After two years of 20%+ gains, a mere .5% gain through the end of May of 2025 certainly seems lackluster. However, the point to point returns don’t tell the full story, as many of us will take what we can get after April’s exhale… the mere fact that major markets are in the black for the year is quite a feat. Despite this rally back up into positive territory, it should come as no surprise that SPX is lagging an “average” year by all forms of the word. The simple chart below details this via the value of a hypothetical $100 portfolio for 2025 (blue) against a sample portfolio which follows the average return for each month dating back to 1987. While plenty can still change over the course of the back half of the year, it goes without saying that markets have plenty of work left to do to fall back in line with our historical expectations.

While pure historical averages alone certainly don’t tell the full story, they can provide some direction as you enter mid-year conversations with clients. With that said, the table below breaks down SPX performance by month dating back to 1987. As you would expect, most months are positive, seeing eight of the 12 calendar months earn positive average returns. Unfortunately, June isn’t one of them, falling by a mere three basis points under “normal” circumstances. It also earns the narrowest spread between the min (-8.60%) & max (+6.89%) return of any calendar month… not inherently a good or bad thing by itself. Perhaps the feather in the cap of June is the fact that despite its negative average returns, it has landed in the green roughly 58% of the time (still the 8th best monthly hit rate.)

2025 has been anything put “normal.” Remember to take these averages with a grain of salt. There are plenty of points throughout history when historically “strong” months have been anything but. The same can be said those points that have been relative underperformers. Regardless, use the averages above to recalibrate your compass over the next month as we rocket into the close of Q2 2025.

International equities are back in vogue, at least conversationally. Last week, I attended a conference in Tampa Bay, where I got the opportunity to speak with several advisors about what investing topics they care about in the current environment. The usual suspects were all there – option overlays, momentum investing (shocker for anyone talking to NDW), and even some crypto questions. International equities were by no means the star of the show, but they made their way into a surprising number of conversations, at least when compared to my experiences at other conferences.

US stocks have been so dominant for so long that international equities often get forgotten about or actively avoided. The underperformance from international equities was well documented heading into this year, especially with the S&P 500 Index coming off back-to-back 20% annual gains. Fast forward a few months and we see that the iShares MSCI ACWI ex US ETF ACWX is outpacing the S&P 500 Index by over 13.5% (through 5/30). If we ended the year last Friday, that would mark the largest outperformance from ACWX over SPX since 1993. Of course, the year did not end last week. We have plenty of time left in 2025 for that spread to change. Still, the outperformance over the past five months has paved the way for notable technical improvement in foreign stocks as we head into the summer.

This improvement in international equities can be seen in our broad DALI asset class rankings. International equities gained 29 relative strength (RS) signals last month, significantly more than any other asset class and marked its largest month-over-month signal improvement since January 2023. The asset class still sits third out of the six areas examined; however, it is only three signals shy of commodities in second, and just seven signals behind domestic equities in first. The tight proximity of the top three asset classes means any day of sharp action could lead to rotation at the top of the DALI rankings.

As an aside, that sharp action could go in almost any direction, as we have seen play out on a few different occasions so far this year. We would advise against preemptively making major asset allocation decisions prior to a ranking change. DALI, like just about everything we do at NDW, is backed by a process. Deviating from that process brings into question the validity of its success moving forward.

With that said, international equities have demonstrated the most near-term RS improvement, even though they have not risen in rank. This makes it important to stay abreast of what areas within foreign stocks are leading the pack. Broad developed market representatives like the iShares MSCI EAFE ETF EFA have shown more consistent improvement when compared to the iShares MSCI Emerging Markets ETF EEM. So far this year, EFA has gained over 17% while EEM has risen just under 9% (through 5/30). Both best SPX (+0.56% over the same timeframe) but developed markets have been more consistent.

Europe has driven most of the improvement in developed and emerging markets, as shown through our NDW Country Index matrix rankings. For those that are not familiar, this ranking looks at broad indices for 42 countries and stacks them up against one another to see which one comes out on top the most. Based on our historical study, owning the top ten countries over time added value over broad international exposure. The current rankings can be found below.

European markets make up six of the top ten ranked countries, having maintained that positioning since the end of April. Four of those countries are European emerging markets, including Hungary, Poland, the Czech Republic, and Greece. Unfortunately, there are not tradable investment instruments that provide proper representation for Hungary and the Czech Republic. However, the other two can be accessed through the iShares MSCI Poland ETF (EPOL) and the Global X MSCI Greece ETF (GREK). The charts below review the current technical pictures for those funds along with the iShares MSCI Austria ETF (EWO), which is another emerging European country that sits one spot shy of the top ten.

Daily Option Ideas for June 2, 2025