**Markets in Q4 2025: Stocks Rise Modestly, Tech Stumbles, Fed Cuts Rates, Bitcoin Tanks**

In the final quarter of 2025, U.S. stock markets reached new highs but couldn’t keep the strong momentum seen earlier in the year. Investors began to question whether the artificial intelligence (AI) boom that had powered much of the rally could really last. Tech stocks, especially those tied to AI, were hit hard, while other sectors like healthcare and value stocks stepped up.

**Stock Market Overview – Q4 2025**

Stocks posted a modest gain of 2.43% for the quarter, ending the year up a solid 17%. But this growth slowed from previous quarters, mainly due to turbulence in the tech sector.

– The Morningstar US Market Index rose 2.4% during the quarter.
– October and November were tough months with multiple selloffs in big tech names.
– AI-driven companies like Nvidia and Oracle saw their stock prices slide as investors grew skeptical about their ability to meet high earnings expectations.
– Concerns also grew around how much debt large tech firms were taking on to build AI infrastructure.

**Value Stocks Outperform Growth Stocks**

As tech (growth) stocks struggled, value stocks outperformed across nearly all categories:

– Mid-cap value stocks led the way with a 4.23% gain.
– Small-cap value stocks rose 4.18%, while small-cap growth gained only 1.50%.
– Large-cap value stocks were up 4.14%.
– Large-cap growth stocks fell 1.42%, although they remained the best performers for the year overall with a 19.64% gain.
– Mid-cap growth stocks dropped the most in Q4, down 5.41%.

**Sector Performance – Healthcare Leads, Tech Lags**

With tech under pressure, other sectors took the lead:

– Healthcare was the top performer in Q4, jumping 11.27%.
– Financial services rose 2.50%.
– Industrials gained 2.09%.
– Utilities fell 1.35%, partly due to their growing ties to tech through rising data center demand.
– Real estate stocks declined the most, losing 1.95%.

**Dividend Stocks Keep Pace**

Dividend-paying stocks kept up with the market:

– The Morningstar Dividend Composite Index returned 2.4%.
– High-yield dividend stocks performed better, with a 3.5% gain.

**Global Market Trends**

U.S. markets trailed international ones during Q4:

– Canadian stocks jumped 7.95%.
– U.K. markets gained 6.51%.
– Chinese markets saw a sharp drop of 6.8% after a strong performance in Q3.

**Federal Reserve Cuts Interest Rates Again**

The Federal Reserve lowered interest rates twice in Q4, bringing the target range down to 3.50%-3.75%. This followed an earlier cut in Q3.

– These rate cuts happened despite some disagreements among Fed policymakers.
– Some officials pushed for more cuts to help a cooling labor market.
– Others warned against inflation risks.
– Inflation is much lower than in 2022 but still above the Fed’s 2% goal.
– Markets expect no further rate cuts at the Fed’s next meeting in early 2026.

**Bond Market Finishes Strong**

Bonds had a solid quarter thanks to rate cuts and weaker job data:

– The Morningstar US Core Bond Index rose 0.97% for the quarter and ended the year up 7.12%.
– The yield on the 10-year Treasury finished at 4.18%, while the 30-year ended at 4.84%.
– Mortgage-backed securities led bond returns with a 1.59% gain.
– High-yield bonds rose 1.40%, municipal bonds gained 1.48%, and intermediate-term bonds were up 1.35%.

**Yield Curve Steepens**

As short-term interest rates fell, the yield curve steepened:

– The gap between 10-year and two-year Treasury yields widened to 0.71 percentage points from 0.56 points in Q3.
– A steeper curve often signals growing confidence in long-term economic recovery.

**Volatility Update**

– Stock market volatility increased due to swings in tech stocks.
– Bond market volatility stayed low and dropped even further below its five-year average.

**Crypto Crash – Bitcoin Takes a Hit**

After rising earlier in the year, Bitcoin plunged over 23% in Q4:

– The drop was driven by heavy selling from investors using borrowed money.
– Crypto funds saw record outflows.
– Bitcoin ended the year below $89,000 after peaking above $123,000 in October.
– Ether fell even more sharply.

**Commodities: Gold and Copper Surge, Oil Slumps**

Gold continued to shine:

– Prices jumped more than 12% as investors sought safety during market uncertainty.
– Copper also surged by 17%, likely driven by industrial demand.

Meanwhile, oil prices dropped:

– Increased production by the U.S. and OPEC+ countries boosted supply and pushed prices down.

**Summary: Q4 Market Themes**

– Stocks rose modestly as AI-driven tech stocks stumbled.
– Value and healthcare stocks took leadership roles.
– The Fed cut rates again amid signs of a weakening job market.
– Bonds performed well, while crypto suffered steep losses.
– Gold and copper soared as safe-haven demand increased.

Investors are now watching closely to see if these trends carry into early 2026 — especially with potential changes at the Fed and ongoing questions about tech’s future performance.