Investors are looking for the U.S. stock market to end 2025 on a high note next week, with equities at record peaks and nearing further bullish milestones to close out another strong year.
Major U.S. indexes were on course to end December higher after stocks shook off turbulence earlier in the month driven by weakness in technology shares over worries tied to spending on artificial intelligence. The S&P 500 posted a record close on Wednesday, ahead of the Christmas holiday on Thursday, and was about 1% from reaching the 7,000 level for the first time. The benchmark index was on track for its eighth straight month of gains, which would be its longest monthly winning streak since 2017-2018.
"Momentum is certainly on the side of the bulls," said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest Wealth Management. "Barring any exogenous event, the path of least resistance for stocks, I think, is higher."
Minutes from the Federal Reserve's most recent meeting highlight the market events in the holiday-shortened week ahead, while year-end portfolio adjustments could cause some volatility at a time when light trading volumes can exaggerate asset price moves.
Heading into the new year, investors are highly focused on when the Fed might further cut interest rates. The U.S. central bank, which balances goals of contained inflation and full employment, lowered its benchmark rate by 75 basis points over its last three meetings of 2025 to the current level of 3.50%-3.75%.
But the Fed's most recent vote at its December 9-10 meeting to lower rates by a quarter percentage point was divided, while policymakers also gave widely different projections about rates in the coming year. The minutes for that meeting, due to be released on Tuesday of next week, may be "illuminating to hear what some of the arguments were around the table," said Michael Reynolds, vice president of investment strategy at Glenmede.
"Handicapping how many rate cuts we're going to get next year is a big thing markets are focused on right now," Reynolds said. "We'll just get a little bit more information on that next week." Investors are also waiting for President Donald Trump to nominate a Fed chair to replace Jerome Powell, whose term ends in May, and any inkling of Trump's decision could sway markets in the coming week.
With just a handful of trading sessions left in 2025, the S&P 500 was up nearly 18% for the year, with the technology-heavy Nasdaq Composite up 22%.
However, the tech sector, which has been the main driver of the more than three-year-old bull market, has struggled in recent weeks, while other areas of the market have shined. Despite rebounding this week, the S&P 500 tech sector has declined more than 3% since the start of November. Over that time, areas such as financials, transports, healthcare and small caps have posted solid gains.
The market moves indicate some rotation into areas where valuations are more moderate, said Anthony Saglimbene, chief market strategist at Ameriprise Financial.
"There are more investors that are buying in to the narrative that the economy is on pretty solid footing right now," Saglimbene said. "And it has weathered a lot of potential roadblocks this year that might not be such roadblocks next year."