Who would have thought in the midst of the global tariff tantrum in April that we would be looking at a 17% gain for the Morningstar US Market Index and a 30% ascent for the Morningstar Global Markets ex-US Index for the year as of mid-December?
It has been a year of resilient equity markets, rewarding those who have stayed invested, according to new insights from Morningstar Index Strategist DanLefkovitz in his recent column, 5 Investing Surprises from 2025. Lefkovitz examines the year through the lens of Morningstar Indexes, pointing out what worked and what didn’t in another wild year for global markets.
What Worked
- US stocks shook off the tariff turmoil of April, recovering from a near-bear market decline to record a 17% gain by mid-December and proving the difficulty of timing the market.
- International diversification worked in 2025 as US investors benefitted from a depreciating dollar, bolstering the argument for maintaining global exposure in an investment portfolio.
- Bonds have behaved as investors would hope in 2025, with the Morningstar US Core Bond Index delivering a solid single-digit return and an above-inflation yield while, importantly, serving as an effective diversifier during the equity market selloff in April.
- The biggest surprise of 2025? Gold, long considered a hedge for fear and inflation, has had a great year, despite the rally in risk assets.
What Didn’t
- Small caps continued to underperform their larger counterparts, surprising given their post-2024 election rally that raised expectations entering the year, along with declining interest rates and a resilient economy, providing favorable conditions.
Dan Lefkovitz – Strategist, Morningstar Indexes: “It has been a particularly weird year for investment performance. We flirted with a bear market for stocks early in the year but are now sitting on strong gains. Both risk assets and portfolio hedges have thrived. The US dollar has depreciated even as US interest rates have remained higher than other markets. Both bulls and bears can find signals in 2025’s market data. In the face of uncertainty, staying diversified and focused on long-term investment goals remains a sensible approach.”
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