Unwinding the Four Salient Factors Fueling Ongoing Growth in U.S. Stock Markets
In the dynamic world of global finance, the US markets continue to defy expectations, with the three largest indices posting healthy gains throughout 2025. Despite macro-economic risks, geopolitical concerns, and valuation debates, the US markets persist, driven by a trend of growth that seems to have taken on a life of its own.
The continued rise in stocks is due in part to the broadening out of earnings, as more companies within the S&P 500 and Russell 2000 are seeing an uptick in earnings growth. This growth is expected to continue into 2026, providing a promising outlook for investors.
The moderation of inflation has played a significant role in encouraging investors to stay in the market. With the worst of inflation seemingly behind us, the plausible scenario that the worst has passed seems to be holding true. This, coupled with the US dollar's dominance in global trade and exchange reserves, has instilled a sense of confidence in US financial markets.
However, the rise in US markets poses a concern for those interested in "value". While staying the course can be rewarding, the lack of specific data on which investment firm achieved the highest stock growth rate in 2025 makes it difficult to pinpoint a clear leader. Notable performance was reported by Alpine Select, with some portfolio stocks gaining up to +12%, and other funds showing gains between +4.6% and +7.8% in related investment areas during 2024/2025. However, no clear overall leader for 2025 stocks growth rate is identified.
In Canada, a majority of exporters are absorbing tariff costs and reducing their margins, a stark contrast to the US where companies have largely shouldered the burden of tariff costs.
Despite these uncertainties, equities have a high likelihood of beating inflation in almost all scenarios. Fresh cash continues to pile into the NASDAQ 100 and other growth-oriented funds, despite potential overvaluation.
One thing is clear: the US dollar's dominance is large and not going anywhere any time soon. There isn't a viable alternative to replace it at present, keeping demand for US dollars and assets elevated.
Investing always carries an element of risk, and the US markets are no exception. Bull markets can be painful to miss, but trying to time the market in the event of a potential reversal can often be a fool's game. Over time, those who remain in the market outperform those who don't.
Inflation has settled into a lower range compared to its highs in 2022 and 2023, providing a more reasonable backdrop for investors. As we move forward, it will be interesting to see how the US markets continue to evolve and what the future holds for investors.
