Stock Market Keeps Its Amazing Streak Going

• Large-cap growth and value funds both gained over 16% in 2025, but only 29% of actively managed large-cap funds outperformed the S&P 500 - the lowest percentage since 2019
• International and commodity funds significantly outperformed domestic equities, with world stock funds up 26.8% and precious metals funds soaring 85.5% thanks to gold's best year since 1979
• Wall Street strategists project S&P 500 year-end 2026 targets ranging from 7,000 to 8,100, potentially marking a fourth consecutive year of double-digit gains matching the longest streak since 1995-1999

Market Summary: Stock Market Extends Multi-Year Rally into 2025

Key Performance Metrics

The U.S. stock market delivered its third consecutive year of double-digit gains in 2025, though returns are moderating. The S&P 500 posted a 17.9% total return, outpacing the average U.S. diversified equity fund's 12.8% gain. The tech-heavy Nasdaq led major indices with a 20.4% price gain, while the Dow Jones Industrial Average rose 13% and the Russell 2000 gained 11.3%.

Sector and Strategy Performance

Large-cap growth and value funds each rose approximately 16%, driven by significant AI stock exposure. However, only 29% of actively managed large-cap funds outperformed the S&P 500—the lowest rate since 2019. International funds excelled, with world stock funds averaging 26.8%, led by Morgan Stanley's Overseas Equity Portfolio at 38.5%. Gold's 63.8% surge—its best performance since 1979—pushed precious metals funds up 85.5%. Bond funds provided stability with a 7.2% gain.

Market Drivers and Concentration

The "Magnificent Seven" mega-cap stocks comprised 34.9% of S&P 500 market value and generated 42% of total returns. Nvidia made history in October as the first publicly traded company to reach $5 trillion in market capitalization. Small- and mid-cap stocks lagged significantly, with small-cap growth funds up just 8.2%.

2026 Outlook

Wall Street strategists project S&P 500 year-end targets between 7,000 and 8,100 (2.3%-18.3% upside). BlackRock remains bullish on AI, citing strong earnings and healthy tech balance sheets. Key risks include Federal Reserve chair transition uncertainty and potential tariff impacts. BofA Securities recommends diversification into healthcare and real estate sectors, which offer attractive valuations relative to historical earnings multiples.