Money makes people crazy. Seriously. If you’ve looked at your 401(k) lately, you might be wondering if the screen is glitching or if we’re actually living through one of the weirdest financial stretches in recent memory. US stock market performance since january 2025 has been a total rollercoaster, but not the kind that just goes down. It’s been more like a high-altitude hike where every time you think you’ve hit the peak, there’s another ridge hiding behind the clouds.
Remember the panic last spring? April 2025 was rough. Everyone was screaming about tariffs and a "hard landing." Fast forward to right now, mid-January 2026, and the S&P 500 is sitting near all-time highs, having clawed back more than 37% from those April lows. It’s wild.
Honestly, the "average" investor is probably feeling a mix of whiplash and greed. We’ve seen the Nasdaq jump over 20% in a year where most people were bracing for a recession that just... never showed up. It’s been a year of Big Tech dominance, weird government shutdowns, and a massive tax bill called the OBBBA that basically acted like a shot of adrenaline to corporate earnings.
Why the US stock market performance since january 2025 defied the haters
Most experts thought 2025 would be the year the wheels came off. They were wrong. Instead of a crash, we got the "resilience" narrative. The S&P 500 managed a total return of about 17.9% for the full year of 2025. That’s the third straight year of double-digit gains.
What actually happened?
Well, the Federal Reserve finally stopped being the "bad cop." They cut rates three times in late 2025—September, October, and December—bringing the federal funds rate down to a range of 3.5% to 3.75%. Lower rates mean cheaper borrowing. Cheaper borrowing means companies like NVIDIA and Microsoft can keep pouring billions into AI infrastructure without breaking the bank.
But it wasn't just the Fed. The "One Big Beautiful Bill Act" (OBBBA) was a massive catalyst. It allowed companies to fully expense certain costs, which is fancy talk for "they paid way less in taxes." When companies keep more cash, they buy back their own stock. In 2025, U.S. stock buybacks topped $1 trillion for the first time ever. You can’t really have a market crash when companies are spending a trillion dollars to prop up their own share prices.
The Magnificent Seven and the AI "Arms Race"
The tech giants—Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla—did the heavy lifting again. These seven stocks delivered a 24.9% return in 2025.
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It’s kinda scary how much the market relies on them. According to Ben Snider at Goldman Sachs, these top tech stocks accounted for 53% of the S&P 500’s total return last year. If you didn't own them, you probably felt like you were standing still. The AI spend is real. Companies spent over $350 billion on data centers and chips in 2025 alone. That’s more than 1% of the entire US GDP just on AI "stuff."
Not everyone invited to the party
Small caps—the little guys in the Russell 2000—had a much harder time. They ended 2025 up about 12.8%, which sounds good until you realize how much they struggled in the first half of the year. High interest rates hurt smaller companies way more than the giants because they usually carry more debt.
Even mid-caps only managed a 7.5% gain. It was a "winner takes all" kind of year. If you weren't big, or you weren't doing AI, the market sort of forgot about you until the very end of the year when things started to broaden out.
What’s happening right now in January 2026?
We are only a few weeks into 2026, and the vibe is... cautiously optimistic?
The S&P 500 is already up nearly 2% in the first two weeks of January. There’s this old saying on Wall Street: "As goes January, so goes the year." While that's not always true—history says the correlation is only about 0.42—it’s a nice start.
We did just survive a 43-day government shutdown that ended in November 2025, which messed up all the economic data. Federal workers are still scrambling to release delayed reports on retail sales and housing. Because of that "data blackout," the Fed might stay on hold at their meeting on January 28th. Most traders think they’ll keep rates at 3.5% to 3.75% for now.
The sectors that are actually winning
It's not just tech anymore. Check out the leaderboards from the last three months:
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- Health Care: Up a massive 11.22% in Q4 2025.
- Financials: Gaining ground as the economy stays "hot."
- Industrials: Benefiting from all those new factories being built.
On the flip side, Utilities and Real Estate have been getting crushed. When interest rates stay "higher for longer" than people expected, these bond-proxy sectors suffer. Real Estate was down over 4% in the final quarter of last year.
The "Bubble" question nobody wants to answer
Are we in a bubble? Honestly, valuations are high. The S&P 500 is trading at a forward P/E ratio of about 22x. That’s the same level we saw in 2021 and dangerously close to the 24x we saw right before the dot-com bubble burst in 2000.
But there’s a difference this time. In 2000, companies weren't making money. Today, they are making a lot of money. S&P 500 earnings grew about 12.9% in the third quarter of 2025, beating expectations. As Rob Haworth from U.S. Bank says, as long as companies "hit the mark" on earnings, the high valuations can be supported. But there is zero room for error. If Google or Microsoft misses a quarter, look out below.
Actionable steps for your portfolio
Don't just sit there watching the tickers move. The US stock market performance since january 2025 has shown that being passive can be dangerous if you're not diversified.
1. Rebalance away from the "Winners"
If you started 2025 with 20% in tech, you probably have 30% or 40% now. That’s "concentration risk." Think about trimming some of those gains and moving them into Health Care or Industrials. These sectors are showing strong "quality" characteristics and aren't as overpriced as the AI names.
2. Watch the January 28 Fed Meeting
This is the big one. If the Fed sounds "hawkish" (meaning they might raise rates or keep them high), expect a pullback. If they signal more cuts, the rally likely continues. Use any 5-10% dip as a buying opportunity rather than a reason to panic. We’ve seen three "scares" since January 2025, and every single one was a buying opportunity in hindsight.
3. Look at "Quality" Small Caps
With rates finally coming down, the "zombie" companies that rely on cheap debt will die, but the profitable small companies are finally starting to breathe. Keep an eye on the Russell 2000. If it breaks its 2025 highs, we could see a massive rotation out of Big Tech and into the rest of the market.
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4. Prepare for Midterm Volatility
It’s 2026. That means midterm elections. Historically, election years are choppy until the fall. Don't be surprised if the market goes nowhere for six months while politicians argue. Keep your cash reserves ready for the inevitable "October surprise."
The market since January 2025 hasn't been easy, but it has been profitable for those who stayed the course. The trend is still up, but the "easy money" from the AI hype cycle is mostly over. Now, it's a game of earnings and interest rates. Stick to the fundamentals, don't chase the 100% gainers, and keep your eye on the Fed.