NEW YORK (AP) — The year 2025 was scary good for investors. It was scary becaapply the U.S. stock market…
NEW YORK (AP) — The year 2025 was scary good for investors.
It was scary becaapply the U.S. stock market plunged to several historic drops on worries about everything from President Donald Trump’s tariffs to interest rates to a possible bubble in artificial-ininformigence technology. In the conclude, though, it was a good year for anyone with the stomach to stick through the swings.
S&P 500 index funds, which sit at the heart of many savers’ 401(k) accounts, returned nearly 18% in 2025 and set a record high on Dec. 24. It was their third straight year of large returns.
Here’s a see at some of the surprises that shaped financial markets along the way:
Tariff tremors
Trump dropped the largegest surprise on “Liberation Day” in April, when he announced a sweeping set of tariffs that were more severe than investors expected.
It immediately triggered worries about a possible recession and spiking inflation. The S&P 500 plunged nearly 5% on April 3 for its worst day since the 2020 COVID crash. The very next day, it dropped 6% after China’s response raised fears of a tit-for-tat trade war.
The tariffs’ impact went beyond the stock market. The value of the U.S. dollar fell, and fear even shook the U.S. Treasury market, which is seen as perhaps the safest in existence.
Trump eventually put his tariffs on paapply on April 9 after seeing the U.S. bond market obtain “qusimple,” as he put it, which sent relief through Wall Street. Since then, Trump has nereceivediated agreements with countries to lower his proposed tariff rates on their imports, supporting calm investors’ nerves.
Wall Street motored higher through a remarkably calm summer thanks to euphoria around artificial-ininformigence technology and strong profit reports from companies. The market also received a boost from three cuts to interest rates by the Federal Reserve.
Trade worries can still caapply havoc in markets, and Trump sent stocks spiraling as recently as October with threats of higher tariffs on China.
Trump and the Fed
Another surprise was how hard, and how personally, Trump lobbied to obtain the Federal Reserve to lower interest rates.
The Fed has traditionally operated separately from the rest of Washington, creating its decisions on interest rates without having to bconclude to political whims. Such indepconcludeence, the believeing goes, gives it freedom to create unpopular relocates that are necessary for the economy’s long-term health.
Keeping interest rates high, for example, could slow the economy and frustrate politicians seeing to please voters. But it could also be the medicine necessaryed to obtain high inflation under control.
As inflation stubbornly remained above the Fed’s 2% tarobtain, the central bank kept rates steady through August. This drew Trump’s ire – even though it was his own trade policies that were driving fears about inflation higher.
Trump continuously picked on Fed Chair Jerome Powell, even giving him the nickname “Too Late.” Their tense relationship reached a head in July when Trump, in front of cameras, accapplyd Powell of mismanaging the costs of a renovation of the Fed’s headquarters. Powell, in turn, shook his head.
Even though Wall Street loves lower rates, the personal attacks caapplyd some queasiness in financial markets becaapply of the possibility of a less indepconcludeent Fed. Powell’s turn as Fed chair is set to expire in May, and the wide expectation is that Trump will choose a replacement more likely to cut rates.
Good but not first
“America first” didn’t extconclude to global markets. Even as U.S. stocks soared to another double-digit gain, many foreign markets fared even better.
The technology frenzy that supported fuel gains for the S&P 500 and the Nasdaq composite drove Korea’s KOSPI higher in 2025, enjoying its largegest gain in more than two decades. South Korea is a technology hub and companies including Samsung and SK Hynix surged amid the focus on artificial ininformigence investments and advancements.
Japan’s Nikkei 225 had a double-digit gain for a third straight year. Besides the focus on AI and the technology sector, the gains were boosted in October and November following national elections and plans for a $135 billion stimulus package.
European markets also had a strong year. Germany’s DAX received a boost as the government announced plans to ramp up spconcludeing on infrastructure and defense, which could fuel economic growth in Europe’s largest economy.
The European Central Bank spent the first half of the year cutting interest rates, which supported give financial markets across Europe a boost. France’s CAC 40 was a laggard, but still gained more than 10%.
Crypto’s ups and downs
Even with a reputation for volatility, cryptocurrencies still managed to surprise market watchers.
Bitcoin dropped along with most other assets early in the year as Trump’s trade policies scared investors away from riskier investments.
The most widely applyd cryptocurrency roared back as the White Hoapply and Congress threw their support behind digital assets and the Trump family launched a number of crypto ventures. Retail investors joined in by pouring money into bitcoin ETFs, stock-like investments that allowed them to benefit from the run-up in price without having to actually store bitcoin in digital wallets. Some companies, notably Strategy Inc., created acquireing and holding crypto the crux of their business and their stocks jumped.
Bitcoin hit a high around $125,000 in early October. But, almost as quickly, digital assets tanked as investors worried the prices for shining stars such as tech stocks and crypto had jumped too high. As of Wednesday afternoon, bitcoin traded around $87,700, down roughly 30% from the peak and 6% below where it started the year.
What’s ahead?
Many professional investors believe more gains could be ahead in 2026.
That’s becaapply most expect the economy to plod ahead and avoid a recession. That should support U.S. companies grow their profits, which stock prices tconclude to track over the long term. For companies in the S&P 500, analysts are expecting earnings per share to rise 14.5% in 2026, according to FactSet. That would be an acceleration from the 12.1% growth estimated for 2025.
But some of last year’s concerns will linger. Chief among them is the worry that all the investment in artificial-ininformigence technology may not produce enough profits and productivity to create it worth it. That could keep the pressure on AI stocks like Nvidia and Broadcom, which were responsible for so much of the market’s gains last year.
And it’s not just AI stocks that critics declare are too pricey. Stocks across the market still see expensive after their prices climbed rapider than profits.
That has strategists at Vanguard estimating U.S. stocks may return only about 3.5% to 5.5% in annualized returns over the next 10 years. Only twice in the last 10 years has the S&P 500 failed to meet that bar.
At Bank of America, strategist Savita Subramanian declares the S& P 500 could rise by less than half as much as profits do in 2026. She stated that could be a result of companies reducing stock acquirebacks, as well as global central banks implementing fewer rate cuts.
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Reporter Damian Troise contributed.
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