Corporate risk appetite rose in May as equity and credit markets rebounded despite persistent concerns surrounding global trade policy. According to Willis Towers Watson’s latest Global Markets Overview, investor sentiment improved particularly across Europe and Asia, thanks in part to a temporary de-escalation in U.S.-China trade tensions that helped reduce recession fears and stabilized financial markets.
The report emphasizes that while uncertainty related to U.S. tariffs—especially under authorities like Section 232, 301, and 122—remains a significant concern, it did not deter markets from gaining ground. Much of the recent optimism was supported by a shift in central bank policies, with both the European Central Bank and the Bank of Canada cutting interest rates by 25 basis points in May. These moves signaled to markets that policymakers believe inflation is nearing controllable levels, which in turn bolstered confidence and encouraged risk-taking.
Energy prices also played a key role in supporting improved market conditions. A notable decline in oil and gas prices during the month helped ease production costs across manufacturing and industrial sectors. This reduction in input expenses not only relieved pressure on producers but also contributed to a more stable consumer pricing environment. These combined factors created a backdrop conducive to renewed investment enthusiasm, even in the face of complex global economic headwinds.
However, analysts at Willis Towers Watson warned that the outlook remains vulnerable to shifts in U.S. trade policy. The recent move by the Biden administration to double tariffs on steel and aluminum imports from 25% to 50% was not fully reflected in May’s market activity but remains a key risk on the horizon. Analysts project that the average import tariff in the U.S. could settle between 14% and 15%—a significant increase from early-year levels—which may introduce future strain on cross-border commerce and global supply chains.
Despite these risks, the firm noted that May’s improvements in corporate risk appetite represented a meaningful shift from the more cautious stance seen earlier in 2025. Market participants appeared more willing to re-enter riskier asset classes, particularly in emerging markets and cyclical sectors that benefit from reduced inflationary pressure and cheaper borrowing costs. Companies also began to resume longer-term investment planning, reflecting a tentative but visible confidence in market stability.
Yet this renewed optimism is tempered by the knowledge that any resurgence of trade friction—particularly from further U.S. tariff hikes or retaliatory measures from trade partners—could quickly reverse these gains. With negotiations between the U.S. and several major economies ongoing, the investment community remains highly attuned to political developments and policy announcements.
Overall, while the month of May marked a turning point in terms of improved corporate sentiment and investment appetite, the sustainability of this momentum depends heavily on continued central bank support and the resolution—or at least the containment—of trade disputes. The coming months will be critical in determining whether the current climate of cautious optimism will solidify into sustained economic confidence or fall victim to renewed geopolitical and commercial turbulence.
