December Market Review: Historic Gains Despite Tariffs and Turbulence in 2025

January 2, 2026

Sean Gross, CFP®, AIF® | Co-Founder & CEO 

Despite numerous significant events throughout the year, 2025 proved to be an exceptionally strong period for financial markets. Investors navigated through tariff policy shifts in April, continuous advancements in artificial intelligence technology, the enactment of the One Big Beautiful Bill Act, and various other developments. Throughout these challenges, U.S. equities reached unprecedented levels, international markets delivered superior performance, and fixed income securities extended their recovery. The S&P 500 has now posted returns exceeding 10% in six out of the last seven years and has approximately doubled since reaching its trough in 2022.

The previous year demonstrates that maintaining discipline and concentrating on long-term objectives represents the most effective approach to managing uncertainty.

 2025 Market and Economic Highlights

• Including dividends, the S&P 500 advanced 17.9% during 2025, recording 39 fresh record peaks. The Dow Jones Industrial Average climbed 14.9% while the Nasdaq delivered a 21.2% return.
• The VIX, which gauges equity market volatility, concluded at 14.95 and remains modest relative to historical levels, despite spiking to 52.33 during April.
• The Bloomberg U.S. Aggregate Bond Index advanced 7.3%, marking its strongest annual performance since 2020. The 10-year Treasury yield declined to 4.17% by year-end from 4.57% at year-start.
• Based on the MSCI EAFE Index and MSCI EM Index respectively, international developed markets and emerging markets each rose more than 30% when measured in U.S. dollar terms.
• The U.S. dollar index closed at 98.32, dropping 9.3% from its 108.49 opening level. The dollar touched a low point of 96.63 in September.
• Bitcoin declined approximately 6.5% from $93,714 to $87,647, following a peak of $125,260 in October.
• Gold prices surged throughout the year, ending at $4,341 per ounce for a 64% increase. Silver prices similarly climbed to $70.60 per ounce from $29.24 at year-start.

Significant developments throughout 2025

Numerous developments during the past year fell into the category of "known unknowns." Former Secretary of Defense Donald Rumsfeld popularized this concept by differentiating "known unknowns" from "unknown unknowns." For investors, this framework proves valuable since the former represents uncertainties that can be anticipated. When markets respond to such events, investors can prepare beforehand and avoid unexpected disruptions.

Tariff-related concerns, for example, were clearly on investors' radar screens before April 2. Though this awareness didn't prevent market reactions given the magnitude of these trade measures, it enabled markets to recover swiftly once developments unfolded. Investors also anticipated Federal Reserve rate adjustments following labor market softening. Many likewise expected passage of new tax legislation given Republican control of both congressional chambers.

Even AI-related concerns, which represent perhaps the most significant market uncertainty currently, have remained prominent in investor thinking. While the DeepSeek development in January—when a Chinese AI firm demonstrated that models could be developed and operated more economically—caught markets off guard, the similarities to the dot-com era and previous episodes of elevated capital spending by major corporations are widely recognized.

The following represents a summary of the top 10 market-moving developments throughout the year: 

• January 20: President Trump takes office. 
• January 21: Announcement of the $500 billion private-sector Stargate project. 
• January 27: AI-related equities decline following DeepSeek announcement. 
• April 2 to 9: "Liberation Day" tariff declaration triggers a market correction. A subsequent 90-day suspension sparked a recovery. 
• July 4: The "One Big Beautiful Bill Act" becomes law, continuing numerous Tax Cuts and Jobs Act provisions.
• September 17: The Fed initiates a new rate-cutting cycle. 
• September 22: Nvidia and OpenAI unveil a significant strategic partnership and investment, generating concerns about "circular deals." 
• October 1: The government enters what becomes a record 43-day shutdown. 
• October 14: Jamie Dimon cautions about "cockroaches" following Tricolor and First Brands bankruptcies. 
• December 16: The BEA reports the unemployment rate reached a four-year peak of 4.6% in November. 

Three primary themes characterized the yearWhich themes influenced markets throughout these developments?

First, artificial intelligence clearly dominated market discussion during 2025. From substantial infrastructure commitments to worries regarding market concentration, AI emerged as a significant driver of economic expansion and market performance. The Magnificent 7 stocks now constitute approximately one-third of the S&P 500, establishing concentration risk that ensures most investors maintain exposure to these equities whether intentionally or not. Acknowledging this factor when developing investment strategies and financial plans will become increasingly critical.

Second, tariff policy generated uncertainty but produced less economic disruption than anticipated. While levies on imported goods increased substantially for numerous trading partners, the feared economic ramifications largely did not occur. This resulted from corporate adaptation, tariff suspensions or reductions, and sustained consumer spending. For investors, this illustrates that policy changes in Washington—whether involving trade or federal finances—do not always produce obvious effects on the economy or markets.

Third, numerous asset classes delivered strong performance during 2025. International equities outperformed U.S. markets, partly due to U.S. dollar weakness. Fixed income securities produced solid returns and have substantially recovered their 2022 losses. Additional individual assets including gold also achieved record performance. Therefore, capturing gains from these asset classes depends less on selecting individual investments and more on maintaining appropriate asset allocation that can capitalize on opportunities while controlling risk exposures.

The bottom line? 2025 represented a successful year for investors. While strong market performance merits recognition, it reinforces the critical importance of maintaining investment discipline. Investors should carry forward this principle as they develop their investment and financial plans for the year ahead.