May 2025 Market Memo

Performance:

Please contact us to inquire about our performance.

May Investment Summary:

In May, we maintained a bullish stance, achieving excess returns. Toward the end of the month, we sold most holdings to lock in profits and significantly reduce portfolio risk exposure.

Market Overview, Analysis, and Outlook:

Macro Environment

The overall market sentiment has warmed considerably due to shifts in Trump’s policies and expectations of future tax cuts, moving from panic to greed. However, are we in the clear? No. The market faces three major "grey rhinos":

• Persistently high U.S. Treasury yields, which have a significant impact on risk markets but are being overshadowed by optimistic sentiment.

• Surging geopolitical instability. Despite a brief period of calm, significant uncertainty persists across Europe, Asia, and the Americas.

• Weakening U.S. economic data, coupled with excessive policy uncertainty, making it challenging for long-term investors to maintain stable investments.

U.S. Stock Market Outlook

We are not optimistic about the mid-term outlook for U.S. stocks. While short-term positive news persists, the market lacks sustained long-term buying support, with overheated sentiment and active speculative capital. We are also cautious about this year’s trajectory, not ruling out the possibility of larger-scale declines or flash crashes.

Future Outlook and Strategy:

Based on market sentiment and macro analysis, starting in June, we will shift to a defensive stance to protect the gains from April and May. Our investments in June will be conservative, and we ask our investors to remain patient alongside us.

Risk Control and Two-Way Strategy:

To address market volatility, we have adopted a two-way approach:

• Significantly increase cash holdings and maintain a small position in U.S. Treasuries, avoiding paired or hedged trades, reducing trading frequency and duration, and using derivatives strategies with small positions to counter volatility.

• Stay vigilant for market opportunities, actively seeking strong sectors and individual stock opportunities for proactive engagement.

Wei Cheng
CEO and Chief Investment Officer

Tranquil Tide Wealth

Written on May 31, 2025