US Stock Market Sees Strong Gains in 2025 Amid Economic Growth and Policy Uncertainty
In 2025, the US stock market experienced notable gains with the S&P 500 rising about 17%, the Nasdaq Composite up approximately 21%, and the Russell 2000 increasing roughly 12%. The growth was driven by AI-driven earnings growth and increased spending, with major tech companies such as Nvidia, Apple, Microsoft, Amazon, and Alphabet accounting for nearly 30% of the S&P 500.
However, the year also faced challenges. In April, after Donald Trump announced sweeping tariffs on US trading partners, the S&P 500 dipped toward bear market levels, while both the Nasdaq and Russell briefly entered bear markets before rebounding once the tariffs were moderated. Despite the growth, valuations of AI-related stocks raised concerns about a potential bubble and a rotation away from Big Tech firms. Mid-sized companies showed improving earnings growth in the third quarter, broadening growth beyond the tech sector.
The US economy grew at an annualized rate of 4.3% in the three months to September 2025, although unemployment rose to 4.6% in November. Gold prices surged significantly, on track for around a 70% gain during the year, while Bitcoin ended 2025 slightly lower after peaking in October.
Looking ahead, analysts expect 2026 to be another strong year for stocks supported by lower borrowing costs and continued earnings growth. Nonetheless, policy risks remain, including uncertainties around Trump's tariff policy and potential leadership changes at the Federal Reserve, as Chair Jerome Powell's term ends in May and a new Fed chair is likely to be named by then.
