Heading into the final two weeks of the year, it’s a good time to pause and look at where we stand in the stock market. At this point, April’s tariff-driven near-bear market for stocks feels like ancient history. The market has since recovered and then some: stocks are up more than 37% since their April 8 low and are up north of 16% for 2025.
From a historical standpoint, 2025 – despite that massive bout of volatility this spring – is turning out to have been a darn solid year. Since 2005, the Morningstar US Market Index has averaged about a 12% annual return, so we’re well ahead on that front. The past decade, meanwhile, has even been stronger than that, averaging roughly 14% returns per year. While 2025 lands smack in the middle of the range of returns for the past twenty years, it’s good news for investors who have stuck with equities even during downturns like the one we saw earlier this year.
Are Tech Stocks a Buy?
Of course, investors have the big rally in tech stocks to thank for most of the gains. Of the 16% or so gain in the market, more than six percentage points – nearly 40% of the return – comes from tech stocks and another nearly three percentage points comes from communication services – dominated by Alphabet GOOG stock, which is up a massive 60% this year.
By one measure, it looks like tech stocks have more room to rally based on Morningstar analysts’ bottom-up valuation estimates Tech, at the sector level, is at its cheapest levels since the April selloff.
But as Morningstar chief US market strategist David Sekera wrote back in November, heavy market concentration can make simple sector-level valuation readings misleading. The fortunes of the biggest stocks in the market – such as Nvidia NVDA and Alphabet – booming to a historic degree, leading to huge fair value increases. In a highlight moment this year, Nvidia’s market cap crossed into $5 trillion territory, breaking a record never before seen in market. But thanks to Big Tech stocks’ heavy weightings in their sector indexes, as their valuation estimates went up more than prices across the sector – and tech broadly has sold off over the last two months – the overall picture of valuations now looks cheap.
Or Are Tech Stocks a Sell?
In fact, the portfolio managers at Morningstar Wealth are looking at the tech sector and lowering their exposure to the AI theme. As Sarah Hansen writes this week, Morningstar strategists are looking at sectors that, on a relative basis have more room to run. They’ve been moving into small caps and Latin American stocks. Check out her story here.
Meanwhile, Morningstar Indexes strategist Dan Lefkovitz offers his take on the key trends in the stock and bond markets for 2025 plus the takeaways that investors can bring into 2026. One of them: market leadership is changeable.
A Quiet Week Ahead
Barring a big surprise, markets should have a quiet week ahead with a short trading session on Christmas Eve Wednesday and a holiday Thursday. Wall Street will likely have skeleton crews on Friday. (Our weekly calendar of key market events can be found here.)
At the same time, investors have already put the government shutdown distorted economic data behind them. The jobs report came in weak and inflation soft. Federal Reserve Chair Jerome Powell had already signaled he would be looking at that data with a skeptical eye. We’ll have to wait until the new year for a cleaner read on the economy.
