(NEW YORK) — The stock market surged to record highs in 2025, hurtling past tariffs, a government shutdown and fears of a bubble in artificial intelligence.
The S&P 500 — the index that most people’s 401(k)s track — climbed about 17% this year, as of Dec. 23. That performance marks a slight slowdown from two consecutive years of more than 20% growth, but the latest uptick extends a run of gangbusters returns.
The yearslong bull market presents a stark choice for investors as the calendar turns to 2026: Flee from ever-higher stock prices or trust that the good times will continue to roll.
Earlier this month, investment bank Morgan Stanley summed up its market forecast with a single question: “Can the bull market endure?”
Analysts attributed the rise of share prices this year to overlapping trends: Resilient corporate earnings, a series of interest-rate cuts meant to boost hiring and near-inexhaustible enthusiasm for artificial intelligence.
Tariffs, which threatened to derail markets in the spring, eased into an afterthought over the latter half of the year.
A day after tariffs were announced on April 2, major stock indexes shed about $3.1 trillion in value. The selloff amounted to the biggest one-day decline in markets since the onset of the COVID-19 pandemic. Days later, a major swathe of the tariffs were suspended, sending the market to one of its largest ever single-day increases.
“While tariffs remain a source of uncertainty, markets are pricing in limited disruption,” JPMorgan Wealth Management said in an investor note last month.
Even as markets proved resilient, the gains this year remained concentrated in a handful of tech giants, known as the magnificent seven: Alphabet, Amazon, Apple, Meta, Microsoft, Tesla and Nvidia. In September, worries over AI threw cold water on those stocks, causing their prices to waver.
In November, blockbuster earnings from chip giant Nvidia helped rebuke AI fears and shake markets out of the doldrums. Nvidia recorded $57 billion in sales over a three-month span, the company said, setting a quarterly sales record and demonstrating near-bottomless demand for the semiconductors at the heart of AI.
Nvidia, the world’s largest company by market capitalization, soared 40% this year, as of Dec. 23.
Still, some analysts have continued to voice concern about the market’s dependence on AI, as tech firms face increased pressure to turn massive capital investment into profits.
“Equity markets may remain exuberant but face rising risks,” investment giant Vanguard said in December, citing AI as a threat to growth.
Other risks abound, some analysts said. Key measures of the U.S. economy have shown mixed results, making the path forward uncertain. Hiring slowed sharply this year, while inflation remained about a percentage point higher than the Fed’s 2% goal. Economic growth withstood headwinds from tariffs and elevated interest rates, but consumer sentiment sputtered.
Ultimately, Vanguard said its baseline expectation remains optimistic, forecasting overall stock returns next year as high as 8%.
Some analysts predicted even better performance in 2026. JPMorgan Wealth Management predicted stock gains next year between 13% and 15%. BNY Wealth estimated the S&P 500 would end 2026 as high as $7,600, which would amount to about a 10% jump from where the index stood on Dec. 23. Morgan Stanley also forecasted an increase in 2026 of 10%.
In response to its own question about whether the bull market could endure, Morgan Stanley answered with little doubt, saying the odds of a recession next year are “extraordinarily low” and the upswing in stocks “still has room to run.”
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