Market volatility has left its imprint in 2025.
Why it matters: Turbulence from tariffs, tech, and more have shaken investors’ confidence at times. Many folks looked for safety during those down periods. Yet, the US stock market overall has delivered a strong performance. So, who are the leaders and laggards as this year comes closer to wrapping up? And what should you watch with 2026 fast-approaching? Morningstar Indexes strategist and columnist Dan Lefkovitz has examined this year’s investment performance.
9 Questions on Market Volatility in 2025
- Many Wall Street forecasters doled out upbeat expectations for 2025 and adjusted them in response to trade tensions. This year unfolded differently than predicted. What surprised you about investment performance?
- Market volatility ebbed and flowed in 2025. How volatile was the US stock market this year compared to recent years?
- What has driven the volatility this year?
- During these down periods, where did investors hide or seek safety?
- Let’s zoom in on the investment leaders and laggards this year. What areas are outperforming, and which ones are underperforming?
- You research the performance of investment factors which can drive risk and return. What has been the leading factor this year, and why?
- Leadership changed throughout the year. What caused those changes?
- Q4 will end in a few weeks. What areas should investors watch as we head into 2026?
- We’ve discussed market volatility in 2025. What takeaways can we bring with us into the new year?
Key Quote on Market Volatility as 2026 Nears
I think this question of whether we’re in an AI bubble or not will continue to preoccupy the market. I would say investors, regardless of their view, should probably be aware of the exposure that they might have to AI and that theme in their portfolios. If you’re just holding a broad US stock market, index fund, or portfolio, you have--might have--more exposure to AI than you think, just given how concentrated the US market has become and the technology names and AI-levered names, how top-heavy the market has become.
Dan Lefkovitz, strategist, Morningstar Indexes
The Takeaway: Investors should bring three important lessons from this year into next year. First, market leadership is changeable, says Lefkovitz. International stocks surged in 2025, while US exceptionalism reversed. Second, valuation matters. It created a tailwind for international stocks and contributed to volatility. Third, diversification works. The Morningstar columnist says investors who had exposure to bonds, gold, or equities outside the US likely had a smoother ride during bumpier moments.
More From Morningstar on Market Volatility in 2025
One of the major drivers of market volatility this year was centered around the dominant theme powering the US stock market, artificial intelligence. Lefkovitz says DeepSeek’s AI arrival and earnings reports and comments from tech leaders generated positive and negative reaction. Meanwhile, moves from the nation’s capital added to market uncertainty: the new tax-and-spending bill, the US government shutdown, and the Federal Reserve’s interest rate decisions, according to Lefkovitz.
And for more on the Fed, watch Morningstar’s senior US economist Preston Caldwell discuss his interest rate forecast for 2026 and how it compares with the central bank’s outlook. Morningstar’s senior markets reporter Sarah Hansen writes about the unusual division within the Fed.
Securities mentioned in this episode:
