Smart Investor: The Stocks That Led 2025’s Rally, Q4 in 13 Charts, and Why Muni Bonds Bounced
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In this week’s newsletter:
While the final print for 2025 was a solid 17% gain in the stock market, it was touch and go in the final months of the year, courtesy of the very same sector that had led the market higher over the summer: tech stocks. As Sarah Hansen highlights, it was a bumpy fourth quarter, thanks to rising worries about the costs of financing the artificial intelligence infrastructure buildout.
Despite that stutter-step action in tech stocks at the end of the year, the undisputed leaders of the 2025 rally were the AI favorites in tech and related names in the communication services sector (home to Alphabet). However, just because a stock has the “tech” label attached does not mean it was a winner. Investors became more selective, and some tech names were left in the dust. So, which stocks were responsible for the 2025 gains in the market? Check out our story here.
This data highlights the big bet that many investors are unwittingly taking on tech stocks. Where should investors look next? Ivanna Hampton spoke with Michael Fields, Morningstar’s chief European market strategist, about where other opportunities might lie.
Pulling back the lens a bit further, we screened for the overall best and worst winners for 2025. (Because of how stocks are weighted in market indexes, just because a stock has the biggest gain, doesn’t mean it was the best performer.) Yes, there are some tech names in our screen of the large- and mid-cap universe, but there are some surprises. And if you were following the crypto meltdown in October and November, you might recognize the worst performer on the list.
Lastly, I want to break with tradition and highlight a piece that ran two weeks ago, one that takes a look at a normally sleepy part of the bond market: munis. Morningstar Indexes’ Dan Lefkovitz notes that, on balance, munis have outperformed their taxable counterparts since 2020, but 2025 was a very bumpy year. The first half saw munis hit by fears they might lose their tax-exempt status, among other issues. But the second half was a strong period for munis, and Lefkovitz digs into the catalysts behind the muni-bond rebound.
As always, be sure to visit our Markets page for our latest coverage and live stock market updates along with our full weekly calendar of key upcoming data and events.
