The Dollar Is Left Behind

After a remarkably turbulent April sparked by major tariff announcements, May saw financial markets largely regain their composure. This was boosted by the joint decision between the U.S. and China to temporarily remove retaliatory tariffs. The S&P 500 gained 6.3%, while the tech-heavy NASDAQ composite was up a robust 9.6%, its best showing since November 2023. Overall, that left the major stock indices basically flat on the year.

Similar trends could be seen in other markets as well. For instance, the 10-year Treasury yield rose from 4.16% at the start of the month, to nearly 4.60% on May 21 (the highest since mid-Feb), before ending the month at 4.40%. In the crypto space, Bitcoin continued its ascent, reaching an all-time high of $111,092 on its way to an 11.2% gain on the month.

Much of what linked the price action in these different markets was ongoing improvement in investor sentiment and reversal of the early April shock. But things aren’t all they seem on that front, as the U.S. dollar followed a different path. After declining 4.6% in April to a three-year low, the dollar index actually ended May marginally lower.

The currency’s lack of a recovery, especially in light of the moves elsewhere, was unexpected.

The Dollar Divergence

The Shift Continues

There is an inverse correlation between yields and prices. Higher yields generally mean lower bond prices, and vice versa. Typically, yields move on investor expectations for growth and inflation. For instance, if investors expect a stronger economy, bonds that pay a fixed rate might become less attractive.

Nevertheless, if investors find an asset less attractive, its price will generally decline. And because investments are bought with a currency, there can be ripple effects. In this case, higher Treasury yields should theoretically attract foreign capital and boost the dollar, yet that hasn’t happened.

One possible reason is that geopolitical upheaval and heightened policy uncertainty may be leading to lower demand from foreign investors not just for Treasurys, but U.S. assets more broadly.

There is some evidence for this: Developed International stocks are up nearly 15.0% year-to-date, while domestic stocks are barely positive. Rather than any broader economic judgment, the dollar’s depreciation might be symptomatic of lower confidence in the investability of the U.S.

Developed International Stocks Versus the United States
Year-to-Date

Market Recap

Asset Returns

May 2025 Sector Total Returns

Macro

•   The United States and China announced a temporary pause in retaliatory tariffs to give time for negotiations.

•   While April CPI came in only marginally below consensus (0.2% vs. the estimate of 0.3%), PPI’s print of -0.5% was significantly below consensus for 0.2%.

•   Conference Board’s consumer confidence index surged to 98.0, significantly above the estimate of 87.1.

•   National home prices fell 0.1% in March, firmly below expectations for an increase of 0.3%.

•   Regional Fed bank surveys of executives from manufacturing and service firms indicated that business activity rebounded in May but remains near multi-year lows.

Equities

•   The S&P 500 forward 12-month price/earnings ratio rose from 20.4x to 21.6x, representing multiple expansion of 5.9%.

•   Large-cap stocks beat small-caps by 1.0 percentage points, the sixth straight month of outperformance and longest such streak since mid-2021.

•   Health Care stocks underperformed the broader market by 11.9 percentage points, the second-worst relative performance in history behind December 1999.

•   For a second consecutive month, growth stocks handedly beat value stocks. Their 5.2 percentage point outperformance was the most since December 2024.

Fixed Income

•   2- and 10-year Treasury yields rose 24 and 30 basis points, respectively, the first month in 2025 where yields finished the month higher than they began.

•   High Yield corporate bond spreads narrowed by 69 basis points, the biggest decline in spreads since October 2022.

•   10-year breakeven inflation expectations rose from 2.24% to 2.33%, while real (i.e. inflation-adjusted) Treasury yields rose from 1.94% to 2.07%.

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photo credit: iStock/phototechno

Performance data quoted represents past performance. Past performance does not guarantee future results. Market returns will fluctuate, and current performance may be lower or higher than the standardized performance data quoted.

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Climate change is remaking the home insurance landscape. Depending on where you live, the prevalence of disastrous hurricanes, wildfires or tornadoes can make policies a lot more expensive and much harder to get.

But what can you do if climate change ends up making it harder to even get a mortgage?

According to a new study by First Street, a risk modeling firm that analyzed the relationship between physical climate risk and foreclosures in the U.S., that’s a real risk.

In fact, just like your credit score, First Street expects that where you live will end up being an important factor in how lenders assess your creditworthiness. So it’s important to consider all aspects of your location when you’re making important life decisions.

“Borrowers in areas exposed to both the direct impacts of extreme weather and the indirect pressures of shrinking insurance availability, rising premiums, and declining property values are under mounting financial strain,” First Street wrote in a May report.

“This means that two borrowers with identical credit scores, histories, and incomes could face substantially different credit risk odds if one lives in a 100-year floodplain and the other does not.”

First Street’s analysis showed that floods are the primary driver of disaster-related foreclosures, particularly when they’ve struck outside the areas FEMA has designated as especially vulnerable to floods.

But even when there’s no extreme weather, higher insurance rates are becoming an increasing burden on homeowners, raising the risk of foreclosure, their research found. Between 2019 and 2022, for every 1% increase in annual homeowners-insurance premiums, there was a 1.05% increase in the foreclosure rate.

First Street projects that if there’s severe weather, climate-related mortgage losses could reach $1.2 billion this year and escalate to $5.4 billion a year by 2035. Properties in states including Florida, Louisiana and California are particularly vulnerable.

So what? Climate risks come with financial risks — including ones we may not have anticipated. For some, they’re even determining where to live.

Here are a few steps you can take to safeguard your finances and credit health in the face of these evolving environmental challenges:

Assess your climate risk with an online tool. Before you buy a house — or even rent — explore the environmental risks of the location. This tool, a partnership between First Street and Redfin, the real estate brokerage, scores environmental factors including wind, floods, and fire on a 1-10 scale.

Consider flood insurance. First Street’s modeling shows 17.7 million properties around the country face at least a 1-in-100 annual flood risk. Of those, about 9.8 million are likely unaware of their flood exposure because they fall outside of FEMA’s Special Flood Hazard Areas, according to the researchers.

Flood damage isn’t covered in standard home insurance policies, so if you want protection, you need to buy separate coverage from the National Flood Insurance Program or a private insurer that offers flood policies.

Plan for rising insurance costs (and consider them before you move.) The average annual premium on a standard home insurance policy shot up 62% between 2018 and 2024, according to a Freddie Mac analysis. While shopping around may help lower your costs, you’ll want to budget for more increases. Plus, premiums can be four or five times higher in some states, becoming a big factor in your monthly housing payment.

Related Reading

•   Jerome Powell Quietly Warned There’d Be Places in the US Where You ‘Can’t Get a Mortgage’ — and He’s Not Wrong (Moneywise)

•   How Climate Change Could Make Your Home Harder to Insure (NerdWallet)

•   Choosing a Home with Climate Change in Mind (National Resources Defense Council)

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

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Between high prices and uncertainty about the future of the economy, many of us are thinking about ways to cut our costs.

And whether you free up cash to cover your basic bills, build up your savings, or take that vacation you really need, tightening your belt is empowering. But finding the time or energy to budget and hunt for deals can be difficult, right?

Thankfully, there are some quick and easy ways to cut back. Here are five things to do to keep your spending in check — even if you feel too busy to budget:

1. Make it a game. Do you love Candy Crush Saga or watching Jeopardy? With some reframing, spending less money can be a fun mental exercise that taps into your competitive side and requires no time at all. Make your plan in the shower or while you’re exercising.

Challenge yourself to forgo one higher-cost item you usually indulge in (a high-end organic item at the grocery store or an expensive hair conditioner.) Or, consider what you love about that discretionary spend and try a similar experience for less. If it’s going out with friends, could you trade in a cocktail for a well drink? (Maybe taste-test for a favorite?)

Other ideas:

•   Try a pantry challenge: How long can you get by without buying any new non-perishable foods?

•   Skip the small toy reward every time you take your (hopefully cooperative) toddler to Walmart.

•   Take the subway or bus instead of using Lyft.

Maybe set a point value for each success and see if you can best your score each month. Or challenge your partner to a contest: Who can get more points by the end of the week?

2. Use those free loyalty programs. Signing up for a free loyalty program can be a no-brainer, depending on your willingness to give some basic personal information.

Most grocery stores simply require signing up once with your name and phone number and/or email address. After that, entering your phone number (or having the cashier scan a bar code in your e-wallet or on your keychain,) gets you all the sale prices and/or access to digital coupons or other rewards. Same goes for gas stations, pharmacy chains, theaters, pet stores, and more.

Many fast-food chains and retailers also offer online/in-app loyalty programs. And then there are miles and point programs for airlines, hotels, and clothing retailers, which you can usually belong to whether you have a branded credit card with them or not. The key is to choose free ones that are hassle-free. You might even get a decent-sized discount just for signing up.

3. Hit ‘pause.’ Many of us have memberships or subscriptions we don’t use enough to justify spending money on, at least not in today’s economy. Whether it’s a streaming service, an app, a gym or a newspaper, if you don’t want the hassle of cancelling the membership (and perhaps re-establishing it later,) pause or freeze it for a while to see how much you miss it. Just make sure to put the cancel-by date on your calendar before the pause is scheduled to lift.

4. Maximize your weekends (or work-free time.) If you’re like a lot of us, there’s very little time during the workweek — even to think. Use the weekend or your day off to plan ahead (hopefully after unwinding) and be thoughtful about your expenses.

•   Plan and prep meals in advance to cut back on eating out on worknights. This can be making freezer-to-oven casseroles or just getting your produce washed and cut for weeknight meals. Whatever it takes to cut down on last-minute takeout.

•   Look into what you can borrow from your local library besides books. You’d be surprised by all the stuff some public libraries loan out – kitchen tools, an Xbox, tennis racquets, snowshoes, and musical instruments to name a few. You’ll have to return the items, but given how many times you only end up using something once or twice, it’s worth considering whether you can avoid an expensive Amazon purchase. If you’re not a library member, signing up usually only takes a minute.

•   Multi-task. It doesn’t take more time to do two things at once. So if you’ve got a weekend full of ferrying your kids around, group your errands with their rides to save on gas. If you’re waiting around for practice to end, make a list of non-perishable items you can buy in bulk.

5. Ask about discounts. Discounts apply to more than just seniors. When you’re scoping out entertainment or other activities — movies, museums, amusement parks or even national parks — check to see if you qualify for discounted admission rates because of your job, where you live, or anything else. Same goes for restaurants, retailers, airlines and hotel chains. You never know when being a veteran or servicemember, a student or teacher, or living in a specific city or county could save you money. But you have to ask.

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

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