautious. He’d rather be cautious than, like, “OK. Everything is great.” And then they go to town and take maybe too many risks.

This is partly a message: “I’m the boss here, and you better understand that I’m worried. So you better manage your different trading desks, your books, your business in such a way that if there’s something going to happen, you were prepared for it because you know the boss says he’s worried.” Smart. Then again, he’s Jamie Dimon. He’s always been smart in my book way back. Followed his career from way, way back.

So not worried about that.

Really, that’s it. One of the things going forward – positive, I think – is we’re going to see there’s probably going to be a change in SLR, the supplementary leverage ratio, which forces banks to set aside more capital for government securities. They’re supposedly risk-free, folks. They’re risk-free in name only. They’re not risk-free. We see that they’re not risk-free because when prices go down, yields go up. There are losses in portfolios that hold governments. They’re not risk-free. They’re risk-free in terms of credit quality, supposedly. Yes, we got downgraded by Moody’s last month. No big deal. They were a decade late in downgrading it after S&P. But the government bond yield curve, the spectrum of government bonds, are not risk-free. There is interest rate risk. There’s price risk.

It’s just about quality when we’re talking about risk-free. The SLR necessitates the banks hold additional capital against governments. Well, Jamie Dimon and all the bankers want that reduced drastically, and I think Scott Bessent, the Treasury secretary, is in line with that. He’s going to do that, and that’s going to give banks probably a little bit of a boost. Things look good. I think now we’re going to start to see stuff like the SLR get pared back. In other words, deregulation is probably going to start to take root. We got tariffs, and now we got the big beautiful bill. Now it’s time for deregulation to start percolating up. Markets are going to like that.

So far so good. It’s going to be an interesting week because we got some interesting statistics. At the end of the month, we got payrolls at the end of the week. Starting off the week, futures are down a little bit, but they’ve had a heck of a run. Things don’t go up parabolically.

Go make yourself some money out there. Cheers.