Weekly Buzz: Why a $34 billion tariff hit couldn’t stop the S&P 500 last month 💪

5 minute read

How did markets manage to stay so calm in May? Despite the trade spats and tariff flip-flops, the S&P 500 gained 6.2% – its best month since November 2023. Here's a closer look at why.

What’s going on?

First off, this is a quick guide to what's happened over the past two weeks:

Traders have coined a new term for the zeitgeist: TACO – "Trump Always Chickens Out". While the term is cheeky, it captures what looks like a pattern: big threats, initial panic, then watered-down or reversed policies and market recovery. Where previous announcements might have triggered large selloffs, we’re seeing increasingly muted reactions as traders bet on reversals.

Case in point: April's "Liberation Day" tariffs sent the S&P 500 plummeting. Seven days later, when Trump announced a 90-day pause on most tariffs, markets saw a historic 9.5% surge – the largest single-day gain since 2008. And despite last week's policy drama, the S&P 500 gained 6.2% in May – its best month since November 2023.

Yet companies are feeling the squeeze – a Reuters analysis shows tariffs have already cost businesses more than US$34 billion in lost sales and higher costs.

So why are markets shrugging it off? Setting TACO aside, the answer also goes back to the fundamentals: corporate earnings. American companies reported profit growth of 13% compared to the same quarter last year. Standouts like Nvidia, whose recent earnings exceeded expectations, remind us that beneath the policy noise, businesses are still growing and innovating.

What's the takeaway?

While flip-flopping policies might frustrate traders trying to time the market, long-term investors have a simpler solution: use volatility as opportunity. Dollar-cost averaging – investing regularly regardless of headlines – naturally buys more when prices dip on short-term scares.

(For a globally diversified portfolio that’s designed for the long term, check out General Investing.)

💡 Investors’ Corner: Emerging markets aren't just growth stories anymore

Emerging markets have long been synonymous with high growth and volatility. But there's a quieter shift happening: these markets are becoming serious income generators too.

The numbers tell the story: around 85% of emerging market firms now pay dividends regularly – matching their developed market cousins. Nearly 40% of these companies offer dividend yields above 3%. Since the early 2000s, their dividends have grown at around 12% annually – far outpacing developed markets.

With better corporate governance and stronger balance sheets, firms that once reinvested every cent into expansion now trend towards returning their excess cash to shareholders. 

Emerging markets are just that – emerging, and evolving over time. But this shift challenges the old either-or thinking: growth versus income, developed versus emerging. A wider view of global markets shows that diversification isn't just about spreading risk across regions – it's also about capturing returns.

(Looking for an easy way to invest in emerging markets? Check out our Flexible Portfolios.)

These articles were written in collaboration with Finimize.

🎓 Simply Finance: Emerging markets

Emerging markets are economies that sit between developing and developed status – think China, India, or Brazil. These markets can offer higher growth as their economies expand, but they may also come with increased volatility due to political shifts, currency swings, and evolving institutions.

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