Six Charts That Show How Stock Markets Got Reshaped in 2025
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Six Charts That Show How Stock Markets Got Reshaped in 2025
08 mins
(Bloomberg) — Stock investors can’t claim that this year has lacked market drama.
It didn’t always look likely, but equities have managed strong returns in 2025, weathering shocks like DeepSeek of China’s challenge to US artificial intelligence and the tariff storm unleashed by the Trump administration in April.
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Dips were bought at record pace and a fear of missing out on the rally dominated sentiment. In the background, a powerful wave of diversification swept through the market as investors responded to the cracks appearing in so-called US exceptionalism by buying up European, Asian and emerging-market stocks.
Here are six charts that capture some of the key episodes that reshaped equity markets in 2025:
The year started with investors maxed-out on American exposure and convinced US dominance was here to stay. But DeepSeek shook the status quo in the AI world, while President Donald Trump’s April tariff salvo all but spelled the end of the bull market that began in 2022. Still, as Trump dialed back his trade war, interest rates fell and the global economy showed resilience, investor confidence returned.
That didn’t spare US stocks from bearing the brunt of the selloff. And they never fully caught up with the rest of the world, held back by a weakening dollar. The greenback hasn’t clawed back its 13% slump in the first half, while a growing chorus of strategists has recommended international equities over their US peers.
MSCI Inc.’s gauge of global stocks excluding the US is tracking its strongest outperformance over the S&P 500 since 2009.
The US flagship index is missing from the ranks of best-performing benchmarks, but it did still achieve decent enough gains of 14%. The nagging worry for investors has been the concentrated nature of those returns. “Bubble in the making” became a key concern this year, with some data echoing the early stages of excessive internet over-valuations. The tech sector’s weighting in the S&P 500 reached a record 36%, breaching the previous peak of 2000 leading into the dotcom crash, before retreating below 35%.
A closer examination of this year’s trading reveals unprecedented levels of concentration behind the gains on Wall Street. Tech megacaps powered the rally all year long, with just five stocks accounting for nearly 45% of the benchmark’s returns: Nvidia Corp., Alphabet Inc., Broadcom Inc., Microsoft Corp. and Apple Inc.
While excitement around AI has driven returns in the US and Asia, the story has been very different in Europe, a market crucially lacking tech stocks. Here, other thematics stepped to the fore. Banks led Europe’s rally, surging on the way to their strongest year since 1997, while governments’ defense, energy and infrastructure spending commitments lifted the names set to benefit from these outlays.
The upshot of all this is the widest dislocation in market leadership between the US and Europe ever seen. Value stocks inspired the advance in Europe, while growth equities led it in the US. This pushed investors into unchartered territory, as equity factors typically move in similar fashion.
Investors buffeted by April’s extreme turbulence could hardly have anticipated the relatively smooth ride they had the remaining three-quarters of the year. No drawdown exceeded 5% until November, with each dip enthusiastically snapped up at a rapid clip. The AI narrative, solid earnings and the leftovers from April’s sudden positioning washout encouraged investors to chase stocks steadily higher. The impressive rally stalled only as exuberance over AI was questioned in the final stretch of the year.
Strong appetite for stocks has been accompanied by the destruction of volatility this year. Considering historical reset patterns for the VIX Index, it’s surprising how often the gauge managed to retrace a spike of 40% or more within a 10-day trading period. This didn’t happen at all before 2011, but has already occurred several times in topsy-turvy 2025.
Stock investors embraced the notion that volatility spikes have become increasingly short-lived. A new market logic appears to have taken hold: stocks panic, volatility gets bid, the risk event is resolved, gamma supply takes over and volatility quickly retreats.
US option volumes marked fresh highs, with two daily prints exceeding 100 million turnover this year for the first time. To emphasise the increased demand, trading volume was above 60 million daily contracts on 117 days compared to only 12 days in 2024.
While hedging demand played a role in April and November, most of the time it was calls dominating the tape. With investors chasing the right tail as well as volatility sellers using ultra short-term contracts to earn income, the options market remains a key factor for stocks, contributing to the swift resets in volatility.
