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May 2025 Monthly Market Note

May registered large gains across equities

MONTH IN REVIEW

Following a return of -0.68% for April (total return), SPX (the S&P 500) returned 6.29% (total return) in May. After returning 1.55% (total return) in April, NDX (the Nasdaq-100) returned 9.13% (total return) in May. The Russell 2000 returned 5.34% in May after a loss of -2.31% in April. SPX & NDX reclaimed their key moving averages in May, which we will illustrate later in this note. Another notable datapoint from May was the release of April’s inflation data: Core CPI printed 0.2% M/M, less than the 0.3% consensus. PPI printed -0.5% M/M, less than the 0.2% consensus. PCE printed 0.1%, matching the consensus. Core PCE printed 0.1%, matching the consensus.

Treasuries sold-off in May. The 10-yr closed at 4.40% to end the month, on the upper end of the important 4.20% – 4.40% technical range. The 30-year Treasury yield ended the month at roughly 4.93%. Over the past several months and years, the correlation between equities and fixed income has been notably high – and likely will remain so. Additionally, the 2/10 Treasury yield spread remained positive and steepened in May after its record-long inversion came to an end in the second half of 2024.

The next Fed meeting will take place on 6/17-6/18, and there is no cut expected. Looking forward, and as of the end of May, the market is pricing in a total of 50bps of cuts for the remainder of 2025 (two cuts). The Fed continues to target 2% inflation as its goal and incoming inflation reports will likely continue to drive the dot plot.

According to FactSet, the trailing 12-month P/E ratio for SPX is 25.9, which is above the 5-year average (24.8), and above the 10-year average (22.4). The forward 12-month P/E ratio for SPX is 21.3, which is above the 5-year average (19.9), and above the 10-year average (18.4). Additionally, per FactSet, SPX is reporting Y/Y revenue growth of 4.9% for Q1 2025, which is above the estimate of 4.3% on March 31. Finally, per FactSet, SPX is reporting Y/Y earnings growth of 13.3% for Q1 2025, which is above the estimate of 7.2% on March 31.

Within commodities and currencies: WTI Crude Oil rose in May by roughly 6%. Gold finished flat for the month of May. Finally, the USD/DXY closed out the month near 99.25, which was slightly lower M/M.

VOLATILITY UPDATE

After closing out April at 24.70, the VIX Index fell during May and closed out the month near 18.50. The 12-month high of the VIX Index was registered on 8/5/24 at 65.73. In 2022, the VIX averaged over 25. In 2023, the VIX averaged near 17. And in 2024, the VIX averaged near 15.50.

The MOVE Index calculates the future volatility of US Treasury yields implied by current prices of options on Treasuries of various maturities. It is thought of as “The VIX Index of the Bond Market.“ After closing out April near 112, the MOVE Index fell in May and closed out the month near 92. Traders will continue to monitor this index to gauge potential future bond and equity volatility. Equities tend to favor a subdued MOVE Index.

NOTABLE CHARTS

LOOKING AHEAD

Among other factors, the market will be adjusting to and watching the new administration, tariffs, inflation, earnings, yields, geopolitical risks, and the Fed outlook. On the inflation front, May’s CPI will be released on 6/11, and PPI will be released on 6/12. Finally, the next FOMC meeting will take place on 6/17-6/18.

Equity High Income

ETFs that seek tax efficient monthly income and upside potential

SPYI QQQI IWMI

Hedged Equity Income

ETFs that seek tax efficient monthly income and a measure of downside protection

QQQH SPYH

High Income Alternatives

Alternative asset classes with an added layer of high monthly income potential

BTCI IYRI IAUI

Enhanced Fixed Income

Fixed income portfolios with an added layer of enhanced tax efficient monthly income potential

BNDI HYBI

Enhanced Income U.S. Treasuries

U.S. Treasuries with an added layer of enhanced tax efficient monthly income potential

CSHI TLTI

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An investment in NEOS ETFs involve risk, including possible loss of principal. The equity securities purchased by the Funds may involve large price swings and potential for loss. There is no guarantee the NEOS ETFs will make monthly distributions and the amounts may fluctuate from month to month. Distributions made by NEOS ETFs have been classified as a return of capital and may be comprised of option premiums, dividends, capital gains, and interest payments. To view both current and historical monthly estimates of ETF distribution composition, investors may view the 19a-1 notices available on each corresponding Fund's webpage. Distributions classified as return of capital will reduce an investor’s cost basis in Fund shares owned, which may result in higher taxes paid in the future when the Fund shares are sold, even if the shares are sold at a loss compared to the original investment.

The use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. These risks include (i) the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations; (ii) risk of mispricing or improper valuation; and (iii) the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Derivative prices are highly volatile and may fluctuate substantially during a short period of time. The use of leverage by the Fund, such as borrowing money to purchase securities or the use of options, will cause the Fund to incur additional expenses and magnify the Fund’s gains or losses. The earnings and prospects of small and medium sized companies are more volatile than larger companies and may experience higher failure rates than larger companies. Small and medium sized companies normally have a lower trading volume than larger companies, which may tend to make their market price fall more disproportionately than larger companies in response to selling pressures and may have limited markets, product lines, or financial resources and lack management experience. The funds are new with a limited operating history.

Investments in smaller companies typically exhibit higher volatility. Investors in NEOS ETFs should be willing to accept a high degree of volatility in the price of the fund’s shares and the possibility of significant losses.

Definitions:

S&P 500® Index (SPX): An Index composed of selected stocks from five hundred (500) issuers, all of which are listed on national stock exchanges and spans over approximately 24 separate industry groups.

Nasdaq-100 Index® (NDX): The Nasdaq 100 Index is a stock index of the 100 largest companies by modified market capitalization trading on Nasdaq exchanges. The index includes companies in basic materials, consumer discretionary spending, consumer staples, healthcare, industrials, technology, telecommunications, and utilities. The index excludes financial firms.

The Russell 2000® Index measures the performance of the small-cap segment of the US equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 7% of the total market capitalization of that index, as of the most recent reconstitution. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set.

MOVE Index: The MOVE index, or Merrill Lynch Option Volatility Estimate Index, is a crucial gauge of interest rate volatility in the U.S. Treasury market. It is calculated from options prices, which reflect the collective expectations of market participants about future volatility. The index measures the implied volatility of U.S. Treasury options across various maturities. Similar to the VIX index’s role in the stock market, the MOVE index is an essential tool for investors, traders, and analysts to assess risk and uncertainty in the bond market. It is often referred to as the “VIX for Bonds.”

VIX Index: The CBOE Volatility Index (VIX) is a real-time index that represents the market’s expectations for the relative strength of near-term price changes of the S&P 500 Index (SPX). Because it is derived from the prices of SPX index options with near-term expiration dates, it generates a 30-day forward projection of volatility. Volatility, or how fast prices change, is often seen as a way to gauge market sentiment, and in particular the degree of fear among market participants. The index is more commonly known by its ticker symbol and is often referred to simply as “the VIX.” It was created by the CBOE Options Exchange and is maintained by CBOE Global Markets. It is an important index in the world of trading and investment because it provides a quantifiable measure of market risk and investors’ sentiments.

U.S. Dollar Index (USD/DXY): The US Dollar Index is a measure of the value of the United States Dollar relative to a basket of foreign currencies. The basket of currencies consists of the Euro, Swiss Franc, Japanese Yen, Canadian Dollar, British Pound, and Swedish Krona.

Consumer Price Index (CPI): The Consumer Price Index measures the overall change in consumer prices based on a representative basket of goods and services over time. The CPI is the most widely used measure of inflation, closely followed by policymakers, financial markets, businesses, and consumers.

Yield Spread: A yield spread is a difference between the quoted rate of return on different debt instruments which often have varying maturities, credit ratings, and risk. When yield spreads expand or contract, it can signal changes in the underlying economy or financial markets.

Personal Consumption Expenditure (PCE) A measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services. The PCE price index is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior.

Headline CPI: Headline inflation is the raw inflation figure reported through the Consumer Price Index (CPI).

Core CPI: Core inflation removes the CPI components that can exhibit large amounts of volatility from month to month.

Producer Price Index (PPI): The Producer Price Index (PPI) program measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services.

EPS (Earnings Per Share): Earnings per share (EPS) is a company’s net income subtracted by preferred dividends and then divided by the number of common shares it has outstanding. EPS indicates how much money a company makes for each share of its stock and is a widely used metric for estimating corporate value. A higher EPS indicates greater value because investors will pay more for a company’s shares if they think the company has higher profits relative to its share price.

P/E Ratio: The price-to-earnings (P/E) ratio measures a company’s share price relative to its earnings per share (EPS). Often called the price or earnings multiple, the P/E ratio helps assess the relative value of a company’s stock. It’s handy for comparing a company’s valuation against its historical performance, against other firms within its industry, or the overall market. P/E can be estimated on a trailing (backward-looking) or forward (projected) basis.

Correlation is a statistical measure that determines how assets move in relation to each other. Correlation is measured on a scale of -1 (perfect negative) to +1 (perfect positive), although perfect negative or positive correlation between two assets is rare.

West Texas Intermediate (WTI) is a grade of crude oil and one of the main three benchmarks in oil pricing, along with Brent and Dubai Crude. WTI is considered a high-quality oil that is relatively easy to refine.

The information on this website does not constitute investment advice or a recommendation of any products, strategies, or services. Investors should consult with a financial professional regarding their individual circumstances before making investment decisions. NEOS Funds or its affiliates, nor Foreside Fund Services, LLC, or its affiliates accept any responsibility for loss arising from the use of the information contained herein.

NEOS ETFs are distributed by Foreside Fund Services, LLC.

Definitions:

Option: Options are financial derivatives that give buyers the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price and date.

Distribution Rate: The annual rate an investor would receive if the most recent fund distribution remained the same going forward. The distribution rate represents a single distribution from the Fund and is not a representation of the Fund's total return. The distribution rate is calculated by multiplying the most recent distribution by 12 in order to annualize it, and then dividing by the Fund's most recent ex-date NAV.

30-day SEC Yield: A calculation based on a formula mandated by the Securities and Exchange Commission (SEC) that calculates a fund's hypothetical annualized income, as a percentage of its assets. A security's income, for the purposes of this calculation, is based on the current market yield to maturity (in the case of bonds) or projected dividend yield (for stocks) of the fund's holdings over a trailing 30-day period. This hypothetical income will differ (at times, significantly) from the fund's actual experience; as a result, income distributions from the fund may be higher or lower than implied by the SEC yield.

Tax Loss Harvesting: The timely selling of securities at a loss in order to offset the amount of capital gains tax due on the sale of other securities at a profit.

Equity High Income

SPYI

QQQI

IWMI

Hedged Equity Income

QQQH

SPYH

High Income Alternatives

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IYRI

IAUI

Enhanced Fixed Income

BNDI

HYBI

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CSHI

TLTI

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May 2025 Monthly Market Note

Explore Our ETFs

Equity High Income

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