#Happy New Year 2026#
If we use one word to describe the U.S. stock market in 2025, it is volatility. Some may choose stronger words like chaos or wild.
After Trump started his second term early in the year, macro policy—especially tariffs—replaced Fed policy as the main market driver. Policies were hard to predict. Price swings were extreme. This became the key feature of the year. The China–U.S. rivalry shaped the market path. Disputes over AI strategy and valuation caused sharp splits within the “Magnificent 7.” Related stocks rose and fell fast. The market still showed a 30/70 effect. Emerging markets clearly beat the U.S. market.
On April 2, called “Liberation Day,” Trump launched a global tariff war. China strongly pushed back. The S&P 500 fell nearly 10% in two days. It dropped 21% from the high and entered a technical bear market. Panic spread. On April 9, the policy was suddenly delayed. The S&P 500 jumped over 10% in one day. The Dow surged 3,500 points in one session, a record move. The chaos was similar to 2020 COVID and the 2008 crisis.
AI leaders that drove gains in 2023–2024 saw roller-coaster prices in 2025. Early in the year, DeepSeek appeared. Nvidia fell nearly 20% in one day. OpenAI teamed up with Oracle. Oracle jumped almost 40% in one day, a record for trillion-dollar stocks. The rally did not last. The stock later plunged and almost halved. Stocks tied to quantum computing, stablecoins, data centers, and nuclear power surged in the first half. In the second half, many fell over 60%. Bitcoin hit a record high of $126,272 in October, then fell 36% by year-end. Big swings became normal across indexes, sectors, and stocks.
The S&P 500 hit a yearly high of 6,945 and a low of 4,835. The full range was 2,110 points. The long lower shadow on the yearly chart was 1,068 points, half of the range. The index closed at 6,845, up 16.4% for the year. This was the third year of double-digit gains, but lower than the prior two years. The Nasdaq 100 rose 20.2%, also less than before. The Dow rose 12.9%, similar to prior years. The Russell 2000 lagged for the third year and rose 11.3%.
Even with double-digit gains in all four major indexes, “easy money” was still a myth. The 30/70 effect stayed. Beating the index was hard. Only 155 S&P 500 stocks (31%) beat the index. The other 345 lagged. About 39% of members ended the year lower.
The top tech seven, once must-own, lagged overall. Google rose 69% and led the group. Nvidia gained 39%. Meta, Microsoft, and Tesla failed to beat the index. Apple and Amazon posted single-digit gains. The fight over AI paths and AI bubbles grew. When big spending turns into real profit is the key question. Storage chips, equipment, and gold and silver miners were top winners. Consumer, property, and energy stocks lagged.
Looking back, the early-year view said 2025 would be volatile. Indexes could rise, but less than before. Volatility would increase. Risk control would decide results. There could be many pullbacks to buy. Emerging markets would face more risk. In hindsight, the direction and size were mostly right. The only miss was underestimating how extreme the swings would be.
Outlook for 2026
A) The market expects the U.S. economy to be better than 2025. It is a midterm election year. Trump may focus more on domestic issues. Tariff tensions may ease. China, the U.S., and Russia may become more stable. A new Fed chair may cut rates faster. Fiscal and monetary policy may both support growth. S&P 500 earnings may keep double-digit growth and speed up in the second half.
B) New tech may keep advancing. AI models will improve. AI apps will spread faster. AI infrastructure spending will continue. Self-driving cars and humanoid robots may enter mass production. Value stocks may see catch-up gains, especially healthcare and high-end manufacturing. Leading financial stocks remain long-term core holdings. Cyclical stocks may offer trading chances.
C) Long-running global tensions may ease. This includes China–U.S. ties, the Russia-Ukraine war, the Middle East, the Korean Peninsula, South America, and areas like the Taiwan Strait and South China Sea. This could lift risk appetite.
D) The S&P 500 may rise for a fourth year. The lower target is around 7,600. In an ideal case, the upper target is near 8,500. This implies 11%–24% annual gains. Downside targets are 6,300–6,100 first, and 5,800 in extreme cases. Q4 2025 and Q2 2026 earnings seasons will shape the range.
E) Even with a better outlook, the Fed faces three goals: cut rates, control inflation, and protect jobs. Big AI leaders face tech risk. Valuation versus growth remains a conflict. Rising costs and supply chain risks matter. Large U.S. government debt is a major risk. Liquidity must be watched closely.
F) Black swans always exist, but we cannot see them early. If institutions misjudge AI progress, growth, or rates and inflation, markets will face stress. Risk is everywhere. In 2026, be ready for a roller coaster and manage risk well.
Finally, best wishes for a happy New Year.
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