US Stock Funds Maintain Strong Performance Despite AI Skepticism, Narrowing Market Leadership
US stock funds averaged a 14.6% return in 2025, marking the third consecutive year of double-digit gains. The fourth quarter contributed 2.5%, even as doubts about artificial intelligence persisted among investors. Returns have gradually cooled from 21% in 2023 to 17.4% in 2024 and now 14.6%, yet the upward trajectory remains unbroken.
Market dynamics shifted sharply in April when President Donald TRUMP announced sweeping tariffs during Liberation Day. What began as hopes for a broadening market quickly reversed, with leadership tightening around the so-called 'Mag 7' AI stocks. "The market dramatically narrowed again," noted Ellen Hazen of F.L. Putnam Investment Management. "Since that day, the Mag 7 has trounced the rest of the market."
The anticipated sector rotation never materialized, leaving gains concentrated in a handful of AI-linked names. This persistent narrowness defied widespread expectations of diversification, underscoring the market's continued fixation on artificial intelligence themes.