October was another strong month for the U.S. stock market. The S&P 500 (SPY) gained 2.5%, the NASDAQ 100 (QQQ) was up 4.7% and the Dow Jones Industrial Average (DIA) was up 2.5%. Despite some extreme volatility early in the year, U.S. stocks have been on a roll in 2025. October was the sixth consecutive month of gains for the S&P 500 and the NASDAQ. That strong momentum has driven another solid year of gains for U.S. stocks. The NASDAQ is up 21% on the year, S&P 500 is up 16% on the Dow Jones Industrial Average is up 11%. Take a look at the 2025 gains in the chart below.
These Three Factors Have Driven the Gains in 2025
U.S. economy growing nicely: The U.S. economy expanded 3.8% in the second quarter. That is the fastest pace of growth in two years.
U.S. corporate earnings hit new record: The strong U.S. economy is driving corporate earnings growth. U.S. corporate earnings hit a new record high in the third quarter of 2025.
The Federal Reserve lowered interest rates: Adding fuel to the fire. the Federal Reserve has lowered short-term interest rates two times this year and is expected to continue lowering for the indefinite future. Lower interest rates drive economic growth and stock prices.
Here are the Risks to U.S. Stocks
As always, stocks have a few things to worry about.
-U.S. stocks are richly valued.
-Slowing labor market.
-Lingering risk of higher inflation.
-High level of U.S. debt.
What to Expect Looking Forward
Despite the risks listed above I remain optimistic on stocks. In fact, I am expecting a solid finish to the year. Not only because stocks have solid upward momentum right now, but also because the S&P 500 has entered its strongest time of the year. Historically speaking, November and December are two of the best months of the year for the S&P 500. Take a look at the chart below.
The Big Picture on U.S. Stocks: The S&P 500 got off to a rough start in 2025. However the index stabilized and has launched a record rally in the last six months. After the extended rally, stocks are having another good year, delivering solid gains. Looking forward I am expecting a strong close to the year because of upward momentum and the seasonal effect.
Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
