I wanted to wrap up 2025 with a couple of items in regard to the S&P 500 that I think are interesting but have flown under most people’s radar this year.
Item #1
One of the largest volume weeks (buying and selling shares) for the S&P 500 this year occurred at the beginning of April when President Trump’s tariffs were being implemented (Liberation Day). While Wall Street experts were predicting tariff gloom and doom in order to get main street investors to sell, those same experts were busy buying stocks at the low point of the dip. By late May the S&P 500 had recovered its losses and moved on to new highs the rest of the year. This is yet another reminder to be careful believing with what the financial pundits and economist tell you.
Historically, imposing tariffs should cause inflation, but that’s typically when countries are in a trade war. In this case, the president used tariffs and the threat of tariffs as a negotiation tactic to get other countries to either remove or lower their tariffs on US exports. Because US trading partners need access to US markets more than we need access to theirs, the tactics seem to have worked so far. The tariffs added $200 billion to the US Treasury by December, and estimates for 2026 range as high as $300 billion. Oddly, economists didn’t seem to be a problem with other countries imposing tariffs on the US, just the US posing tariffs on them. So far, the negative effects have yet to show up as just last week the third quarter annualized GDP was announced at 4.3% which is the highest in two years. The outlook for 2026 is positive.
Item #2
Here is my Public Service Announcement going into 2026 in regard to portfolio management as it pertains to asset allocation and risk levels. Currently, any S&P 500 index type fund (ETF or Mutual Fund) has become overweighted at the top. Right now, the top 10 stocks of the S&P 500 make up almost 40% of that index and the top 20 stocks make up almost 50% of those 500 stocks (See the chart below.). Additionally, nine of the top ten stocks are concentrated in the technology sector, which will make the S&P 500 subject to the higher volatility of the technology sector and increase the risk level of a portfolio.
- 1 Nvidia NVDA 7.37%
- 2 Apple Inc. AAPL 6.48%
- 3 Microsoft MSFT 5.80%
- 4 Amazon AMZN 3.98%
- 5 Alphabet Inc. GOOGL 3.16%
- 6 Alphabet Inc. GOOG 2.94%
- 7 Meta META 2.69%
- 8 Broadcom AVGO 2.65%
- 9 Tesla, Inc. TSLA 2.43%
- 10 Berk- Hath BRK.B 1.75%
https://www.slickcharts.com/sp500
I currently have a positive outlook going into 2026. AI is driving a lot of the growth in the markets, but with interest rates being cut this fall and gasoline prices on average now below $3/gal nationwide, the rest of the economy may start to move forward more quickly.
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This post is for informational purposes only. It is not intended as investment advice as each person’s financial situation is different. I strongly recommend working with a financial advisor who can deliver current information to you quickly and offer help with sorting through the various investing options.
Bret Wilson is a Financial Advisor with Wilson Investment Services, based in Rockwall, Texas.