The Dow Jones Industrial Average fell on the last trading day of 2025. The S&P 500 and Nasdaq Composite also saw declines, but the overall performance for the year was strong. The S&P 500 is set to rise by 17%, marking its third year in a row with double-digit gains. The Nasdaq increased by 21%, fueled by excitement around artificial intelligence. Meanwhile, the Dow Jones rose by 13%, benefiting from less exposure to tech stocks.

December Market Insights

December was a profitable month for stocks, with both the Dow and the S&P 500 on course for their eighth consecutive winning month. The Nasdaq stayed flat, indicating selective gains. Mixed news from companies and the economy created a generally stable environment. Nike’s share prices went up, and initial jobless claims dropped to 199,000, showing a resilient labor market. Artificial intelligence continued to shape market trends, though technology sector returns varied. Alphabet’s shares gained over 65%, while Amazon faced challenges. Commodities performed well, with gold rising more than 64% and silver increasing over 140%. This trend suggests that future returns might lean more on traditional fundamentals. The Dow Jones, created by Charles Dow, is a price-weighted index that includes 30 major U.S. companies. Its performance can be affected by company earnings, economic data, interest rates, and inflation. Various trading methods, like ETFs, futures, and options, allow investors to engage with the Dow Jones Index. The market’s small pullback at the end of the year, despite a strong 2025, hints at potential volatility for January 2026. The S&P 500 has enjoyed an impressive eight-month winning streak, which historically can lead to a period of consolidation. With the CBOE Volatility Index (VIX) around a low of 12, buying call options on the VIX could serve as an affordable hedge against sudden market drops.

Commodities Versus Technology Stocks

We should closely monitor the gap between rising commodities and mixed performance in technology stocks. While the Nasdaq was flat in December, gold achieved an astonishing 64% gain this year—the best performance since the late 1970s during high inflation. This indicates that traders might consider using options to create spread positions, such as going long on commodity ETFs like GLD while possibly hedging with puts on tech funds like QQQ. The strength in the labor market, highlighted by initial jobless claims dropping to 199,000, will direct attention to the upcoming January jobs report. This data will be vital for the Federal Reserve’s interest rate decisions in early 2026. Traders can use options straddles on index ETFs like SPY or DIA ahead of the report to benefit from significant market movements, regardless of the news being strong or weak. After a 17% gain in the S&P 500, it is essential to recognize that valuations are now high, with the index’s forward price-to-earnings ratio at 21, which is above the ten-year average. For those holding substantial long equity positions, it’s a good time to protect gains from 2025. This can be done by buying protective put options on major indices or implementing collar strategies, which involve selling call options to fund the purchase of puts. Create your live VT Markets account and start trading now.

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