5 themes that defined business and markets in 2025: Morning Squawk

• Major indexes posted third straight positive year with S&P 500 up 13.7%, Nasdaq up 17.3%, and Bitcoin surging 166.5% despite tariff fears and AI spending concerns
• Trump's broad tariff plans sparked business scrambles to import goods early while the Supreme Court deliberates their legality, raising inflation and consumer cost concerns
• Fed cut rates three times to 3.5%-3.75% range amid Trump's pressure campaign, including his unprecedented firing of Fed Governor Lisa Cook pending court challenge

Market Summary: Five Defining Themes of 2025

Stock Market Performance: Major indexes hit all-time highs despite volatility from Trump's tariff threats in April. With one session remaining, the S&P 500 gained 13.7%, Dow up 17.3%, Nasdaq surged 21.3%, and Russell 2000 climbed 12.1%. Crypto dominated with Bitcoin up 66.1% and Ethereum soaring 166.5%. Gold rose 19.2%, while oil fell 5.8%.

Trade Policy Impact: President Trump's return brought sweeping tariff threats on imports, prompting companies to rush shipments and lobby Washington for exemptions. Small businesses struggled more than larger firms to absorb costs. The Supreme Court's pending decision on tariff legality leaves trade policy uncertain.

AI Investment Boom: Nvidia and OpenAI led an AI spending surge, striking major deals with hardware and data center companies. While AI stocks attracted significant investment, concerns grew about a potential bubble that could impact the broader market given the economy's reliance on AI-related spending.

Federal Reserve Tensions: The Fed cut rates three times to 3.5%-3.75% amid unprecedented pressure from Trump. The president threatened to fire Chair Jerome Powell and actually dismissed Governor Lisa Cook (pending Supreme Court challenge). Powell's term expires May 2026, giving Trump opportunity to reshape Fed leadership.

Economic Divergence: A "K-shaped" economy emerged with wealthy consumers thriving while lower earners struggled with inflation. This split drove airlines to expand premium services while fast-food chains pushed value menus. Youth unemployment particularly suffered, contributing to historically low consumer sentiment despite overall economic growth.