2025 Market Mania and the Power of the Magnificent Seven

Pete Williams

Hey folks, welcome back to Radio Pete's Wealth Talk! I'm Pete Williams, and today, yeah, we're getting right to it—2025 was, I mean, bonkers for the markets. I'm not exaggerating when I say this year’s returns were enough to give even the pros whiplash. This is especially true since the 2025 returns follow two previous years with double digit returns as well.

Pete Williams

So, let's kick things off by recapping how the big three—the S&P 500, Dow Jones, and NASDAQ—performed. I always have to double-check the numbers because they’ve just been that wild, but the S&P 500 notched about a 16.5% gain for the year. And the NASDAQ? It just shot right past that, with a 19% return. The Dow? It sort of pulled up the rear by comparison, hanging out closer to 13%. That's a massive spread between indexes that people often lump together in their minds.

Pete Williams

And the volatility, —if you felt seasick, you weren’t alone. You may recall the 20-plus percent decline when President Trump began implementing his tariff program in April followed by a rapid climb to new highs shortly thereafter. I remember checking charts back in, what, 1999… or, no, maybe it was 2000? Anyway, there were days in ’99 when the NASDAQ would swing 5-6% and everyone acted like the sky was falling or like they’d discovered buried treasure, depending on which side they were on. 2025 felt that way, but, like, on steroids, right?

Pete Williams

Now, if you’ve tuned in before—I mean, we talked about this back in a previous episode —you already know the story of these so-called “Magnificent Seven.” Apple, Microsoft, Alphabet, Amazon, NVIDIA, Meta, Tesla… did I remember them all? Yeah, that’s seven. Anyway, these giants didn’t just show up for the party—they kicked down the front door and took over the dance floor. Their combined market cap now makes up almost 30% of the whole S&P 500. That’s just wild. It’s like having your starting lineup in basketball, but every one of them is an All-Star, and the rest of the bench barely touches the ball.

Pete Williams

That brings us to something a lot of investors, maybe you listening right now, wrestled with all year—diversification. And, this will continue to be the challenge for 2026. This is supposed to be the whole point after all. Spread the risk, don’t hitch your wagon to a single star, all that commonsense stuff. Diversified portfolios do very well over time with reasonable volatility. The S&P has performed at about a 10% long term. That may sound small given the past few years; but, remember, there are also years of negative, even substantial negative years. And, oh, by the way, 10% doubles your money in 7.2 years. Do that over a lifetime of investing and you can end up with a nice nest egg.

Pete Williams

Remember, too, that diversification is not only within a given asset class but over several asset classes which, along with stocks, includes bonds and alternatives. In that latter category, you may have noticed that gold, silver and bitcoin had a good run along with some massive volatility. You can also participate in real estate through certain stocks as well as ETFs and mutual funds. The idea is that if, or should I say when, the trend in one asset class reverses, the others "fill the gap" so to speak.

Pete Williams

So, the bottom line is that simply buying an S&P ETF or mutual fund may not give you the diversification it once did. It may rely too much on 7 magnificent stocks. For 2026, here's the debate: on the one side do you keep chasing the winners, double down on the Apples and the NVIDIAs, and the other side, do you “stick with diversification.” Or, diversify even more than you did in 2025? The thing is, there’s no easy answer—when you’re in a year where seven stocks can drive the whole index, it’s tough to stick to your guns. But, as we talked about in previous episodes, leadership can and does change, sometimes when no one expects it. Maybe next year, those dividend-paying companies everyone forgot about are the new stars. Or gold may continue to shine. Or not. That’s why you re-balance things, even when it feels boring, and why we keep talking about cycles, patience, and, yeah, not losing your cool when the headlines get weird. Most advisors recommend diversification over asset classes and within asset classes followed by a re-balance when things get out of line based on your individual goals and appetite for risk.

Pete Williams

Alright, folks, that about wraps it for today’s whirlwind through 2025’s market madness. We’ll keep digging into these themes in future episodes, so if you’re still wondering whether to double down on the leaders or spread it out, definitely stay tuned. Thanks for listening—and, as always, be smart, stay curious, and don’t be afraid of a little volatility. I’ll catch you next time.