The Financial Quarterly | Quarter 4 2025
Key Takeaways for Savvy Investors
2025 was a year for the record books.
The U.S. stock market achieved something remarkable: three consecutive years of double-digit gains, a feat that’s only happened a few times in the past.2
This happened despite a wild ride: markets tumbled in the spring when sweeping tariffs were announced, recovered after he walked back the most severe proposals, survived a government shutdown, and shrugged off ongoing concerns about AI valuations.2
2025 proved again why staying invested through turbulent markets is usually a wise decision for long-term investors.
However, after three years of exceptional returns, it’s natural to ask: What happens next?
What does history tell us about year four? Not much. This kind of streak has only happened six times since the 1940s.5
Maybe the rally will continue for another year or two (like it did in the late 1990s). Maybe it won’t.
As we know, the past doesn’t predict the future.
There are reasons for optimism in 2026.
Corporate earnings remained strong throughout 2025, the Fed is cutting rates, and AI continues to drive innovation. Many Wall Street analysts expect another positive year, but we know that market predictions aren’t worth much.6
There are also challenges to navigate.
After such strong gains, stocks are trading at elevated valuations, and some analysts worry about a bubble.6 The labor market may be weakening, inflation remains sticky, and tariff uncertainties linger. With clouds on the horizon, reversals can happen quickly, so we should be prepared for another bumpy year ahead.
Review and Outlook
Watch as the Chief Market Strategist of SEI reviews the financial markets for the fourth quarter.
How Did Markets Perform Last Year?
S&P 500
%
The broader market rallied for the third year in a row despite a tumultuous 2025.1
NASDAQ
%
The tech-focused NASDAQ roared on an insatiable appetite for AI.1
DOW 30
%
The blue-chip stock index notched double-digit growth on the back of tech rallies and interest rate hopes.1
Trends That Drove Markets in 2025
Source: FRED, S&P 500 closing prices 12/31/24-12/31/25. This chart is for illustrative purposes only. Past performance does not predict future results.
What factors may influence markets in the months to come?
Let’s take a look ahead at some of the factors that we’ll be watching in the weeks and months ahead.
Tariffs
Trade policy dominated headlines in 2025. Uncertainty around future tariff decisions may continue into 2026.4
Economic Data
With concerns about growth and jobs in the headlines, economic data may drive much of the story in early 2026.3
Earnings
Corporate profits hit record highs in 2025, fueled by AI spending and strong margins. Tax cuts and lower rates could help, but elevated valuations leave little room for disappointment.3
Interest Rates
The Fed lowered rates in 2025, but inflation concerns remain. Further cuts depend on whether prices cooperate and the job market weakens further.2
We’re watching the data, staying balanced, and positioning portfolios for a potentially choppier 2026.