Wall Street finished 2025 near record highs on Wednesday, as ballooning tech valuations and hopes of lower interest rates helped stock markets defy a year of economic uncertainty.
The benchmark S&P 500 rose 16.4% over the course of the year, closing at 6,845.50 on New Year’s Eve in New York, as investors largely shrugged off geopolitical uncertainty and the frenzy around artificial intelligence continued.
It fell 0.7% during Wednesday’s trading session. Other global indices had an even stronger year. In London, the FTSE 100 enjoyed its biggest annual gain since 2009, advancing 21.5%.
The Dow Jones Industrial Average gained 13.4% during 2025. The tech-focused Nasdaq Composite rallied 20.5%.
A line chart showing S&P 500
Donald Trump’s aggressive plan to impose sweeping US tariffs on imports from across the world spooked investors in the spring but 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.
A line chart showing Nasdaq Composite
Fears of an emerging bubble in tech valuations loom large. The entire Nasdaq has surged by more than 110% since OpenAI introduced ChatGPT in November 2022, sparking a sharp increase in interest surrounding the possibilities presented by 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.
A bar chart showing S&P annual performance
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, Trump appears to monitor the market closely, and regularly cites strong rallies as evidence of a strong economy on his watch.
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.
