In this episode:

• The S&P 500 ended the month up more than 6%, marking its best May performance in over three decades. Since the April 8 lows, the index has risen 19%, largely driven by the “Magnificent Seven” and a record level of retail investor activity, which accounted for 36% of daily trading volumes.
• Trump’s “Big Beautiful Bill,” narrowly passed in the House by a single vote, includes significant tax cuts funded by tariffs—though the expected revenue from those tariffs is increasingly uncertain. The bill risks triggering a surge in public debt and has already caused political turmoil, including the resignation of Elon Musk. Meanwhile, Trump doubled tariffs on steel and aluminum, aiming to counter the image of a yielding leader captured in the acronym “TACO” (“Trump Always Chickens Out”).
• The escalation in U.S.-China tensions—with potential tech sector restrictions and measures targeting Chinese students—adds to an increasingly fragile fiscal backdrop. Treasury yields are at their highest since 2007, the housing market is slowing, and CEO confidence has dropped to historic lows. Inflation remains under scrutiny amid a global environment of rising interest rates and growing systemic risks.

The recent rally has been fueled by forced repositioning and overly optimistic expectations, but it stands on shaky ground. In a climate of rising uncertainty around tariffs, debt, and geopolitics, this may be the time to reduce risk exposure, improve portfolio quality, and take advantage of low volatility to add protection.