2025 gave us “bubbles” – here’s how you invest through them

2025 was supposed to be the year everything fell apart, or so the headlines suggested.

In January, DeepSeek shook up AI stocks and sparked talk of a tech bubble. In April, Liberation Day tariffs had investors questioning US exceptionalism entirely. Gold's surge prompted warnings of a bubble there. All against a backdrop of valuations that drew comparisons to the dot-com era.

Yet here we are, and the sky hasn't fallen. In this Reserve Letter, we take stock of 2025: what actually happened, why staying invested paid off, and what it means for the year ahead.

A round-up of 2025

For all the drama, 2025 turned out to be a strong year for investors who stayed the course.

In late January, Chinese AI startup DeepSeek released a model that reportedly rivalled OpenAI's at a fraction of the cost. Nvidia dropped 17% in a single session, shedding nearly $600 billion in market value – the largest single-day loss for any company in stock market history. Talk of an AI bubble started. Within a week, however, the market had recovered.

In April, Liberation Day tariffs sent the S&P 500 into its worst stretch since the pandemic. From the announcement to the lows that followed, the index plunged 12%. Headlines questioned whether the era of US exceptionalism was over. From those lows, the index is now up by around 37%.

These fears haven’t gone away. All year, the bubble warnings have kept coming. AI valuations were too high. The S&P 500 was trading like it was 1999. Yet when you look at the actual data, the comparisons don’t quite hold. Today's AI leaders trade at around 26 times forward earnings. During the dot-com bubble, that figure was 67 times, with far less to back it up.

So how did the year actually end up? The S&P 500 has returned around 17% year-to-date. International markets outside the US are up over 28%. Global bonds returned around 7% as central banks delivered on rate cuts. Gold is now up by about 60%, on track for its fourth strongest annual return since 1971.

None of this happened in a straight line, but those who stayed invested captured gains on multiple fronts.

More than the names you know

When Nvidia shed 17%, the S&P 500 lost just 1.5%. When US equities tumbled 12% after Liberation Day, gold climbed 10% that same month. The more you spread out, the less any single shock matters.

You’re also likely invested in far more than the names that dominate the conversation. Nvidia is only one company; the Nasdaq holds 100 and the S&P has 500. Moreover, despite how often the Magnificent Seven make the headlines, the S&P 500 is actually one of the least top-heavy indices in the world.

If you’re invested in a broad index, you own financials, industrials, utilities, healthcare, consumer staples – companies you've never heard of, doing things you've never thought about. They don't make the news, but they're compounding your wealth all the same.

So how did the S&P 493 (let’s put aside the Magnificent Seven for a moment) do in 2025? Take this past November. While tech fell 4% on AI profit-taking, defensive sectors picked up the slack. Healthcare surged 9%, its best month in three years. While Meta and Nvidia dealt with market volatility, the broader S&P 500 finished mostly positive as the rest of the market held. The S&P 493 did just fine.

What 2025 taught us (again)

2025 reinforced a lesson that bears repeating: the market rewards patience over prediction. Every major scare this year resolved within weeks: sharp drops, followed by recoveries that reward those who stay invested. The edge isn't in predicting which headline will move markets, but in building a diversified portfolio that can weather whatever comes.

Our General Investing portfolios take diversification further, investing in thousands of securities across dozens of countries and asset classes. You can read an analysis of our latest returns here. Not every asset will move predictably in volatility, but over time, holding a mix will smooth out the long-term picture.

Private markets offer another layer of diversification. They're not immune to economic forces, but they tend to avoid the sentiment-driven swings that move public market prices. For example, when both stocks and bonds fell in tandem in 2022, private equity still posted positive returns.

There will be new headlines in 2026, new uncertainties and new reasons for concern – but also moments of celebration. Whatever the case may be, the principles that worked for long-term investors this year will work in the next: stay invested, stay diversified, and let compounding do its job.

Here's to another year of building wealth together.