US Stocks Surge: Evaluating Their Strong Performance This Year
As 2025 approaches its conclusion, it’s a fitting moment to assess the progress in the stock market. The past several months have seen remarkable recovery and performance, particularly since the lows experienced back in April due to tariff-driven issues.
US Stocks Surge: A Strong Performance This Year
Since hitting lows on April 8, US stocks have rallied impressively, boasting an increase of over 37%. In fact, the market has gained over 16% during this calendar year. Despite earlier volatility, 2025 is shaping up to be a strong year for investors.
A Historical Perspective
Typically, the Morningstar US Market Index delivers an average annual return of about 12%. However, the current year has far surpassed this benchmark, reflecting a robust recovery following the ups and downs witnessed earlier. In the past decade, the average return has been closer to 14% per year.
The Role of Tech Stocks
Tech stocks have been pivotal in driving the latest market surge. Approximately 40% of the recent gains, translating to more than six percentage points, have stemmed from this sector. Communication services, primarily led by Alphabet (GOOG), contributed nearly three additional points to the overall increase, with Alphabet stock rising about 60% this year.
Morningstar analysts suggest that tech stocks still possess potential for further gains, indicating that valuations within the sector are at lower levels compared to the highs reached following April’s market selloff. Nonetheless, David Sekera, Morningstar’s Chief US Market Strategist, cautions that concentrated market leadership can distort sector valuation readings.
Market Dynamics and Future Trends
Prominent tech companies like Nvidia (NVDA) have experienced unprecedented growth, with Nvidia’s market capitalization surpassing the $5 trillion mark this year. However, as tech stocks have recently pulled back over the last two months, the overall valuation picture appears attractive.
Cautiously, portfolio managers at Morningstar Wealth are re-evaluating their tech stock investments. There’s a shift towards smaller companies and Latin American stocks as strategists seek areas with greater growth potential.
Looking Ahead
As the trading week progresses, market activity is expected to slow, especially with the Christmas holiday approaching. Christmas Eve on Wednesday will see a shortened trading session, and many on Wall Street will be reduced to skeleton crews on Friday.
Despite previous concerns over government shutdowns that affected economic evaluations, recent data shows a weaker jobs report and declining inflation. Federal Reserve Chair Jerome Powell has expressed a need for cautious analysis moving forward. A clearer economic outlook will likely emerge in the new year, allowing investors to reassess their strategies effectively.
