US Stock Market and Economy Overview for 2025 and Outlook for 2026
In 2025, the S&P 500 increased by approximately 17%, the Nasdaq rose about 21%, and the Russell 2000 climbed around 12%. Early in the year, spring tariffs caused market volatility with the S&P 500 nearing bear-market territory before rebounding after the tariffs were rolled back. The AI rally bolstered the performance of Nvidia, Apple, Microsoft, Amazon, and Alphabet, which together make up about 30% of the S&P 500. Earnings growth also broadened beyond the technology sector.
Despite this, concerns about valuations and fears of an AI bubble persisted, leading some investors to rotate away from Big Tech stocks while certain non-tech stocks remained highly valued. The US economy expanded at a 4.3% annualized rate in Q3 2025, while unemployment increased to 4.6% in November. Gold prices climbed about 70% throughout the year, whereas Bitcoin ended slightly lower despite earlier gains.
Looking ahead to 2026, analysts anticipate another potentially strong year for the stock market driven by lower borrowing costs. However, policy risks remain, including uncertainty around the Federal Reserve chair transition when Jerome Powell's term ends in May. Vanguard projects relatively subdued US stock returns over the next decade in the range of 3.5% to 5.5% annualized.
