The U.S. stock market is closing out 2025 near a record high, with the S&P 500's 17% gain vaulting the index toward its seventh-best three-year run on record.
The yearslong rally appeared to end abruptly in the spring with the rollout of President Trump's "Liberation Day" tariffs and the emergence of "Sell America" trades that bet on the U.S.'s retreat from the world stage, only to roar back to life within weeks.
The slowdown foreseen by many on Wall Street never materialized in full. Tariff exemptions and a slew of trade deals have limited the inflationary effects of the highest import taxes in decades. And an artificial-intelligence arms race has triggered a capital-spending boom of epic proportions, propelling growth, minting millionaires -- and leaving the U.S. stock market even more top-heavy than before.
Chip designer Nvidia's 40% climb this year lags behind Broadcom's 51% advance and farther still from Alphabet's 66% rally. But those gains look pedestrian next to Advanced Micro Devices' 78% run-up. Palantir skyrocketed 139%. Micron Technology posted a stratospheric 248% increase.
The Dow Jones Industrial Average is up 14% this year, while the Nasdaq composite gained 21%.
On Tuesday, the benchmarks barely budged. The S&P 500 inched 0.1% lower and the Nasdaq ticked down by 0.2%. The Dow fell 0.2%, or 95 points.
Even as China's export machine has grown in the face of Trump's trade policies, pressuring economies around the world, much of Wall Street still views U.S. tech companies as pre-eminent. Broadcom plus the Magnificent Seven, which also includes Amazon, Meta, Tesla, Apple and Microsoft, now account for 40% of the S&P 500's market capitalization, according to Dow Jones Market Data. That is more than double the 15% commanded by the index's eight biggest names a decade ago.
"Betting against them is a dangerous game," said Thorne Perkin, president of wealth manager Papamarkou Wellner Perkin.
That concentration at times brought more turbulence to the markets this year, be it from April's tariff announcements, Chinese AI advances or construction delays at data-center projects. In November, an information vacuum during the government shutdown and scrutiny of AI's returns sent markets into a tailspin.
But with each setback, both Wall Street traders and individual investors stepped up -- and stepped in to buy the dip. The S&P 500 is up 38% from its lowest close in April.
Surprisingly resilient consumer spending shored up an uncertain economic backdrop.
"What most economists missed this year is how much money has been made by the 1%," Perkin added.
While rich asset owners have plowed money into homes, cars and more, analysts warn stress among lower- and middle-income Americans could destabilize the economy.
Inflation remains elevated. Job growth has slowed to a near-standstill. Unemployment is rising.
In their outlook for 2026, economists at JPMorgan Chase said the "jobless expansion" might mean productivity growth will continue to boost wage and wealth gains that help the economy plow ahead. On the other hand, weakness in the labor market -- and, in turn, all the spending that depends upon it -- may signal more fragility ahead.
"The juxtaposition of an acceleration in business spending alongside a material softening in job growth is unprecedented in the global economy over the past quarter-century," they wrote. "In the U.S., this juxtaposition is not evident in over 60 years of history."
The bank's analysts remain "constructive" on stocks despite the risks of an overly concentrated market. Goldman Sachs' baseline forecast is similarly "friendly" for equities thanks in part to stimulative tax breaks by Washington and the Federal Reserve's interest-rate cuts.
On Tuesday, newly released minutes from the central bank's December meeting showed participants are divided on the path forward. Futures markets are pricing in a coin flip's chance of at least two more quarter-point rate reductions by the end of 2026, according to CME Group.
Though bonds rallied this year, Treasury yields have remained relatively stable since the Fed began cutting last year, pressuring businesses that need to borrow and keeping mortgage rates far above prepandemic levels. The 10-year yield settled Tuesday at 4.128%.
"It's a sign of a healthy economy," said David Stubbs, chief investment strategist at AlphaCore Wealth Advisory. "The U.S. is a lot better with rates at 4% than at 2%. At 2%, you've got a problem."
As Wall Street moderated its outlook from the depths of April's market tailspin, the U.S. dollar stabilized after its worst first-half plunge in 50 years. But wild trading in other corners of financial markets continued.
Gold and silver traded like meme stocks en route to their largest one-year gains since the inflationary shock of 1979. Bitcoin plunged in recent months and is on track to finish the year below where it started.
Now, as investors look toward next year, more are turning away from richly valued tech stocks and toward banks, materials firms and healthcare companies closely tied to the real economy. Others are looking abroad, where indexes in Japan, the U.K., Germany and elsewhere outperformed their American peers this year.
"We aren't in the 'Sell America' camp -- that's pretty dramatic," said Jason Pride, chief of investment strategy and research at Glenmede.
In a new era of heightened trade barriers, he added, "If all these economies and markets are less hooked together than they used to be, then there are greater benefits in diversification."
Pride believes it is unlikely that the increasingly debt-fueled tech boom would go south in a hurry. But if the AI trade were to blow up, he said, the blast radius could be wide.
"Everybody is making the same bet over and over again," he said. "If it doesn't pan out, we have just plunked down a lot of money on the table that depreciates really quickly. And the clock is ticking."
