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The team at Tacticum Investments S.A., whose primary shareholder is Arkadiy Mutavchi, has summarized the performance of US securities for 2025 and forecasted the main trends for the American stock market for 2026.
In 2025, US stocks continued to rise for the third consecutive year. The growth rates of major stock indices slowed somewhat compared to 2023 and 2024, but once again delivered returns significantly exceeding historical averages. The primary drivers for the rise in quotes were robust economic growth, a significant increase in corporate profits, monetary policy easing by the FRS, and, of course, the continuation of the investment boom related to AI.
Economic scenarios for 2025 assumed US economic growth of 2.0-2.5% against a backdrop of rising consumer spending and significant investment in AI technologies. Forecasts also anticipated the persistence of slightly elevated inflation (2.5-3.0%), stabilization of unemployment at 4.0-4.5%, and a continued reduction in interest rates. Complete statistics for 2025 are not yet available, but, according to analysts at Tacticum Investments, it can already be asserted with high confidence that, overall, these forecasts proved correct. This is particularly remarkable given that throughout the year, the Trump administration raised import tariffs approximately six-fold – far exceeding all forecasts – yet, contrary to the expectations of most economists, this measure did not have a negative impact on the American economy.
Judging by preliminary data (final figures for 2025 will appear only in March following the publication of annual reports), investment analysts’ forecasts regarding the growth of US corporate profits in 2025 at the level of 14-16% were also justified. This growth, as emphasized at Arkadiy Mutavchi’s company, became the main reason for the rise in stock quotes over the past year (it accounted for about 80% of this increase, compared to approximately 40% in 2024). As in the previous two years, the growth leaders remained the shares of the largest technology companies, although their lead over the rest of the market narrowed significantly (Chart 1).
By the end of 2025, shares of the so-called “Magnificent Seven” companies (Alphabet, Amazon, Apple, Meta Platforms, Nvidia, Tesla, and Microsoft) rose by an average of 25% (compared to 67% in 2024), but only two companies – Alphabet and Nvidia – outperformed the market (in 2024, there were six such companies). Nevertheless, they accounted for nearly half of the gains in the S&P 500 (+17.9%) and Nasdaq 100 (+21.2%) indices. Note: Returns are hereinafter indicated including dividends, unless otherwise noted.
Among industry groups, technology stocks, primarily manufacturers of semiconductors and peripheral computer equipment, showed the highest return (+24%). Investors also demonstrated interest in industrial sector securities (+19%), primarily manufacturers of equipment for power plants and electrical grids. All other sector indices showed returns below the market average (Chart 2).
As noted by the colleagues of Arkadiy Mutavchi (primary shareholder of Tacticum Investments S.A.), contrary to expectations that in 2025 growth would broaden to cover a larger number of securities than in the preceding two years, giant corporations (not only technological but also from other economic sectors) once again significantly outperformed their smaller competitors (the 10 largest companies provided 53% of the return for the S&P 500 index). The S&P Midcap 400 index of medium-sized companies grew by only 7.5% for the year, and the Russell 2000 small-cap index by only 12.8%. The S&P 500 Equal Weight index, in which the share of each company is 0.2% (for comparison, in the regular S&P 500, the weight of the 10 largest companies is over 40%), showed a return of 11.4%. The dominance of growth stocks over value stocks also persisted across all capitalization groups (Chart 3), although the gap here narrowed compared to 2024. The lowest return among all more or less well-known indices was shown by the small-cap value index, Russell 2000 Value (+12.6%).
According to analysts at Tacticum Investments, market growth throughout the year was neither smooth nor calm (Chart 4), which is typical, but the main cause of heightened volatility was President Trump’s chaotic attempts to establish unprecedentedly high import tariffs.
Initial investor optimism, associated with hopes for tax cuts and business deregulation under the new Republican administration, helped them overcome the January shock from the news that the small Chinese company DeepSeek was able to create an advanced and incredibly cheap AI model, which cast doubt on the correctness of the strategies of American tech giants in this area.
But as early as mid-February, investors began to realize, as noted at Arkadiy Mutavchi’s investment company, that Trump’s import tariffs would be much higher than their expectations, leading to the start of serious sell-offs in the market. As a result of these sell-offs, by the end of the first quarter, major indices had fallen by 4-8% compared to the beginning of the year. But even this decline in quotes failed to prepare the market for the shock of a tenfold increase in tariffs announced on April 2: in the four days following this announcement, indices fell another 11-12%. This decline would likely have continued had Trump not unexpectedly retreated on April 9, postponing the introduction of tariffs for 90 days, which led to a massive market rebound on that day (by 9-12%).
The single-day mega-rally was not the end of it – this postponement shifted investor sentiment; the majority decided that Trump would not raise tariffs to a level that would damage the stock market. Selling was replaced by buying, and by the end of June, market indices reached new historical highs. In subsequent months, tariffs ceased to be a significant factor for investors: the market repeatedly reacted with declines to Trump’s new tariff initiatives, but these drops were shallow and short-lived. Significant support for the market in the second half of the year was provided by the FRS, which lowered the key rate three times by a total of 0.75%. The market also passed through the longest federal government shutdown in US history without losses; however, in the last two months of the year, the rise in quotes ceased: at year-end, the S&P 500 and Nasdaq 100 indices were trading at lower levels than at the end of October. This is likely due to growing investor doubts regarding the ROI of gigantic investments by tech companies, as well as fears over growing competition among them.
Thus, despite a series of negative surprises over the last 12 months, analysts from the investment company Tacticum Investments assert that for American stocks, 2025 was as successful a year as the previous two. In total, over the last three years, the S&P 500 index has risen by 86% (average annual return was 23%, which is more than double its average over nearly 100 years). Such sustained multi-year growth usually strengthens the propensity of economists and investment analysts to forecast the continuation of existing positive trends in the near future. This has happened this time as well.
Taking all the above into account, colleagues of Arkadiy Mutavchi share the opinion of economists and believe that key economic indicators in 2026 will be approximately the same as in 2025. In accordance with the consensus forecast, the continuation of the technological investment boom, tax cuts, income growth (and consequently, spending) across various population groups, deregulation, and the preservation of dovish monetary policy will ensure economic growth in 2026 at the level of 2.0-2.5% with elevated, but tolerable, inflation of 2.5-3.0%. In the second half of the year, some economists expect a slight economic slowdown and a small increase in unemployment, but the probability of a recession is assessed as low.
Investment analysts are, as always, more optimistic than macroeconomists. With nominal economic growth of 5%, they expect earnings growth for the largest companies of 13-14% and growth of the S&P 500 index by 10-12% by the end of 2026 (and this time, none of the analysts from major banks forecast a decline).
At the same time, according to the December Bloomberg Market Pulse survey, a significant portion of investors – about 30% – expects a fall in US stocks in 2026. Such expectations are explained by the fact that stocks remain very expensive: the price-to-earnings (P/E) ratio for the 100 largest US companies rose again in 2025, reaching 29.2 at year-end (against an average value of 20.6 over the last 30 years); stocks cost more only in 1999 at the peak of the dot-com bubble. In principle, the majority of analysts in the market also consider stocks too expensive (for example, Bank of America analysts write that out of 20 indicators they monitor to assess stock valuation, 18 indicate that stocks are currently overvalued), yet they continue to convince themselves and their clients that the rise in quotes will continue.
Analysts at Tacticum Investments believe that the price/earnings ratio is indeed not very useful for forecasting short-term returns in the stock market, and expensive stocks can indeed continue to rise for some time (this is exactly the growth we observed in the market in 2025). However, as emphasized by Arkadiy Mutavchi’s team, an analysis of this ratio over the last 30 years suggests that stocks have not managed to trade at such levels for long: if we take the P/E ratio for the 100 largest US companies exceeding 27 as the lower bound for very expensive stocks (over the last 30 years, stocks cost less 85% of the time), one can see that the first time stocks crossed this boundary was in mid-1998, and they continued to rise until the spring of 2000 (i.e., for 7 quarters) with a total gain in the S&P 500 index for that period of 35%. After that came a bear market, which lasted 2 years and ended with the S&P 500 falling by 48%. The second time this boundary was crossed was at the end of 2020; this time, market growth continued for only 4 quarters with a total index increase of 29%, and in early 2022, a decline in quotes began, lasting 10 months and reaching 27% at the low point. And finally, for the third time, this boundary was crossed in mid-2024, and stocks have been rising for 6 quarters now with a total gain in the S&P 500 index of 28%.
In principle, just two cases in 30 years cannot be called a sufficiently representative sample, but betting that this time stocks will be able to rise for another whole year seems quite risky to us at the investment company Tacticum Investments.
Catalysts for the next bear market could be a multitude of events, but in our opinion, it will most likely be a negative repricing of companies’ prospects related to the development of artificial intelligence (AI) models and/or the more populist (and chaotic) policies of President Trump, for whom the main task in 2026 is maintaining the Republican majority in the House of Representatives after the November midterm elections.
In 2025, major technology companies continued to pour hundreds of billions of dollars into creating the infrastructure necessary to improve and use AI systems, and also continued to promise to spend even more money on this in the coming years (according to Bloomberg, capital expenditures of just four companies – Microsoft Corp., Alphabet Inc., Amazon.com Inc., and Meta Platforms Inc. – will grow by 34% in 2026 to 440 billion dollars). Support for such unprecedented spending by investors has generally been maintained, but more questions are arising regarding their payback in the foreseeable future. American giants justify their investments with the desire to create AI of a qualitatively different level (artificial general intelligence - AGI, sometimes called human-level AI), but so far there is no proof that this is possible in principle. At the same time, known technical shortcomings of existing AI systems (“hallucinations”, lack of understanding of physical limitations of the real world) hinder their commercial use. Furthermore, the experience of Chinese companies suggests that high-quality AI systems can be made at much lower costs, and that the differences between such systems created by different companies are small, leading to fierce price competition and low profitability for this business (for American companies, such prices would be hopelessly unprofitable).
In the second half of 2025, it also became clear that a distinct problem could be the increased energy intensity of the process of training and using AI systems, which could lead to delays in commissioning new data centers due to difficulties related to their connection to power grids (and consequently, to delays in receiving revenue from their operation). Investors also became concerned about the rapid moral obsolescence of processors required for training and operating AI systems (additional costs and a new increase in cost of goods sold), and the financing of AI startups by tech giants in exchange for purchasing equipment and services from them (so-called “round-tripping” deals, which obscure the objective assessment of the business).
Analysts at Tacticum Investments expect that in 2026, all these investor doubts regarding the main investment idea of the last three years will only intensify.
As for President Trump’s actions, there is a fear that in the run-up to the elections, he will focus less on the reaction of financial markets when making populist decisions which, in his opinion, will increase the chances of the candidates he supports. This is characteristic of all presidents; for this very reason, stocks in the second year of the presidential cycle historically demonstrate low returns, but Trump’s impulsiveness and self-confidence make the situation even more alarming. He will undoubtedly restore import tariffs in one way or another if the Supreme Court declares them illegal (a decision is expected in January-February), and possibly increase them. He will likely continue, at a minimum, to demand rate cuts from the FRS and, at a maximum, try to limit its independence. He may also resort, in one form or another, to price controls on various goods and services. Most likely, these actions will be inflationary and/or anti-market in nature and will be characterized by suddenness and low predictability, which will very likely negatively affect market quotes.
Thus, the team at Tacticum Investments draws attention to the fact that we have, on the one hand, a heavily overvalued market threatened by several serious potential problems, and, on the other hand, excessive optimism among the majority of investors and analysts, based on the strong rise in quotes over the last few years. A year ago, the situation looked similar, as the colleagues of Arkadiy Mutavchi note, and in 2025 the optimists won, but we are not sure that they will get lucky this year as well. Tacticum Investments S.A. advises all investors to exercise caution, follow the news, and be constantly ready for active actions in the stock market. Good luck to everyone.
