In a year marked by economic turmoil, Wall Street's performance in 2025 was nothing short of remarkable. Despite the challenges, the stock market ended the year near record highs, driven by a surge in tech valuations and the promise of lower interest rates. But here's where it gets controversial: while the S&P 500 rose 16.4%, the broader market's performance was buoyed by a sustained rise in tech stocks, with the Nasdaq Composite rallying an impressive 20.5%.
The year began with a jolt as Donald Trump's aggressive plan to impose sweeping US tariffs on imports from around the world spooked investors in the spring. However, the acute anxiety gave way to a stubborn cynicism around the so-called 'Taco' trade: Trump Always Chickens Out. While the US president did roll back some tariffs in response to concerns over their impact on American consumers and businesses, tariffs have surged to the highest average effective rate since 1935.
The longest US government shutdown in history also shrouded the economic landscape in a further layer of fog, as inflation held firm, jobs growth stalled, and the Federal Reserve weighed highly-anticipated decisions on rates. But the wider market was buoyed by a sustained rise in tech stocks, driven by enormous interest in the potential of AI.
At the heart of the rally is Nvidia, the top chipmaker, which this summer became the first public company in history to scale a $4tn market value, amid a stratospheric increase in its stock price. It finished the year up 34.8%, with a valuation of $4.55tn. The S&P 500, dominated by tech stocks like Nvidia, Apple, Microsoft, Amazon, and Alphabet, owner of Google and YouTube, enjoyed its third consecutive positive year in 2025, albeit with its weakest growth of the three.
Analysts broadly expect more of the same in 2026, having issued relatively optimistic market forecasts for the year ahead. A further climb is likely to please the president, despite his protests. But many Americans remain apprehensive about the economic outlook. Twice as many Americans believe their financial security is getting worse than better, according to a Harris poll for the Guardian. And the stock market rally has disproportionately benefited the wealthy, leading some economists to refer to a 'K-shaped economy' that is deepening inequality and has left those without investment portfolios feeling left behind.
