The 2025 market in review: 5 key charts

Uncertainty dominated early 2025 as many forecasters braced for slower growth and markets repriced quickly after the Trump administration unveiled a broader and higher-than-expected tariff schedule. The shock culminated in early April, when U.S. equities suffered a sharp two-day drawdown as investors worried tariffs would lift costs, weaken demand, and invite retaliation.

Yet the economy proved more resilient than the initial narrative implied: Real GDP growth remained firm through midyear (including a 4.3% annualized gain in Q3), inflation cooled into the high-2% range by late 2025, and consumer outlays stayed supportive even as hiring slowed and unemployment drifted higher (ending 2025 at 4.4%).

Markets ultimately treated the tariff shock as a volatility event rather than a lasting earnings reset. After stabilizing from the April sell-off, equities recovered and finished the year with broad double-digit gains—led by large-cap growth/tech—helped by moderating inflation and a pivot toward easier monetary policy.

For calendar 2025, the S&P 500 rose 16.39%, the NASDAQ gained 20.36%, the Dow added 12.97%, and the Russell 2000 increased 11.26%. The Federal Reserve reinforced the improving risk backdrop by cutting rates three times in 2025 (September, October, and December), bringing the fed funds target range down to 3.50%–3.75% by year-end.

In hindsight, 2025 was another reminder that markets often reprice uncertainty well before the economic data ultimately validates (or refutes) the fear. Despite numerous perceived headwinds, markets will usually place greatest value on economic growth prospects and healthy corporate earnings. With 2025’s gain, the S&P 500 has now seen three consecutive years of double-digit returns.

2025 was not without significant headwinds

Despite the market’s gains and robust corporate earnings, not all data was positive in 2025.

The Motley Fool and other analysts cited several less encouraging developments last year, reflected in several key metrics:

Uncertain long-term inflation effect of tariff policy. Goldman Sachs economists estimate that U.S. consumers are now absorbing 55% of tariff costs, a share that could rise to 70%. Tariffs have added roughly half a percentage point to inflation measures.
Heavy dependence on artificial intelligence spending as a growth driver. Some analysts have raised concerns that this dependence may be unsustainable in 2026.
Slowing job growth. Through November, the economy added an average of 55,000 jobs per month, the lowest pace outside the pandemic period since the Great Recession. The unemployment rate reached 4.6% in November, its highest since 2021. The December jobs report showed unemployment dropped slightly to 4.4%, with 50,000 jobs added, down from 64,000 in November.
Historically low consumer sentiment. In 2025, the University of Michigan’s consumer sentiment index recorded its lowest annual average since the survey began in 1952.
Continued weakness in manufacturing. U.S. manufacturing activity fell in December, according to the Institute for Supply Management (ISM), marking the 10th consecutive monthly decline.

Related Article: Fed’s third rate cut of 2025: What’s next?

5 key charts that helped define the market in 2025

Charlie Bilello of Creative Planning notes in “7 Lessons From 2025” that “Everyone loves a comeback story.” That was certainly true for U.S. equity markets in 2025.

Bilello writes,

“There’s no better signal for investors than fear and panic which tend to be followed by positive outsized returns.

“And back in April of this year during the ‘Tariff Tantrum,’ we saw various forms of panic including:

“The 12th biggest 4-day decline in the S&P 500 since 1950 (-12.1%).
“The percentage of bears in the AAII sentiment poll rising to 62%, the highest since the week of the March 2009 low and before that the October 1990 low.
“The Volatility Index ($VIX) spiking 143% over 4 trading days with a close above 50 for the first time since 2020.

“What has transpired since is one of the biggest short-term rallies in history, with the S&P 500 rising 43% from its intra-day low on April 7. … This is one of the greatest market comebacks in history, right up there with 2020 and 2009.”

FIGURE 1: 2025 MARKET COMEBACK WAS THE SECOND-FASTEST RECOVERY IN THE LAST 75 YEARS

Line chart of the S&P 500 Index showing a sharp early-2025 sell-off followed by one of the fastest market recoveries in the past 75 years.

Source: Charlie Bilello, Creative Planning. Chart as of 12/11/2025.

FactSet now projects Q4 2025 earnings growth of 8.3%. If that projection holds, it will represent the 10th consecutive quarter of year-over-year earnings growth for companies in the S&P 500 Index.

FIGURE 2: S&P 500 EARNINGS PROJECTED TO SHOW CONTINUED STRONG GROWTH THROUGH 2027

Bar chart showing S&P 500 earnings growth through 2025, with analyst projections indicating continued growth through 2027.

Source: FactSet

Bespoke Investment Group notes that one of the biggest themes for 2025—and continuing into 2026—is concentration risk for the S&P 500’s performance:

“There is one topic that has now been at the forefront of investors’ minds for around a decade and will, in all likelihood, remain a key issue headed into the new year: concentration. As shown below [Figure 3], the Tech sector currently accounts for over a third of the S&P 500’s weight. That is far and away the largest sector with the next largest, Financials, only having a 13.4% weight. While those two sectors do have large numbers of stocks (70 and 76, respectively), the bulk of that weight (i.e. market cap) for Tech comes from a small handful of names. The three Magnificent 7 members that are part of Tech—Apple (AAPL), NVIDIA (NVDA), and Microsoft (MSFT)—alone are more than half of Tech’s weight. Similarly, Consumer Discretionary has more than half of its weight tied up in two stocks: Tesla (TSLA) and Amazon (AMZN).”

FIGURE 3: MARKET CONCENTRATION REMAINS A KEY THEME

Chart highlights S&P 500 sector concentration, showing technology’s outsized weight driven by a small number of large stocks.

Source: Bespoke Investment Group

In an article for Kitces.com (Nerd’s Eye View), James Liu, CFA, points to high market valuations as a key theme for 2026:

“The chart below [Figure 4] tracks the Shiller price-to-earnings (P/E) ratio, a popular way to measure price to earnings on a cyclically adjusted basis; hence, it’s sometimes known as the cyclically adjusted P/E ratio (CAPE). Specifically, the denominator of the valuation metric is calculated using ten years of inflation-adjusted earnings to reduce cyclicality. It is currently hovering just above 39, the second-highest level in over 150 years. It has only been higher once before, during the peak of the dot-com bubble in 1999, when it reached approximately 44.”

FIGURE 4: MARKET VALUATIONS APPROACHING DOT-COM LEVELS

Line chart of the Shiller P/E ratio shows U.S. equity valuations near levels last seen during the dot-com bubble.

Sources: Clearnomics, Robert Shiller

The University of Michigan’s long-running consumer sentiment survey continues to show significant economic and employment concerns for many Americans.

“While consumers perceived some modest improvement in the economy over the past two months, their sentiment remains nearly 25% below last January’s reading,” says Surveys of Consumers Director Joanne Hsu.

She adds, “They continue to be focused primarily on kitchen table issues, like high prices and softening labor markets. Although consumers’ worries about tariffs appear to be gradually receding, they remain guarded about the overall strength of business conditions and labor markets.”

FIGURE 5: UNIVERSITY OF MICHIGAN CONSUMER SENTIMENT REMAINS HISTORICALLY LOW