US stocks experienced remarkable performance in 2025; however, global markets captured the spotlight. A significant benchmark for equities outside the United States, the MSCI All Country World ex-USA, experienced a robust increase of 29.2% in 2025, substantially exceeding the S&P 500’s growth of 16.39%. The surge in artificial intelligence has positively impacted markets across Asia, with technology firms and semiconductor manufacturers experiencing significant increases in demand. In Europe, markets experienced an uplift due to initiatives aimed at increasing government expenditure on defense alongside enhanced expectations for economic expansion. A depreciated US dollar additionally served as a favorable factor for international equities. As the dollar depreciates and other currencies appreciate, investments expressed in those currencies gain value upon conversion back to dollars. The US dollar index, a gauge of the dollar’s strength relative to six prominent currencies, experienced a decline of approximately 9.4% in 2025, marking its most significant downturn since 2017. As we approach 2025, US stock valuations appear comparatively high when assessed against global counterparts, prompting investors to seek opportunities for returns in alternative markets.
“A lot of things went right for international stocks in 2025,” stated Michael Reynolds in an interview. “Following a period marked by uninspiring fundamentals, foreign equities achieved a robust year of earnings growth,” Reynolds stated. “This was underscored by fiscal stimulus in Europe and growth associated with AI in Asia.” Asian markets have been buoyed by the surge of enthusiasm surrounding AI. Last year, tech companies and chipmakers in South Korea, Taiwan, Japan, and China experienced a significant boost due to heightened investor interest in AI. In 2025, South Korea’s Kospi index experienced a remarkable increase of nearly 76%, marking its most successful year since 1999. Japan’s Nikkei 225 experienced a 26% increase, buoyed by advancements in technology firms and semiconductor manufacturers. In Japan, shares of memory chip manufacturer Kioxia experienced a remarkable increase of 536%. In South Korea, the stock of tech giant Samsung experienced a remarkable increase of nearly 130%.
“The AI trade has broadened materially over the past year,” stated Arun Sai. “That optimism has increasingly been reflected in prices beyond the US, extending globally, particularly into markets such as Korea and Japan.” In Taiwan, shares in Taiwan Semiconductor Manufacturing Company gained 46.54% last year and reached record highs. Meanwhile, shares of China-based Alibaba soared 75.81% as the company embraced AI and launched its own chatbot. European equities experienced a notable upswing in early 2025 following the German government’s implementation of significant reforms aimed at enhancing defense expenditure. European defense stocks experienced a significant upswing last year, highlighted by a remarkable 154% increase for German manufacturer Rheinmetall. Simultaneously, the enhanced economic prospects for Greece, Spain, and Poland positively influenced the markets of those nations. European banks such as Santander and Deutsche Bank experienced remarkable performance, each increasing by approximately 126% and contributing to the uplift in markets. Spain’s benchmark IBEX 35 index experienced a remarkable increase of 49%, marking its most successful year since 1993. Italy’s FTSE MIB experienced a remarkable increase of nearly 32%, marking its most successful year since 1998. Germany’s DAX increased by 23%, while Greece’s ATHEX Composite rose by 44%, marking their strongest annual performance since 2019. Poland’s WIG index experienced an increase of 47%. “In a year when the falling dollar sent investors scrambling for global exposure, Poland offered a unique mix of growth and value,” stated David Russell. “Greece is finally recovering from a decade-long debt crisis,” Russell stated. “The nation regained its investment-grade rating from Moody’s and experienced a surge in tourism.” It represents a quintessential narrative of recovery after experiencing a phase characterized by poor lending practices and diminished valuation multiples. The UK’s benchmark index experienced a notable increase of 21.51%, marking its most successful year since 2009.
The index commenced 2026 with notable vigor, momentarily surpassing a historic peak of 10,000 points on Friday for the first time in its history. For US investors, analysts indicate that the dollar will be crucial in assessing the returns on international stocks. “If the dollar continues to weaken, foreign stocks may continue to have the wind at their back,” Reynolds stated. Despite a year of outperformance in international markets, certain investors maintain that the underlying fundamentals continue to favor the United States. “We still favor the US first and international second,” stated Sameer Samana. “The expectation is that the dollar will stabilize, which is likely to mitigate the competitive edge for emerging market equities.” Market exhibits a positive sentiment regarding the future of US equities, bolstered by the robustness of corporate profits and a prevailing belief that advancements in AI will sustain earnings growth. Nevertheless, investors in the previous year sought opportunities abroad to enhance portfolio diversification in the face of increased uncertainty, and both developed and emerging international markets emerged as robust choices. “One of the biggest and most underappreciated surprises of 2025 has been the extraordinary outperformance of emerging market (EM) equities,” stated Lisa Shalett. “Overweighting the US has served global investors well the past 15 years,” Shalett stated. “That said, we believe that the evolving geopolitical landscape, along with changes in monetary and fiscal policy amid technological advancements and the limitations posed by developed world debt, necessitates diversification beyond US equities and fixed income for long-term investors.”