Stock Market in the Last Year: What Most People Get Wrong

If you only looked at the headlines for the stock market in the last year, you probably think it was a smooth, boring ride to the moon. The S&P 500 finished 2025 up about 17.9%, which sounds like a standard "good year." But honestly, that number hides a massive amount of chaos.

Investors basically spent the first half of the year in a panic. Remember April 2025? The US introduced reciprocal tariffs that sent developed market equities tumbling more than 16%. People were calling it the end of the bull run. Then, the market just... shrugged. It turned into a "vegetables first, dessert later" kind of year, where the early pain paved the way for a massive rally in the second half.

Why the Stock Market in the Last Year Wasn't Just About NVIDIA

We've all heard the "Magnificent Seven" story a thousand times. But in 2025, that group actually started to fracture. It wasn't a monolith anymore. While Alphabet (GOOGL) crushed it with a 66% return, and NVIDIA managed to climb nearly 39%, others like Meta and Tesla were much more modest.

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The real story was the "everything rally" that started to broaden out. For the first time in years, international stocks actually outpaced the US. The MSCI World ex-USA Index gained roughly 30%. That’s a huge deal. It means the decade-long era of "US exceptionalism" is finally facing some real competition. If you were only holding US tech, you actually underperformed the global average.

The Weird Renaissance of Data Storage

While everyone was looking at AI chips, the boring stuff—data storage—quietly exploded.

• Western Digital (WDC) ended the year up over 260%.
• Seagate Technology (STX) wasn't far behind, gaining 217%.
• Micron (MU) surged 240%.

Why? Because you can't run a massive AI model without a place to put the data. These "hardware" stocks became the backbone of the market while the flashy software companies like The Trade Desk (TTD) got absolutely hammered, losing 68% of their value. It was a year where physical infrastructure mattered more than digital ad-tech.

The Fed and the Pivot That Actually Happened

Everyone spent 2024 guessing when the Federal Reserve would finally cut rates. In 2025, they actually did it. Jerome Powell and the FOMC delivered three 25-basis-point cuts in the second half of the year—September, October, and December.

This moved the benchmark rate down to a range of 3.50% to 3.75%.

It wasn't just about making borrowing cheaper, though. It was a psychological shift. The Fed essentially signaled that they were "done" with the inflation fight, even though CPI was still hovering around 2.6% in the summer. This "risk management" move, as Powell called it, gave the market the green light to push the S&P 500 nearly to the 7,000 mark by Christmas Eve.

Gold and Bitcoin: The Safe Haven Paradox

Usually, when the stock market is ripping, gold stays quiet. Not last year. Gold topped $4,500 per ounce, which is wild. You had this weird situation where investors were bullish enough to buy tech stocks but scared enough to hoard gold.

Bitcoin followed a similar, albeit more volatile, path. It climbed above $120,000 before settling back down near $88,000. It's becoming clearer that "digital gold" is becoming a staple in portfolios, but it still behaves like a tech stock on steroids when the market gets twitchy.

The AI Bubble Debate: Is It 1999 All Over Again?

By November 2025, the "bubble" talk reached a fever pitch. Jeff Bezos called the AI investment boom an "industrial bubble," and even Sundar Pichai mentioned some "irrationality" in the market.

But here’s the nuance: the valuations in 2025 weren't nearly as insane as the Dot-com era. NVIDIA's price-to-earnings (P/E) ratio actually stayed in the 50s because their earnings were growing so fast. In 1999, companies with zero revenue were trading at infinite multiples. Today, these companies are printing cash.

That said, the "AI Cold War" with China created some real friction. When the Trump administration banned the sale of H20 chips to China early in the year, NVIDIA lost billions in market cap in a single week. The market recovered only when it became clear that domestic demand for data centers was more than enough to fill the gap.

Actionable Insights for 2026

Looking back at the stock market in the last year, the biggest takeaway is that diversification actually worked for the first time in a decade. If you were 100% in the S&P 500, you did fine, but you missed out on the massive gains in emerging markets and hardware.

What to do now:

1. Check your concentration: If NVIDIA or Alphabet now makes up 20% of your portfolio because of the 2025 run, it’s time to rebalance.
2. Look at "Old Tech": The 2025 performance of Western Digital and Micron shows that the AI trade is moving from "hype" to "physical build-out." Look for the companies providing the copper, power, and cooling for these data centers.
3. Don't ignore the Fed: While rates are lower, the Fed has signaled they might pause in early 2026. Don't assume the "free money" era is coming back entirely; 3.5% is still much higher than the 0% rates we saw a few years ago.
4. Watch the Tariffs: Trade policy was the biggest source of volatility in 2025. Any new escalations with Europe or India could cause another April-style dip. Keep some cash on the sidelines to buy those "policy-driven" pullbacks.

The "everything rally" of 2025 was a gift, but the market is becoming more selective. The winners of 2026 likely won't be the same names that carried us through the last twelve months.

Next Steps for Your Portfolio
Start by reviewing your 2025 tax-loss harvesting opportunities, especially if you held healthcare or consumer defensive stocks that lagged. Then, evaluate your international exposure to see if you’re positioned for the continued growth in emerging markets that dominated the latter half of last year. Finally, tighten your stop-losses on high-multiple AI names to protect the gains from the 2025 surge.