Total Average Expenditures by Quartiles of Household Income 2000-2024 (Source: Bureau of Labor Statistics via Federal Reserve Economic Database)
The Financial Markets The Stock Market
The U.S. stock market reflects expectations for future economic performance and corporate profitability. In 2025, the S&P 500, a broad benchmark index for U.S. large company (large-cap) stocks, rose to record highs. However, in a major shift for stock market performance, the U.S. stock market lagged behind most major foreign stock markets. That trend continued in the first quarter of 2026. The table below compares major stock index returns for selected countries for 2024, 2025, the 5-years (annualized) ending December 31, 2025, and the first quarter of 2026. The selected indexes are broad measures of stock market performance in their respective countries. The U.S. S&P 500 is a leading benchmark index for U.S. large company (large-cap) stocks, with a long-run historical annual average return of approximately 10 percent. The U.S. stock market soared in 2024, with returns more than twice the historical average. In 2024, the U.S. stock market was the leader of the pack, outperforming every other index listed below with the S&P 500 returning 23.31 percent. That trend reversed in 2025. Although the S&P 500 reached record highs, the U.S. stock market lagged behind several foreign stock markets. In 2025 the U.S. S&P 500 returned 16.39 percent, significantly higher than the historical average, but lower than the returns of several foreign stock markets. Despite the U.S. imposed tariffs in 2025, the stock market performance of Mexico, Canada, the United Kingdom, Germany, Japan, and China exceeded the performance of the S&P 500. The stock markets of America’s top three trading partners – Mexico, Canada, and China, all outperformed the S&P 500 despite significant U.S. tariffs. Canada and Mexico vastly outperformed, with stock market returns of 28.93 percent and 25.17 percent, respectively, compared to the 16.39 percent for the U.S. The 2025 Canadian stock market performance propelled it to the top spot for 5-year returns, with annualized returns of 13.27 percent. The U.S. ranked third in 5-year returns, with annualized returns of 12.75 percent. The Iran war and skyrocketing oil prices weighed heavily on global stock markets and economic uncertainty in the first quarter of 2026. The S&P 500 declined 4.63 percent, with only Germany performing worse with a drop of 7.39 percent. Four of the nine countries listed below had stock market increases, including Canada, Mexico, the United Kingdom, and Japan. The Mexican stock market was by far the top performer with an increase of 8.11 percent, with Canada a distant second posting a gain of 3.19 percent.
12
Center for Business and Economic Insight
Made with FlippingBook Learn more on our blog