Things Investors (Re)Learned in 2025

What a year that was! Twists and turns abounded in 2025, giving investors a roller coaster ride to a fine bull market return for global stocks. Before you pop the Champagne (or, if you are like some of us, put on your flannel pajamas and hop in bed with earplugs at 8:30 PM), here is a quick look at some of the key takeaways from the year that was.

Volatility goes both ways … quickly.

We often say short-term volatility flips fast, making corrections (sharp, sentiment-fueled drops of -10% to -20%) impossible to time. Try, and you could easily get whipsawed, which is jargon for selling low and buying high.

Boy did stocks prove this one in April! While 2025’s correction began in February, when stocks began slipping from an all-time high, it really got cooking after President Donald Trump announced broad tariffs on April 2, dubbed “Liberation Day.” His announcement happened after market close, setting markets up to vote their feelings on April 3. And did they ever: Global stocks fell -3.7% that day and kept sliding, notching a cumulative -11.3% decline through April 8.^[i] But then Trump announced a temporary suspension of most new tariffs on April 9, propelling a swift recovery. The MSCI World Index rose 6.5% that day.^[ii] By mid-May, it had erased the post-Liberation Day decline. By mid-June it was back at all-time highs. As the news changed quickly, so did sentiment, forcing markets first to price worst-case scenario adjustments, then adjust rapidly as things quickly went better than feared.

Patience and discipline wouldn’t have felt good from April 2 through April 8, especially as headlines warned of worse to come. But we reckon it felt great over the next two months as the drop faded and the bull market continued. When markets are reeling quickly, the best course of action is usually to take a deep breath, assess the lay of the land and be rational.

Currencies giveth and taketh away.

Of course, the above figures are all in US dollars. In pounds, euros and other currencies that strengthened versus the dollar this year, things look different. You see a deeper decline off the top and a much slower recovery, with global stocks flattish or even negative into Q3.

What gives? Currency swings.

Now, currency moves aren’t inherently good or bad for stocks. This is easy to see when you think it through, because currencies always trade in pairs and country returns globally are highly correlated—they move together directionally vastly more often than not. In a global bull market, most countries and regions will participate to varying degrees. Which means they will be rising even as some of their currencies are strengthening and others are weakening. If currency moves dictated stocks, you would have everyone going in opposite directions and it would be chaos. That doesn’t happen.

But currency moves do affect investors’ returns. Say you are a US investor and you own some eurozone stocks. Your return on those stocks is the company’s return in euros, plus or minus the currency movement. When the dollar strengthens, it means euros buy fewer dollars, so it detracts from your return on those stocks. When the dollar weakens, it means euros buy more dollars, so it adds to your return.

The dollar weakened against most major currencies in 2025, so US-based investors with global portfolios got some extra sweetness. Not only did non-US stocks outperform this year, but the dollar’s weakening added to already-big returns.

But folks based in the UK, eurozone and Scandinavia took a slightly bitter pill. Their stronger currencies detracted from their returns on US stocks, leaving returns in pounds, euros, kroner and kronor lower. In euros, the MSCI World Index is up just 7.3% year to date through December 30 (21.8% in US dollars).^[iii] Several local-country indexes are up a heckuva lot more than that, including Germany’s DAX, France’s CAC 40, Austria’s ATX, Italy’s FTSE MIB and Spain’s IBEX. A couple of those are up more than 50% locally due to their sector concentrations (eurozone Financials did smashingly this year).

This can make global diversification look pointless. We assure you, it isn’t—just as it wasn’t for US investors in past years when the dollar strengthened, subtracting from returns on non-US stocks. It is rather a call for patience, because currency moves tend to even out over time as currencies ripple higher and lower in cycles, like sine waves (sorry). Currencies will add at times and subtract at others, but global diversification’s benefits stretch well beyond this. We think there is really no better way to mitigate risks and widen your opportunity set.

Nothing leads forever.

After several years of US stocks beating global markets, people mostly penciled this in as automatic. Ride the S&P 500, surf the Magnificent Seven, party in the USA.

Only, the US underperformed in 2025. Even with US stocks’ temporary leadership in the correction rebound, they still lagged overall.

Through Thursday’s close, the S&P 500’s 18.7% doesn’t look far off the MSCI World Index’s 21.8%.^[iv] But there is a little more to the story. The MSCI World Index has 23 constituent countries. Of these, the US is … drumroll please … 20^th on the leaderboard. It is beating only Denmark (the lone negative, due to well-documented struggles at a major Pharma firm and wind energy company), New Zealand and Australia. All other 19 countries are well ahead of it, some absurdly so. And it isn’t just the dollar: Even in local currency terms, US stocks are behind the pack, leading only six other countries.

Leadership rotates, usually when few expect it. No one country (or sector, style, or, or, or) leads for all time. Which is why global diversification matters.

Don’t believe everything you read.

Lastly, we keep seeing this thing about how the Magnificent Seven (those seven huge US Tech and Tech-like firms) are driving stocks’ gains. One article Wednesday accused them of propping up Wall Street.^[v]

Can we please put this to bed? Five of them lagged global markets this year. Concerns about the bull market’s breadth are greatly exaggerated. It is so much broader than seven companies.

Happy New Year, friends. May 2026 be a wonderful year for all of you.