Despite modest performance over the final quarter of the year, the US stock market posted its third consecutive calendar year of double-digit gains in 2025. S&P 500 index investors reaped gains of 17.83% (including dividends), on top of the 20% plus returns in each of the prior two years. This is only the eighth time in the last 100 years that the market has climbed over 15% in three straight years. Remarkably, this runup included recovery from a sharp 18% selloff amid the “tariff tantrum” in Q1 along the way.
The driving force behind the market’s continued ascent is speculation of the impact of artificial intelligence (AI) on corporate profits and economic growth. Two companies – Alphabet (i.e. Google) and Nvidia – accounted for fully one-quarter of the market’s gains in 2025. This repeated the 2024 pattern in which the so-called ‘Magnificent Seven’ stocks provided half of the market’s returns. Still, the overall gains in 2025 were more widely dispersed across sector groups than in the prior year.
US stocks weren’t alone in rewarding investors over the past year. Foreign stocks in both developing and emerging markets outperformed domestic equities for the first time in a long time, and by a wide margin, aided by a weakening US dollar. The Bloomberg US Aggregate Bond Index gained a healthy 7.22%, while precious metals went on a tear. Gold added 64% to its prior year gains, while silver rocketed 142% higher. Both metals joined the king of industrial metals, copper, in finishing the year just off all-time highs. Bitcoin rose 33% to reach its record high in early October only to reverse course in dramatic fashion, dropping 30% to close out 2025 down 6% for the year.
2025 performance for the major market indices follows: S&P 500 +17.83%; NASDAQ Composite +20.36%; Dow Jones Industrial Average +12.97%; Russell 2000 +11.29%; MSCI EAFE +31.91%; MSCI Emerging Markets +34.32%; Bloomberg Aggregate US Bond index +7.22%.
Wall Street consensus forecasts for 2026 call for strong corporate profit growth, low risk of recession, and Federal Reserve interest rate cuts over the course of the new year. Conventional thinking suggests that the stock market will continue its advance if these projections materialize, but sky-high valuations after three years of big gains pose a significant downside risk if reality doesn’t live up to expectations. And nobody should be surprised if simple profit-taking induces a stock market correction somewhere along the way.
Financial Disclosures
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Market data provided by JPMorgan Asset Management and MarketWatch.com.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.
The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas, Europe, the Middle East, Africa and Asia. The MSCI EM Index consists of the following emerging market country indices: Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Egypt, Greece, Hungary, Poland, Qatar, Russia, South Africa, Turkey, United Arab Emirates, China, India, Indonesia, Korea, Malaysia, Philippines, Taiwan, and Thailand.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
The Bloomberg Barclays U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.
Stock investing includes risks, including fluctuating prices and loss of principal.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
Because of their narrow focus, investments concentrated in certain sectors or industries will be subject to greater volatility and specific risks compared with investing more broadly across many sectors, industries, and companies.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors.
The information presented is for educational and informational purposes only and is not intended as a recommendation or specific advice. Cryptocurrency and cryptocurrency-related products can be volatile, are highly speculative and involve significant risks including: liquidity, pricing, regulatory, cybersecurity risk, and loss of principal. A cryptocurrency fund may trade at a significant premium to Net Asset Value (NAV). Cryptocurrencies are not legal tender and are not government backed. Cryptocurrencies are non-traditional investments, resulting in a different tax treatment than currency. Federal, state or foreign governments may restrict the use and exchange of cryptocurrency. The use and exchange of cryptocurrency may also be restricted or halted permanently as regulatory developments continue, and regulations are subject to change at any time. Cryptocurrency exchanges may stop operating or permanently shut down due to fraud, technical glitches, hackers, malware, or bankruptcy.