The S&P 500 rose 16.4% in 2025. That sounds like a straightforward good year. But the story of how that return was generated matters as much as the number itself.

The year had two very distinct halves.

The first quarter of 2025 was ugly. In the two trading days after President Trump announced sweeping reciprocal tariffs on April 2, the S&P 500 fell 10.6%. Every sector sold off. NVIDIA dropped 20% in that quarter alone. Apple fell 11%. Microsoft fell 12%.

Then on April 9, something changed. The White House announced a 90-day pause on most of those tariffs. The S&P 500 had its single best day since October 2008. Trading volume that day hit an all-time record of $1.86 trillion in notional value. The market had absorbed an extraordinary shock, panicked, and then recovered with breathtaking speed.

By the end of 2025, the index had not just recovered. It had set new records.

The NASDAQ, which is even more concentrated in technology, rose 20.4% for the full year. The IT sector, which had fallen 12.8% in the first quarter, came roaring back. AI remained the dominant narrative driving valuations for the companies at the very top of both indices.

But here is the detail that mattered most: in 2025, the S&P 500 was actually outperformed by several international markets. Canada returned 28.9% for the year. Mexico returned 25.2%. Germany, Japan, and China all beat the US. It was a genuinely unusual year in that respect, a reminder that the US does not automatically lead every year simply because it has led for most of the past fifteen.