Surprising Winners in a Rocky 2025 Market

2025 has been a tumultuous year for investors, but amidst the volatility, certain regions and asset classes have outperformed expectations. European stocks, Latin American equities, and real estate investment trusts (REITs) have demonstrated surprising resilience, with Morningstar's European stock index, Latin American equities index, and global REIT index showing year-to-date gains. These outperformers share a common thread - they had previously underperformed in prior years. The reasons for their turnaround are multifaceted, including macroeconomic improvements, interest rate cuts by central banks, and a weakening US dollar.

Key Takeaways:

• Morningstar's European stock index has gained significantly in 2025, driven by a strengthening financial services sector, Germany's increased deficit spending, and a V-shaped recovery from US tariff announcements.
• Latin American stocks have rallied, with the Morningstar Latin American equities index rising over 22% year-to-date, boosted by a weakening US dollar and recovery in Brazil, Mexico, and smaller markets like Colombia and Chile.
• REITs have also performed well, with the Morningstar Global Markets ex-US REIT Index showing double-digit gains, driven by low or falling interest rates and stable property sectors.
• US mega-cap technology stocks, which dominated the market in 2023 and 2024, have struggled in 2025, with a reversion to mean following unusually strong returns.
• Diversification across geography, style, and market capitalization can help investors benefit from leadership changes and navigate market volatility.

Statistics:

• Morningstar's European stock index has gained over 15% in 2025.
• The Morningstar Latin American equities index has risen over 22% year-to-date.
• The Morningstar Global Markets ex-US REIT Index has shown double-digit gains.
• The US dollar has weakened against peer currencies, magnifying European equity gains for unhedged US investors.

Sources:

• Dan Lefkovitz, "Surprising Winners in a Rocky 2025 Market," Morningstar, 2025.
• Morningstar Indexes, 2025 year-to-date returns data.