US stocks close out third year of gains on down note

STOCKS and bonds slipped along with gold and silver on the last day of 2025, ending an otherwise buoyant year on a lacklustre note.

The S&P 500 extended a stretch of post-Christmas losses, paring the benchmark’s advance for 2025 to roughly 16 per cent. The Nasdaq 100 was down 0.8 per cent on Wednesday (Dec 31), its fourth day of losses. Even so, both indexes have posted double-digit gains for three consecutive years, notching their longest winning streak since 2021.

Gold and silver fell at the end of their best year since the 1970s. CME Group raised margin requirements on precious-metal futures for the second time in the space of a week following the recent bout of heightened volatility.

Investors, this year, have enjoyed blockbuster returns in a market that has been powered by optimism about the vast economic potential of artificial intelligence and primed by Federal Reserve interest-rate cuts. It hasn’t been a smooth ride, though, with traders weathering swings triggered by a range of forces including US trade policies, geopolitical tensions, concerns over lofty valuations and some uncertainty around the path of central-bank monetary policy.

“Describing 2025 as ‘resilient’ might be an understatement,” said Adam Turnquist, chief technical strategist for LPL Financial. “The economy showed remarkable strength by overcoming higher inflation, a slowing labour market, fewer rate cuts than originally expected, and a sharp rise in the effective tariff rate. Despite these challenges, growth remained steady without slipping into recession.”

Looking ahead into 2026, market research firm Bespoke Investment Group cautions against expecting solid market performance during the first trading day of the new year. Since 1953, the S&P 500’s median change to kick off a new year has been a 0.3 per cent drop, with gains less than half the time, according to a note by Bespoke. The stock market has also traded lower on the first trading day of each of the past three years, the note said.

Beyond stocks

Among other asset classes, US Treasuries posted their strongest year of returns since 2020. On Wednesday, Treasuries ticked lower, with the 10-year yield climbing to 4.17 per cent.

There was little market movement even after the release of US jobless claims data on Wednesday. Applications for US unemployment benefits fell last week to one of the lowest levels this year. Initial claims fell by 16,000 to 199,000 in the week ended Dec 27, Labor Department data on Wednesday, showed. The median forecast in a Bloomberg survey of economists called for 218,000 applications.

The dollar, meanwhile, was little changed on Wednesday after a three-day stretch of wins. Still, the greenback recorded its worst year since 2017, with investors saying more declines are coming if the next Fed chief opts for deeper interest-rate cuts.