ICM Monthly Outlook - May 2025

Equity markets have continued their snapback since our last update. The U.S. equity market has recovered all ground since April 2nd, boosted by the capitulation on tariffs, solid earnings in Q1 2025, and better-than-expected jobs numbers. Since their lows on April 8, the S&P 500 has risen 18% and the NASDAQ has increased by 24%. Year to date, U.S. equity markets have returned to positive territory. Our central-case scenario is for the U.S. to avoid a recession this year, despite the dent in confidence suffered by some investors caused by President Trump’s policies.

We believe that the extent of the rally in equities and the inconsequential widening of credit spreads suggest that most investors do not expect a recession either. We anticipate that global GDP will kick-on based on fiscal expansion in Europe, the subsidence of tariff risk, a strong pipeline of new orders after the U.S. inveigled trade partners into larger deals than would have been on the table, and a rebound in consumer confidence. We expect to see a plethora of upward revisions to global GDP growth forecasts.

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