2025 was a year unlike any other, but big gains for stocks echoed from prior years. US stocks added 17% on a price return basis, following a 23% gain in 2024 and 24% gain in 2023. A wide range of assets hit all-time highs during the year. Some highlights include:1
- The S&P 500 nearly touched 7,000
- The Dow surpassed 48,000
- Gold topped $4,500 per ounce
- Bitcoin climbed above $120,000 (before settling near $88,000)
Several key factors helped propel markets, such as:
Energy costs fell throughout the year. Oil prices dropped from a peak above $80 per barrel earlier in the year to post-pandemic lows below $56 per barrel.
Rates fell. For the second consecutive year, the cost of borrowing came down a bit. Interest rates declined from multiyear highs as the US central bank lowered its key lending rate further.
Inflation stabilized. Prices across a range of goods and services continued to increase in 2025, which has played a big role in souring consumer sentiment. But the rate of growth largely leveled out, providing some stability.
Artificial intelligence (AI) augmented earnings growth. Corporate profits broadly hit record highs, largely due to spending on the AI buildout, helping buttress rising stock prices.
These factors and more made for a dynamic 2025. As the calendar flips to 2026, here's a closer look at how markets performed last year and what you might expect in the new year.
AI euphoria underpins 2025 stock performance
You can't describe the 2025 stock market without talking about tariffs and AI. While focus on tariff policy—which dominated the market in early 2025—has subsided somewhat, AI captured headlines in the latter half of the year and may continue to do so in 2026.
Fidelity research reveals that roughly 60% of GDP growth is being driven by the AI buildout. That helped communication services and tech outpace the rest of the market for the third straight year. Comm services added 33% and tech gained 24% last year, after surging 39% and 36% respectively in 2024 and roughly 60% for both sectors in 2023.
| Sector | 2025 | 5-year | 10-year |
|---|---|---|---|
| Communication services | 33.0% | 105.1% | 197.6% |
| Technology | 24.4% | 150.9% | 677.1% |
| Industrials | 18.7% | 79.0% | 181.7% |
| Financials | 14.2% | 90.6% | 180.7% |
| Utilities | 13.4% | 39.6% | 96.0% |
| Health care | 13.2% | 38.7% | 115.0% |
| Materials | 9.4% | 29.4% | 108.0% |
| Consumer discretionary | 6.2% | 49.7% | 207.6% |
| Energy | 5.5% | 143.3% | 52.3% |
| Consumer staples | 1.9% | 25.7% | 65.3% |
| Real estate | 0.6% | 14.9% | N/A |
| S&P 500 | 17.3% | 80.0% | 252.3% |
Source: Fidelity.com, as of January 1, 2026. Data is cumulative, and returns are on a price return basis (i.e., they do not include dividends). Sector performance is based on S&P 500 sector indexes.
Industrials—which became a closely related sector to the AI buildout for the key role many of these companies play in data centers, power production, and other AI support services—was the lone other sector to outperform the S&P 500. All told, all 11 stock market sectors ended the year in the green (only materials finished in the red in 2024).
Market breadth broadened a bit more in 2025. Nevertheless, certain mega-caps (i.e., the Magnificent 7) were responsible for a large proportion of the market's gains, and large-cap stocks outperformed both mid-caps and small-caps once again. After a long period when mid-caps and small-caps consistently beat large-caps, it’s been the latter that has dominated over the last decade-plus. Within cap size, here were the top 5 stock gainers across these categories:
| Large-cap/mega-cap | Medium-cap | Small-cap |
|---|---|---|
| Micron ( |
Echostar ( |
Regencell Bioscience ( |
| Robinhood ( |
Lumentum ( |
QMMM ( |
| Rheinmetall ( |
Bloom Energy ( |
Abivax Societe ( |
| Newmont ( |
Lundin Gold ( |
Discovery Silver ( |
| Siemans Energy ( |
Western Digital ( |
Cidara Therapeutics ( |
Source: Fidelity.com, as of January 1, 2026.
Another noteworthy stock market trend from 2025 was the outperformance of international stocks versus US stocks. Led by improving fundamentals, an earnings awakening, and relatively attractive valuations for markets in Germany, Japan, and several other countries, the MSCI World ex USA Index gained roughly 30%—far outpacing the S&P 500's 17% increase.
2026 stock outlook
Will stocks "four-peat" in 2026 after "three-peating" in 2025? If so, will last year's winners repeat in a momentum play? Could there be a rotation to other parts of the market? These are questions active investors may be wondering as the new year potentially brings new trading strategies.
Over the last several months, there has been some shakeout of the speculative corners of the market with weakness among riskier stocks and bitcoin in particular. At the same time, there's been some rotation into historically more diversified market giants. Since peaking in late October, the tech-heavy Nasdaq has edged lower, while the Dow Jones Industrial Average gained more than 4%.
Regardless, US stocks are trading near record highs, and there are reasons to think stocks can sustain their momentum. In addition to several bullish economic factors, there are strong themes across sectors, highlighted by the AI buildout that could continue to bolster comm services, tech, and industrials, as well as utilities, energy, and others. Additional themes could power other sectors, like the global race for certain metals might mine more gains for materials, and the potential proliferation of GLP-1 drugs to treat diabetes and obesity could help health care stocks thrive.
From a historical perspective, there are several competing trends for how 2026 could play out. For example, following a year of positive stock market gains, the S&P 500 has risen 7.3% on average since 1945, rising 2 out of every 3 times. Under this scenario, history says let the winners ride by owning an equal amount of the best-performing 3 sectors or top 10 sub-industries for the coming year, according to stock market research company CFRA. However, the fact that stocks have risen 3 straight years presents a potentially bearish outlook. CFRA notes that 4 consecutive positive years has occurred just twice since 1945: 1949-1952 and 1995-1999, with the latter being the only period of 5 consecutive positive years.
Bears might also point out that there are looming market risks, including:
- Plunging consumer sentiment. Lingering inflation and other economic worries have driven several measures of consumer confidence to multiyear lows.
- Growing labor market worries. Some economic weakness as well as the possibility for AI to eliminate jobs has shown up in recent jobs reports.
- Rising debt loads. Credit card debt and default levels recently reached their highest levels in years, potentially signaling growing financial stress among consumers.
However, Jurrien Timmer, director of global macro at Fidelity, thinks that 2025 may have laid the groundwork for a positive 2026. "It was an unusual year with many crosscurrents, like tariff headwinds and Fed tailwinds, but factors like a capex boom could continue to support earnings," Timmer says. "And the bond market (which can come into greater focus when market risks are rising) has remained relatively quiet. All the factors have added up to a resilient market."
2026 stocks
Every year brings new opportunities and challenges. 2025 was a year of significant change and uncertainty, whose unusual circumstances were an apt reminder to stay diversified and balanced. Whatever 2026 brings, now is a good time to reevaluate your strategy to ensure it's lined up with your short- and long-term investing and trading goals.