2025: The Year in Charts
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Here are the charts and themes that tell the story of 2025…
I. The Great Unknown
The beginning of each year is a time of hope and promise, a clean slate to start anew.
Whatever happened last year is in the past – and the great unknown that is the future awaits.
The thought of that can be both exciting and scary at the same time, because no one knows if that future will be cruel, calm, or chaotic.
And more often than not, it’s all of the above at different moments – and 2025 was no exception.
The year started out benign enough, with S&P 500 building on a strong upward trend throughout 2024.
On February 19, the S&P 500 closed at its 3rd all-time high of the year, up 4.5% year-to-date.
Would it be a repeat of 2024 – another year of smooth sailing?
The answer to that question would come soon enough…
II. The Tariff Tantrum, Part 2
No one rings a bell at the top.
Which is why no one suspected anything more than a standard pullback when the S&P 500 gave up its gains on the year in early March.
But a storm was quietly brewing, and by early April it had intensified into a full-blown hurricane.
Ascribing a specific “reason” for a big stock market decline is often a difficult endeavor. But not this time. The primary fear among market participants was clear as day: trade wars and tariffs.
On April 2 came “Liberation Day,” and with it “reciprocal tariff rates” that were much higher than anyone expected on nearly every country around the world.
The market reaction was swift, with the S&P 500’s decline reaching -21% by April 7, the 2nd fastest bear market in history.
When the market closed April 8, it was down over 15% on the year, the 4th worst start to a year in history.
In a poll I conducted on X that day, two-thirds of respondents said the US economy was headed for a recession.
The Volatility Index ($VIX) had closed above 50, an indication of extreme fear.
And bearish sentiment (AAII Investor Poll) had risen to its highest level since March 2009.
All hope was lost. Or so it seemed.
III. Tacos and Turnarounds
When were the new punitive tariff rates supposed to begin?
April 9.
And when did they actually begin?
Never.
On April 9, President Trump did a 180 degree reversal, initiating a 90-day pause on the higher planned tariff rates for all countries except China.
The US stock market rose 9.5% that day in its third biggest one-day gain since 1950.
In the subsequent weeks and months, this same pattern would play out again and again. New tariffs were threatened and announced only to be removed or delayed within hours/days. And when the about face came, the stock market would explode higher, not only erasing the prior losses but tacking on additional gains as well.
Thus the “TACO trade” was born, whereby “Trump Always Chickens Out” after announcing aggressive tariff policies. And with each new tariff threat, the sell-offs seemed to become smaller, as fewer market participants believed they would actually be enacted.
By the end of June, the fears over tariffs had vanished, and the S&P 500 was back at all-time highs.
This was one of the fastest turnarounds in market history, with the S&P 500 gaining 22% in just 12 weeks.
And the 64% decline in the $VIX during this period was the biggest volatility crash we’ve ever seen.
It took less than 3 months from the April 2025 bear market lows for the S&P 500 to hit a new all-time high. That was the 2nd fastest recovery for US stocks in the last 75 years, trailing only the vertical rally in 1982.
During bear markets, it’s tempting to think you can get out and get back in when the “coast is clear.” The only problem? By the time the coast is clear, many of the best days and biggest gains will have already passed. We saw that once again in 2025.
IV. A Wave of Easing
With the exception of Brazil and Japan, nearly all of the major global central banks cut interest rates in 2025…
The US Federal Reserve cut rates by another 75 bps (25 bps in September, October, and December), adding to the 100 bps of rate cuts in 2024.
That brought the Fed Funds Rate down to a new range of 3.50% to 3.75%.
Why did the Fed cut rates?
Growing evidence of a weaker labor market, which saw the Unemployment Rate rise to 4.6% (highest since September 2021) and jobs growth slow to just 10k per month (over the last 4 months, fewest since 2020 recession).
What about the other part of their “dual mandate,” maintaining price stability?”
They seem to be ignoring that for now, with US CPI averaging close to 4% per year since the start of 2020, nearly double the Fed’s target.
While Americans live in the real world of punishing cumulative inflation, the Fed is only focused on how much prices have increased over the last 12 months. And while even those prices have yet to hit the Fed’s 2% target (latest CPI report showed a 2.7% YoY increase), the Fed still believes monetary easing is warranted.
As for QT (Quantitative Tightening), that came to an end in November with the Fed’s balance sheet shrinking by over $2.4 trillion from its 2022 peak.
And without any pause or delay, a new QE (Quantitative Easing) program has begun, starting in December with $40 billion per month of Treasury Bills. After four straight years with a balance sheet reduction (2022-25), the Fed will enter 2026 printing money and expanding its balance sheet once again.
V. Deeper in Debt
In a year filled with many surprises, rising National Debt wasn’t one of them. Everyone expected our nation’s debt to increase and increase it did, rising another $2.3 trillion in 2025 to end the year at $38.5 trillion.
This follows increases of $2.2 trillion in 2024, $2.6 trillion in 2023, $1.8 trillion in 2022, $1.9 trillion in 2021, and $4.5 trillion in 2020. The National Debt has more than doubled over the last decade.
To say the US government is spending money like a “drunken sailor” would be an insult to drunken sailors who at least a) spend their own money and b) quit when they run out of funds.
In contrast, the US government has no constraints – they spend other people’s money and then spend even more, borrowing to close the gap.
With the passage of the “Big Beautiful Bill” came a host of new tax cuts (see chart below for summary) in addition to the extension of the 2017 tax cuts. There was also a $5 trillion increase in the “debt ceiling,” meaning another showdown is likely at some point in 2027. The question is not whether we will continue to run a deficit in the years to come (absent real spending cuts, we most certainly will), but how big those deficits will be.
VI. The World Strikes Back
If someone told you the US would increase overall tariff rates from 2% to 14% in 2025, you would likely have assumed that this would have hurt international stocks as US imports would decline and the Dollar would rise.
But naturally, the exact opposite occurred, with imports spiking to due to the front-running of tariffs and international stocks outperforming US stocks by their widest margin since 1993.
Meanwhile, the US Dollar Index fell 9% on the year as international currencies rose in value, providing an additional boost to US-based investor returns.
“Why should I own anything other than the S&P 500.”
That was #1 question investors were asking at the start of 2025.
Now they have the answer…
VII. Investors Partying Like It’s 1999
While international stocks reversed a 16-year trend of US outperformance in 2025, the same could not be said for major factors within the US market:
- The S&P 500 Index has outperformed the S&P 500 Equal Weight Index by 34% over the past 3 years, the widest 3-year performance gap in history. The prior record was 32% outperformance from 1997-1999 which was followed by a sharp reversal and 7 years of Equal Weight outperformance.
- US Large Caps (S&P 500) outperformed US Small Caps (Russell 2000) by 5% in 2025, their 5th straight year of outperformance. That ties 1994-1998 for the longest streak of Large Cap outperformance ever. That prior streak was followed by 6 straight years of Small Cap outperformance (1999-2004).
- Growth stocks outperformed Value stocks by 3% in 2025, their third straight year of outperformance and a record eighth year outperformance in the past nine years. The ratio of Growth to Value has surpassed the March 2000 bubble peak.
Speaking of bubbles, many comparisons have been made to the dot-com era with AI boosting optimism and valuations to levels we haven’t seen since back then.
US Tech sector outperformance hit a new record high in 2025, moving above the peak from 2024 and March 2000.
And concentration among the “Magnificent Seven” stocks ended the year at close to 35%, another record high. The weighting of the top 10 stocks in the S&P 500 grew to a record 39% as the biggest stocks in the index outperformed once again.
Leading the charge was Nvidia, which became the world’s biggest company in 2025 and the first ever to surpass a $5 trillion market cap.
But 2025 was not the same story as 2023-2024 when we saw massive outperformance among all of the Magnificent 7 names. Five out of the Seven stocks in the Magnificent Seven actually underperformed the S&P 500 in 2025 – only Google and Nvidia outperformed.
Which means that investors are trying to decipher who the biggest AI winners will be.
Is this narrowing leadership also a sign that large cap growth outperformance is in the final innings and more vulnerable to a shift in leadership? Only time will tell, but this will be one of the key things investors will be watching in 2026.
VIII. The Physical/Digital Gold Divergence
Gold ended 2025 up over 64%, its best year since 1979.
That gain was more than enough to push real (inflation-adjusted) gold prices up to new highs for the first time since the 1980 peak. The ratio of gold to inflation ended the year at 13.3x, its highest level ever.
Gold thrives on uncertainty, and there was plenty of it to go around in 2025 with the tariff turmoil and longest government shutdown in history. It also likely benefitted from the falling dollar, increase in national debt, and the unnecessary/unwarranted monetary easing from the Fed.
Up until early October, Bitcoin seemed to be benefitting from many of the same narratives, but after a 36% correction it would end the year down 6%.
Was this simply a reversion to the mean after an incredible run that saw Bitcoin more than double in both 2023 and 2024 and spike to a peak of $126,000 in 2025? Or is this the start of a bigger Bitcoin correction like we saw most recently in 2022 (-78%) and 2018 (-84)? Like many questions in markets, these can only be answered with the benefit of hindsight.
IX. Triumph of the Optimists
The recession that many predicted during the tariff tantrum in April never arrived.
After a 0.6% decline in Q1, Real GDP in the US grew 3.8% in Q2 and 4.2% in Q3 (annualized rate).
That brings the US economic expansion up to 65 months and counting, with most now expecting it to continue for at least another quarter (latest Atlanta Fed Q4 GDP estimate: +2.7%).
The S&P 500 ended the year up 18% on a total return basis, earning a double-digit percentage gain for the third straight year.
What propelled the US stock market higher?
Earnings and expectations.
S&P 500 operating earnings rose 13% during the year to new record highs.
And on top of that growth we saw a multiple expansion of 3%, with the S&P 500’s P/E ratio moving up to 26x at year-end from 25.2x at the start of the year. Expectations for future growth are high, with the S&P 500’s P/E ratio now 40% above the historical median since 1989.
Expectations within the corporate bond market are lofty as well, with investors reaching for yield as if there will never be a default cycle again. Investment Grade spreads hit their tightest levels since 1998 during the year (0.74%) while High Yield spreads hit their tightest levels since 2007 (2.59%).
This spread tightening boosted credit-sensitive areas of the bond market (US High Yield +8.6%) while the falling interest rates (US 10-Year Treasury moving from 4.58% down to 4.18%) helped boost rate-sensitive sectors. Emerging Markets were the best performers overall, with local currency bonds ($EMLC ETF) gaining nearly 19%.
The Aggregate US bond market was up over 7% in 2025, its best year since 2020.
The US 60/40 portfolio, which had been declared “dead” by many in 2022 when both stocks/bonds fell, rose 13.6% in 2025, following gains of 15.5% in 2024 and 18% in 2023.
Stocks have done the heavy lifting over the past seven years, responsible for nearly all of the 60/40 portfolio’s 11.6% annualized gain. The 18% annualized return for US stocks over the last seven years is the highest since early 2001.
Within the S&P 500, all 11 sector ETFs finished higher led by Technology ($XLK) with a 25% gain.
The Dow hit at least one new all-time high for the 13th straight year, surpassing the record run from 1989 to 2000. Records are indeed made to be broken.
23 out of the 30 stocks in the Dow finished up on the year, with Caterpillar leading the way (+60%).
Like every year, there were winners and losers, but the number of winners far outpaced the number of losers in 2025.
With the exception of Bitcoin, every major asset class ended 2025 in the green, led by Gold’s 64% gain.
The S&P 500 would end the year at 6,846, hitting 39 more all-time highs and besting the average Wall Street firm’s price target by over 200 points.
The 4th worst start to a year in history was followed by a 37% advance to year-end, one of the greatest market comebacks in history.
All in all, it was a triumph of the optimists once more.
XI. What Comes Next?
These were the charts and themes that told the story of 2025. As always, the narratives followed prices.
As prices change in 2026, the narratives will surely change as well.
- Where will the S&P 500 end 2026?
- How about the 10-Year Yield?
- Where is Crude Oil headed?
- Is Gold or Bitcoin a better investment today?
- How many times will the Fed cut rates in 2026?
- Will inflation finally move down to the Fed’s 2% target?
- When will the economy fall into recession?
I don’t know the answer to any of these questions.
As Lao Tzu said, “those who have knowledge don’t predict. Those who do predict don’t have knowledge.”
What’s the alternative?
Weigh the evidence as it comes, invest based on probabilities, be forever humble and thankful, and leave the predictions to those whose job it is to entertain. That’s the best you can do in this fickle business of investing – try to find the right path for you and stick with it long enough to reap the enormous benefits of compounding.
In 2026, I predict one thing and one thing only: you will see many more surprises. For that is the nature of markets.
I wish you all a happy, healthy, prosperous and fulfilling 2026.
If we can help you on your road to wealth, reach out.
Get a FREE Wealth Path Analysis from Creative Planning to ensure you’re on the right path for 2025.
Creative Planning is proud to provide comprehensive wealth management services to clients in all 50 states and abroad, with over $385 billion in assets under management and advisement. So whether you’re in New York, California, Texas, Florida or place in between, there’s an advisor near you!
Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. Read our full disclosures here.
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