If you looked at your 401(k) during the first half of 2025, you probably wanted to throw your laptop out the window. It was rough. The S&P 500 didn't just "dip"—it cratered nearly 19% by the time spring rolled around, mostly because everyone was freaking out over those massive reciprocal tariffs. But then, something weird happened. The market didn't stay down. It clawed its way back to finish the year up 17.9%, marking the third straight year of double-digit gains.
Now that we’re sitting in mid-January 2026, looking back at the s&p 500 performance 2025 year to date feels like reviewing a thriller movie. We saw the index nearly touch the 7,000 mark and hit a record high of 6,932.05 on Christmas Eve.
Honestly, the "everything rally" of late 2025 was one for the history books.
Why the Market Ignored the Drama
You’d think a massive trade war and 145% tariffs on China would be a permanent death blow for stocks. It wasn't. While the headlines were screaming about economic collapse, the actual numbers under the hood were surprisingly sturdy.
Earnings growth did the heavy lifting.
About 75% of the gains last year came from actual profits, not just hype or "multiple expansion." Companies simply made more money. According to data from RBC Wealth Management, the "One Big Beautiful Bill Act" passed mid-year acted like a shot of adrenaline for corporate balance sheets.
🔗 Read more: DJT Trading at 13.87: Why the Trump Media Rollercoaster is Far From Over
It wasn't just tech, either.
Sure, the "Magnificent 7" still did a lot of the work—accounting for about 42.5% of the total return—but things started to broaden out. For the first time in years, the "S&P 493" (everyone else) didn't look totally pathetic. Alphabet was the surprise MVP of the mega-caps, surging 66%, while NVIDIA "only" gained 38.9%.
The Sectors That Actually Made Money
If you bet on the basics, you might have felt a bit left behind. Defensive plays like Real Estate and Consumer Staples were basically the wallflowers of the 2025 party.
- Communication Services: This was the absolute winner, up 33%.
- Information Technology: No surprise here, finishing up around 24%.
- Industrials: This was the dark horse. Because of all the physical data centers and power grids needed for the AI boom, Industrials jumped 19.4%, actually beating the broader S&P 500.
- Materials: This was the stinker. It was the only sector to finish in the red, down about 10.5%.
The Federal Reserve also played a huge role in this roller coaster. They cut interest rates three times in the latter half of 2025, bringing the target range down to 3.50%–3.75%. That basically told investors, "The water's fine, come on in."
The OpenAI Shockwave
We can't talk about s&p 500 performance 2025 year to date without mentioning the AMD and OpenAI deal. In October, OpenAI signed a massive $120 billion contract to buy 6 gigawatts of AMD’s Instinct chips.
AMD stock went absolutely nuclear, finishing the year up over 77%.
It changed the narrative. It wasn't just a "Nvidia story" anymore. Suddenly, the entire AI infrastructure chain—from the chipmakers to the companies building the actual power lines—became the hottest ticket in town. This "AI supercycle" is what analysts at J.P. Morgan think will keep the momentum going through 2026.
What Most People Get Wrong About 2025
A lot of folks think 2025 was just another "AI bubble" year. That’s a bit of a lazy take.
While speculative trading did tick up, we didn't see the insane IPO frenzy that usually signals a bubble about to burst. IPO volume was actually pretty modest. Plus, international stocks—specifically in Germany and Japan—actually outperformed the U.S. for the first time in twenty years. The MSCI World ex USA Index gained about 30%.
💡 You might also like: Why a pic of one hundred dollar bill looks so different now
Basically, the U.S. was the worst performing major market in 2025, even with a 17.9% return. Let that sink in. The rest of the world finally woke up.
What Now? Practical Steps for 2026
We are two weeks into the new year, and the S&P 500 is currently trading around 6,944. It’s "priced for perfection," as the saying goes. There’s a lot of noise right now—criminal investigations into the Fed, talk of 10% caps on credit card fees, and geopolitical tension in South America.
But don't panic.
Earnings for 2026 are projected to grow another 12-14%. If you're looking at your portfolio today, here is how to handle the "post-2025" reality:
🔗 Read more: NJ Police Department Salaries: What Most People Get Wrong
Check your concentration. If you’ve been riding the AI wave, you’re likely heavily overweight in Tech and Comm Services. 2025 showed us that Industrials and Financials are starting to catch up. Rebalancing isn't sexy, but it works.
Watch the "One Big Beautiful Bill" tailwinds. The tax relief for households is expected to keep consumer spending from falling off a cliff, even if the job market slows down a bit. Look at companies that benefit from middle-income spending.
Don't ignore the Fed. While they were the "hero" of 2025, they’ve signaled they might be done cutting for a while. If inflation stays "sticky" around 2.7%, those high-flying valuations might start to feel a little heavy.
The 2025 market proved that resilience is a real thing. It survived tariffs, political upheaval, and a massive spring sell-off to end at record highs. Keeping a cool head in 2026 is going to be just as important as it was last year.