Fortunately that 20% decline marked the low for the S&P 500. From that bottom, U.S. stocks launched one of their best rebounds ever – climbing 35% in the six months from April to October. For the year the S&P 500 gained 16% in 2025.
- S&P 500 (SPY): +16%
- Dow Jones Industrial Average (DIA): +13%
- NASDAQ 100 (QQQ): +20%
- Vanguard International Stocks (VEU): +28%
*charts from tradingview.com
Many widely held stocks did well in 2025. AI software company Palantir (PLTR) once again led the way higher as one of the top performing stocks in the S&P 500. Google also did well and gold logged its second big year in a row. Apple, Amazon and Bitcoin were laggards.
- Palantir (PLTR): +136%
- Google (GOOG): +65%
- Gold (GLD): +62%
- Nvidia (NVDA): +37%
- Tesla (TSLA): +20%
- Apple (AAPL): +12%
- Amazon (AMZN): +5%
- Bitcoin (IBIT): -10%
4 Catalysts that Drove Stocks Higher in 2025
Strong global economic growth: The global economy grew at a solid pace in 2025. According to the International Monetary Fund global GDP will expand between 3% and 3.2% in 2025. Anything above 3% is good.
Record corporate earnings in 2025: The strong global economy drove the S&P 500 into record profit for 2025.
Inflation was better in 2025: Inflation has been trending lower for the last 4 years and it continued to fall in 2025.
Fed lowered interest rates: The fed lowered interest rates in 2025.
Strong global economic growth: Wall Street is looking for global GDP growth of 2.8%-3.2% in 2026. This would be slightly lower than 2025 – but still very good. I predict global economic growth will surprise to the upside in 2026 and be at the higher end of the predicted range. Take a look at the link below to a report from Goldman Sachs.
Inflation will continue trending lower: The rate of inflation has been trending lower for a few years and it will continue to trend lower in 2026. The primary driver of the lower inflation rate has been energy. The price of oil has been falling for a few years and just hit a new multi-year low.
Interest rates will continue falling in 2026: The fed is scheduled to continue lowering interest rates in 2026. This is a tailwind for the economy and the stock market.
S&P 500 is in a bull market: The S&P 500 is currently in a bull market. According to history, this bull market is still relatively young and should last at least a few more years. Below are some great stats from Carson Research on the length of the average bull market and how the current one compares.
But much like 2025 – I don’t expect the path higher to be smooth. I am expecting to see the usual bouts of volatility and a few pullbacks in 2026.
The S&P 500 is richly valued: After a solid run higher in the last three years, the S&P 500 is richly valued compared to history.
Midterms in November 2026 add uncertainty: The S&P 500 has a history of lower gains during mid-term election years. However on the plus side, the sixth year of two-term presidents tends to be a good year for stocks.
The Big Picture on 2026: 2025 was another strong year for US stocks with the S&P 500 gaining 16%. Looking forward – I am expecting the usual volatility and pullbacks but remain optimistic on the S&P 500 in 2026. Many of the trends that drove stocks higher in 2025 will remain in play in 2026. That’s why my goal for the S&P 500 is a 10% gain in 2026.
