With only a few weeks left in 2025, all major investment categories are demonstrating positive growth, according to an analysis of various exchange-traded funds as of December 5th. This strong performance signals a largely optimistic financial landscape as the year draws to a close, with a particular focus on the robust returns from international stock markets outside of the United States.
The financial year of 2025 has seen a remarkable display of resilience and growth across global asset classes. The leading performers have been stocks in developed economies excluding the US, indicating a potential shift in market leadership. This trend prompts investors to consider whether this outperformance by international markets will continue into the new year, influencing portfolio strategies.
A significant factor contributing to the positive outlook for foreign equities, especially from the perspective of a US investor, is the weakened state of the US dollar. Despite some recent recovery, the broader trend of dollar weakness persists. Should the Federal Reserve proceed with anticipated interest rate cuts, this scenario would likely sustain, if not amplify, the bullish sentiment surrounding international investments.
In contrast to the widespread gains, certain segments of the market have lagged. Specifically, US Real Estate Investment Trusts (REITs), represented by the Vanguard Real Estate ETF (VNQ), have shown the weakest performance, with only a modest gain of 3.9% year-to-date. This sector has largely traded within a narrow band since April, failing to participate in the broader market rally.
As the curtain prepares to fall on 2025, the overarching narrative is one of widespread positive returns, underpinned by strong international market performance and a favorable currency environment for US investors looking abroad. The focus now shifts to how these trends will evolve and shape investment opportunities in the coming year.
