May Market Insights: Seasonality, Tariffs, and Interest Rates — Oh My!

Enje Harden
May 8
3 min read

Hello investors,

As we step into May, it’s a great time to pause and reflect on the market forces shaping the current investment landscape. Whether you're a seasoned investor or just getting started, understanding why the market behaves the way it does helps you become a more confident, intentional participant.

Let’s explore three key factors affecting the markets this month: seasonality, tariffs, and interest rates—plus a simple story to make sense of it all.

🌤 Seasonality: The “Sell in May” Effect?

You may have heard the old Wall Street adage: “Sell in May and go away.” While it’s not a hard rule, data shows that markets historically tend to slow down during the summer months. This is partly due to reduced trading volume as institutional investors take vacations and quarterly earnings announcements ease up.

For long-term investors, seasonality shouldn’t dictate knee-jerk decisions—but it can be a useful lens. This is a good time to check your portfolio allocations, rebalance if needed, and be patient while the summer months unfold.

🏗 Tariffs Still Matter: The Slow Burn on Businesses

The U.S. has continued to impose and adjust tariffs on goods from key trade partners, notably China. Recently, the Biden administration reaffirmed several Trump-era tariffs while exploring additional duties on electric vehicles and green tech imports.

While these policies are aimed at supporting domestic industries, they also raise input costs for U.S. companies—especially manufacturers and retailers who rely on global supply chains. For investors, this means margin pressure for some firms and potential volatility in affected sectors like industrials, tech hardware, and consumer goods.

If you're investing in individual companies, pay attention to their exposure to foreign suppliers and raw materials. For broader ETF or index investors, it's another reminder of how geopolitics quietly shapes our portfolios

📉 Inflation & The Fed: Still Watching and Waiting

Inflation remains sticky, though it has cooled significantly from its 2022 peak. The most recent CPI report showed annual inflation hovering just above the Fed's 2% target—close, but not quite there.

As a result, the Federal Reserve is maintaining its cautious stance on interest rate cuts. At their May meeting, they chose to keep rates steady, signaling that any potential easing will depend on a few more months of solid inflation data.

📖 A Story: Grandpa Joe’s Lemonade Stand & Stock Prices

Let’s bring this home with a simple story.

Imagine Grandpa Joe runs a lemonade stand. He borrows $100 from the local neighborhood bank to buy lemons, sugar, and cups, and he promises to pay it back with a little interest.

Now, let’s say the bank suddenly raises interest rates. Grandpa Joe still needs lemons, but now it costs him more to borrow money. That extra cost eats into his profit. If Joe were a public company, investors might think: “Hmm… his profits may go down. Maybe his stock isn’t worth quite as much as before.”

Now imagine thousands of "Grandpa Joes" across America—companies big and small—facing higher borrowing costs. This is why high interest rates can weigh on stock prices. It’s not just about the number; it’s about how money moves.

The Federal Reserve isn’t trying to hurt Grandpa Joe—they’re trying to keep inflation from getting out of hand. But while they do that, it affects the stock market in real time.

📌 Final Thoughts

May reminds us that investing is always part art, part science. Seasonality cools things off. Tariffs quietly shift business dynamics. Interest rates tug at the levers of growth and valuation. It can feel like a lot—but that’s why we’re here.

Whether you’re investing $100 or $100,000, staying informed helps you stay empowered. Keep learning, stay curious, and don’t hesitate to ask questions.

Until next month,

Enje