Investing can sometimes feel like a road trip. There are smooth stretches of highway, but also plenty of potholes, detours, and traffic jams along the way. 2025 was a perfect example of this journey. It wasn’t always a comfortable ride, but for those who stayed buckled in, the destination was well worth the trip.
US stocks marked their third consecutive year of double-digit gains, despite a landscape filled with economic twists and turns. Let’s break down what happened in the markets last year and what it means for your long-term financial journey.
The Big Picture: Climbing Higher in 2025
Despite some mid-year jitters, 2025 was a strong year for the markets. The S&P 500 climbed nearly 18%, closing near record levels and continuing its upward trend. However, the real standout performances came from international stocks, which soared an impressive 32%, and emerging markets, which outpaced even that with a 33.6% gain. US bonds also delivered solid returns, rising 6.3%.
This year’s numbers highlight the importance of diversification, reminding us not to keep all our eggs in one basket. Here’s a quick snapshot of the year’s performance:
- US Stocks (S&P 500): Up 17.9% [i]
- International Stocks: Up 31.9%[ii]
- Emerging Markets: Up 33.6%
- US Bonds: Up 6.3%[iii]
Overall, it was a year of broad gains, reinforcing the value of a well-rounded investment strategy.
This growth happened against a backdrop of significant events:
- Interest Rate Cuts: The Federal Reserve lowered interest rates by 0.75 percentage points (three separate cuts) to address labor-market concerns, even as it kept an eye on stubborn inflation.[iv]
- Tariff Uncertainty: New tariff announcements in the spring caused market jitters, but stocks rebounded as trade deals were announced.
- Government Shutdown: We saw the longest government shutdown in US history (43 days), yet the markets proved resilient, continuing to post gains during the closure.
Tech, AI, and Diversification
Technology companies remained a major topic of conversation. The tech-heavy Nasdaq advanced nearly 21% in 2025. You likely heard headlines about massive companies hitting multi-trillion-dollar market caps. While AI continues to drive excitement, it’s a good reminder that you don’t need to chase a few “big names” to capture that growth.
Technology touches almost every type of business today. By maintaining a broadly diversified portfolio, you ensure you aren’t missing out on the winners, regardless of where they appear or what industry they are in.
A Look Abroad
For the first time in recent years, developed international markets outperformed the US significantly—the widest margin since 1993. Emerging markets did even better, rising over 33%.
This serves as a powerful reminder of why we don’t put all our eggs in one basket. Just as you wouldn’t fish in only one spot of the lake all day if the fish aren’t biting, a globally diversified portfolio helps you catch growth wherever it happens to be occurring.
The Value of Staying the Course
If you had checked your portfolio on April 1st and then ignored it until May 1st, you might have thought 2025 was a calm year. But if you watched the daily news during April, it likely felt like a rollercoaster. Volatility is a normal part of investing, but it can be uncomfortable in the moment.
The lesson from 2025 and indeed, from the last 100 years of market data—is that patience pays off. Investors who reacted to the spring swoon or the government shutdown by exiting the market might have missed the recovery and subsequent gains[v].
Thinking about investments over the long term can help ease the urge to make hasty changes.[vi] Just like a well-planned road trip, if you know where you are going, a few detours shouldn’t stop you from reaching your destination.
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[i] US stocks performance based on S&P 500 data. S&P data © 2025 S&P Dow Jones Indices LLC, a division of S&P Global.
[ii] International stocks performance based on MSCI World ex USA Index and MSCI Emerging Markets Index. MSCI data © MSCI 2025, all rights reserved.
[iii] Bond market performance based on Bloomberg US Treasury Bond Index and Bloomberg US Aggregate Bond Index. Bloomberg data provided by Bloomberg Finance LP.
[iv] Interest rate data sourced from the US Federal Reserve statements, 2025.
[v] Past performance is not a guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio
[vi] This material is intended for educational purposes and should not be considered a recommendation to buy or sell a particular security.