US Annual (2025) Recap: Dow +12.97%, S&P +16.39%, Nasdaq +20.36%, Russell 2000 +11.29% (FactSet)
US equities were broadly higher in 2025. Major market indices notched their third straight annual gains; the S&P, Nasdaq, and Russell each saw their seventh double-digit rise of the past nine years. There was (again) note of gains concentrated around many of the large-cap tech names, with the equal-weight S&P +9.3% trailing the cap-weighted index by more than 700 bp. (FactSet)
The Mag 7 names were broadly positive, with GOOGL +65.4% and NVDA +38.9% the notable gainers in that group. The AI space was also a major market driver this year; AI chipmakers and AI infrastructure firms were among the market's best-performing areas. Retail-investor favorites had a very strong year, with this group repeatedly stepping in to buy dips. The most-shorted S&P 500 stocks also handily topped the benchmark. Other areas of strength included A&D, engineering/construction, larger-cap banks, credit cards, networking/communications, China tech, industrial metals, precious-metals miners, nuclear, and select quantum-computing names. Laggards included managed care, apparel, HPCs, food, grocers, commodity chemicals, containerboard, and E&Ps. (FactSet)
Treasuries were mostly firmer with the curve steepening. The 2Y yield dropped 77 bp over the course of 2025 and the 10Y yield fell 40 bp, though the 30Y ultimately remained near the 4.80% level, its yield rising 6 bp over the course of 2025. Investors this year voiced some concern about increased federal spending leading to greater note/bond issuance and sparking "bond vigilantes" into action, though the Treasury continued to maintain guidance about coupon sizes remaining stable for the next several quarters (while leaning on shorter-term debt), noting tariff revenue has become an important input to deficit projections. (FactSet)
The dollar logged its worst calendar year since 2017; DXY (9.5%). Overall, the greenback was little changed against the yen but was down nearly 12% on the euro cross. Analysts flagged pressures from a volatile trade-war backdrop and Fed rate cuts at a time when many central banks have begun to hold, both of which helped undermine US exceptionalism. While the market has worked through initial trade shocks, forecasts for the dollar in 2026 look for further weakness to come. (FactSet)
It was a banner year for metals. Gold ended the year at $4,341/oz, just shy of its record above $4,500 but up 64.4% from 2024's close. It was gold's strongest annual performance since 1979. Silver settled up 141.4%, also its best year since 1979; analysts noted some help not only from safe-haven demand but also from the metal's broad industrial applications (including in electronics). Copper was similarly in demand, rising 40.1% for the year. (FactSet)
Bitcoin futures were down 6.8% for 2025. It was a volatile year for bitcoin futures, which dropped as low as $74,635 amid April's Liberation-Day market drawdown, hit record highs above $127K in October, then again fell to nearly $80K later in November. (FactSet)
WTI crude dropped 19.9% for 2025, with oil having its worst year since 2020. Crude also dropped during the spring's tariff concerns but recovered a bit when the US struck Iran's nuclear facilities in June. Despite some geopolitical shifts late in the year (prospects for a Russia-Ukraine ceasefire, US seizing Venezuela-linked tankers in the Caribbean), the market remained focused on forecasts for oversupply in 2026. (FactSet)
Outperformers: Communication Services +32.41%, Tech +23.31%, Industrials +17.70%
Underperformers: Real Estate (0.35%), Consumer Staples +1.32%, Energy +4.96%, Consumer Disc. +5.31%, Materials +8.43%, Healthcare +12.53%, Utilities +12.69%, Financials +13.32%
Notable 2025 Headlines:
Trump works to recast US trade relations through tariffs:
Global trade was a central focus this year as one of President Trump's signature priorities. Anxiety and uncertainty were high early in his administration, with tariffs on major trading partners Canada, Mexico, and China announced, then delayed, followed by a comprehensive "reciprocal" tariff plan launch on 2-Apr "Liberation Day." This was the market's most challenging period of the year: between 19-Feb and 8-Apr, the S&P 500 dropped 18.9% while the Nasdaq shed 23.9%. But implementation delays (creating space to strike bilateral deals) and the "TACO" narrative (Trump Always Chickens Out) put a floor under the slide and offered some increased confidence conditions might not be as bad as feared. Trade relations with China rocked back and forth, with Trump repeatedly raising and lowering rhetorical pressure while holding a series of international meetings (with rare-earth exports a notable topic) that ultimately punted many issues into 2026 or beyond. (FactSet)
Throughout, Trump trumpeted the benefits to US coffers from increased tariff revenues, with more than $200B collected in 2025 and perhaps $2.3T over the next decade at current tariff levels. The president has said this income will help address the federal deficit, fund future income-tax cuts, and lead to $2,000 tariff "dividend" checks for Americans in 2026. Businesses worked hard to navigate the volatile tariff backdrop, employing multiple mitigation strategies but also passing costs through to consumer prices or weathering margin compression. The question of whether tariffs would represent a one-time price adjustment or an ongoing challenge to bringing inflation back to the 2% target remained a key monetary-policy debate. And the future shape of tariffs remains unsettled given a pending Supreme Court decision on whether Trump's use of emergency powers to implement them is justified (though administration officials stress they have other tariff powers at their disposal). (FactSet)
AI again a major market driver, though not without skepticism:
The evolution of AI was front and center this year amid rising corporate adoption, accelerating compute demand, and political prioritization by the White House. A network of corporate alliances were formed (such as the Stargate Project launched in January) as well as a host of strategic investments. Capex on AI projects is estimated to top $400B in 2024, with some analyst estimates at $525-575B for 2026. But the year's enthusiasm and optimism also brought some significant scrutiny and sparked many comparisons to the dot-com bubble. Questions were raised about the scope of the AI infrastructure buildout, particularly the degree to which it may be funded by debt; ORCL (+17.0% for the year but down 30.7% in Q4) was the poster child for these worries, having issued nearly $26B debt this year and being noted for its reliance on OpenAI for future revenue growth. A related issue was AI "circularity," with larger firms making investments in firms so that those firms could become customers. There was also a broad debate about monetization, with AI seen as a definite aid to efficiency with less-clear prospects for future revenue streams. (FactSet)
Fed cuts rates by 75 bp, with market expecting a bit more to come:
The evolution of AI was front and center this year amid rising corporate adoption, accelerating compute demand, and political prioritization by the White House. A network of corporate alliances were formed (such as the Stargate Project launched in January) as well as a host of strategic investments. Capex on AI projects is estimated to top $400B in 2024, with some analyst estimates at $525-575B for 2026. But the year's enthusiasm and optimism also brought some significant scrutiny and sparked many comparisons to the dot-com bubble. Questions were raised about the scope of the AI infrastructure buildout, particularly the degree to which it may be funded by debt; ORCL (+17.0% for the year but down 30.7% in Q4) was the poster child for these worries, having issued nearly $26B debt this year and being noted for its reliance on OpenAI for future revenue growth. A related issue was AI "circularity," with larger firms making investments in firms so that those firms could become customers. There was also a broad debate about monetization, with AI seen as a definite aid to efficiency with less-clear prospects for future revenue streams. (FactSet)
Trump makes no secret of his rate preferences, raising concern about Fed independence:
Throughout the year, President Trump argued consistently for lower rates, repeatedly using social media and press appearances to excoriate Chair Powell as "too late," pressure him to resign, and even muse about perhaps firing him. While Trump eventually backed away from these threats (some reports said advisors warned him about a sharply negative market reaction), the administration increased the pressure on Fed Governor Lisa Cook on allegations she lied on a mortgage application. Trump announced that he had fired her for cause, though Cook refused to accept the dismissal and instead filed a lawsuit against the president. Lower courts have kept the case alive against administration attempts to dismiss it; oral arguments will be heard by the Supreme Court in January. (FactSet)
Earnings growth in double digits for the second straight year:
Corporate earnings remained strong in 2025, with FactSet noting forecasts for a 12.1% annual increase for the calendar year, which would be the fifth consecutive year of earnings growth and well ahead of the 10-year average of 8.6%. Earnings for Q1 came in at 13.3% (vs 11.3% expected at the beginning of the quarter), Q2 was at 12.0% (vs 9.2% forecast), and Q3 registered 13.6% (vs 6.8% expected). Big tech companies were a big driver of the overall increase, with NVDA, GOOGL, and AMZN three of the top five contributors to CY25 earnings growth. However, the 493 S&P constituents outside the Magnificent 7 are forecast to ultimately report earnings growth of ~9% for the year. (FactSet)
Even outside of trade, Washington was a big part of the year's narrative:
The GOP's central legislative achievement this year was the very narrow passage of the One Big Beautiful Bill Act (OBBBA), which permanently extended the tax cuts from 2017's Tax Cuts and Jobs Act, which were scheduled to expire at year's end. The bill also boosted the debt limit by $5T and incorporated several other provisions pitched as pro-growth (though estimates suggest it could boost federal debt by $4T+ over ten years). Trump also put Elon Musk in charge of the "Department of Government Efficiency" (DOGE), aimed at cutting government spending and shrinking federal employment. While the results of the former were limited, BLS noted in its November report that federal employment is down 271K jobs since peaking in January. The Trump administration's immigration crackdown has also been seen as a headwind on job growth. Finally, while the market was not terribly concerned about economic damage from the record 43-day government shutdown from 1-Oct through 12-Nov, the disruption in the flow of economic data has proven a major challenge (with agencies not yet caught up with the backlog). (FactSet)
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