KEY TAKEAWAYS
- US stocks continued climbing in 2025, with the S&P 500 gaining almost 18%, while international stocks soared nearly 32%.
- The Fed reduced interest rates by 0.75 percentage points even as it coped with stubborn inflation, citing labor market worries.
- Value lagged growth in the US, but international small value was among the best-performing asset classes of the year.
US stocks notched their third year in a row of double-digit gains, but it wasn’t the smoothest ride. The S&P 500 hit records in the winter that were followed by a spring swoon. After powering past that to new highs in the fall, the markets cooled a bit along with the temperatures.1 Still, the S&P 500 was up 17.9% for the year and closed near record levels.2 The climb came despite tariff uncertainty, interest rate changes, and concerns about the durability of AI’s gains—not to mention the longest government shutdown in US history.3 Global stocks rose (see Exhibit 1), with returns in developed international and emerging markets better than those in the US. In the bond market, US Treasuries were higher for the year, and the benchmark 10-year yield fell to just above 4%.4
We encourage you to read Dimensional’s 2025 Market Review for yourself. There are many interesting insights about the year just ended. The report also offers a level-headed perspective on why there is ample room for investor optimism in the years ahead.
We agree with this perspective, as well as the authors’ observation: “A look back at recent history makes a case for sticking with a plan.”
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