At a Glance
- The S&P 500 returned 18% in 2025, ending on a record high.
- Tariff shocks in April triggered a near 5% plunge.
- Bitcoin peaked at $125k before falling 30%.
- Why it matters: Investors navigated sharp swings yet the year closed with strong gains.
The year 2025 was a rollercoaster for investors, with the S&P 500 posting an 18% gain amid tariff turmoil, AI hype, and a volatile crypto market.
Tariff Turbulence
President Donald Trump announced a sweeping tariff package on April 3, causing the S&P 500 to fall 5% that day and 6% the next as China retaliated. The tariffs were paused on April 9 after the bond market reacted, easing fears and sending the market back on track.
Fed and Trump Showdown
Jerome Powell kept rates steady through August while inflation stayed above the Fed’s 2% target. Trump criticized Powell’s decisions, calling him “Too Late” and accusing him of mismanaging a Fed renovation. Powell’s term ends in May, and analysts expect a successor who may favor rate cuts.
Global Markets Outshine
Korea’s KOSPI achieved its biggest gain in over two decades, buoyed by AI-driven tech stocks. Japan’s Nikkei recorded a double-digit rise for a third straight year, helped by election-linked stimulus. Germany’s DAX rose after the government announced new infrastructure spending, and the ECB cut rates in the first half of the year.
Crypto Rollercoaster
Bitcoin fell early in 2025 amid tariff fears but rebounded as the White House and Congress supported digital assets. Retail investors poured money into Bitcoin ETFs, boosting the price to $125k in early October. By mid-week, Bitcoin traded around $87,700, a 30% drop from the peak and 6% below the year-start level.
| Event | Bitcoin Price |
|---|---|
| Early 2025 | $30k |
| Early Oct Peak | $125k |
| Mid-week | $87,700 |
Looking Ahead
Analysts project earnings per share for the S&P 500 to rise 14.5% in 2026, up from 12.1% in 2025. Yet concerns about AI profitability and overvalued stocks remain. Vanguard estimates U.S. stocks may return only 3.5-5.5% annually over the next decade.
Key Takeaways
- 2025’s 18% S&P 500 gain was driven by tariff shocks, AI enthusiasm, and a volatile crypto market.
- Bitcoin’s journey from a low to a $125k peak and back illustrates the market’s sensitivity to policy and sentiment.
- Future gains hinge on AI profitability and a potential shift in Fed policy, with long-term returns expected to be modest.
The year’s volatility underscores how policy moves and tech hype can dramatically reshape markets, but investors who weathered the swings saw substantial rewards.
