3 surprising market winners in 2025
Even before tariff-related volatility, DeepSeek AI's launch clouded the major technology theme that powered the market in 2023 and 2024, as AI stocks entered a bear market in March.
But there have been equity gains to be had in 2025. When I look at year-to-date returns across indexes, I notice a few surprising stars: European stocks, Latin America, and real estate investment trusts.
The common thread that connects the three? All had been underperformers in prior years.
European stocks have been made great again
Morningstar's European stock index is riding high this year, as the macroeconomic environment has been improving. The financial-services sector, in particular, is a key beneficiary.
Then there's Germany's newfound interest in deficit spending and the continent's focus on military self-sufficiency, spurred by the Donald Trump administration.
US tariff announcements caused sharp selloffs in Europe, but the recovery has been V-shaped. A weakening US dollar has magnified European equity gains for unhedged US investors. It doesn't hurt that the European Central Bank and the Bank of England have actually been cutting interest rates.
My research and investment colleagues have called Europe 'the most attractive developed-markets region globally,' making European stocks worthy of inclusion in a diversified portfolio.
Latin America: Can the revival last?
South of the US border, stocks are rallying.
Morningstar's Latin American equities index is up more than 22% so far in 2025, thanks to Brazil, Mexico, and the smaller markets of Colombia and Chile. Here, too, a weakening dollar has boosted equity returns for unhedged US investors. This marks quite a turnaround from losses of more than 25% in US dollar terms in 2024.
Brazil, for its part, faces serious fiscal challenges. In Mexico, sentiment was dented by election results on both sides of the border.
Coming into the year, my colleagues on Morningstar's research and investment team identified Brazil as the highest potential global equity market for the coming 10 years. Latin American stocks are volatile but could hold more upside.
REITs, especially those outside the US, outperform
Real estate investment trusts are also up double digits this year outside the US. Property sectors in many geographies are vibrant, bolstered by low or falling interest rates.
What about the US? The Morningstar US REIT Index is well behind the Morningstar Global Markets ex-US REIT Index in 2025, but it's in positive territory, ahead of the broad US equity market. US interest rates that appear to be staying higher for longer are seen as a negative for real estate. That said, REIT yields are attractive, and property is a 'real asset' that can act as an inflation hedge.
Diversification assures exposure to unloved asset classes
US mega-cap technology-oriented stocks did so well for so long that many investors thought they were the only game in town. Coming into 2025, it was hard to envision how the Magnificent Seven could ever be knocked off their perch. The rise of artificial intelligence, widely viewed as 'bigger than the internet,' seemed inexorable. No one saw DeepSeek AI coming, and few predicted the degree to which tariffs would disrupt.
Gravity is a powerful force in investing, too. US stocks, especially on the growth side of the market, posted returns in 2023 and 2024 that far exceeded their historical levels. Their losses in 2025 can be seen as a reversion to the mean, or a return to long-term averages.
The surprising winners of 2025 show that investment performance is dynamic. Contrarian bets can be profitable, though they can also take time to pay off. Investors who diversify by geography, style, and market capitalization are also well placed to benefit from leadership change.
___
This article was provided to The Associated Press by Morningstar. For more markets content, go to https://www.morningstar.com/markets.
Dan Lefkovitz is a strategist for Morningstar Indexes
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
14 minutes ago
- Yahoo
Solar Firms Surge as Senate Drops Excise Tax From Trump Bill
(Bloomberg) -- Shares for solar companies rose on Tuesday on the Senate's decision to remove an excise tax on wind and solar projects from President Donald Trump's tax and spending bill. Struggling Downtowns Are Looking to Lure New Crowds Philadelphia Transit System Votes to Cut Service by 45%, Hike Fares Sprawl Is Still Not the Answer Shares in Sunrun Inc. were up about 11%, Enphase Energy Inc. was up about 4% and Solaredge Technologies Inc. were up 9% at around 12:49 p.m. in New York after news reports on the change. The Senate passed the $3.3 trillion bill on Tuesday after making the last-minute change and other modifications meant to mollify some Republicans. The measure spiked a previously proposed excise tax on wind and solar projects that contained a certain threshold of components made in China, Senator James Lankford, a Republican from Oklahoma, told reporters Tuesday. That proposed tax, which had been tucked into the Senate bill unveiled days ago, was supported by some US manufacturers who said the country needs to urgently wean clean energy supply chains off China. But it had sparked alarm from renewable developers who said it could hike costs for wind farms and solar arrays that still rely on some foreign components and supply chains dominated by Beijing. Senator Ed Markey, a Democrat from Massachusetts, hailed the removal of the excise tax in a post on X ahead of passage. The bill would still phase out subsidies for wind and solar projects placed in service after December 31, 2027; some Republicans had made a last-ditch push to ease the credit cutoff. The various iterations of Trump's tax and spending package have whipsawed much of the renewable energy industry — and, with it, shares of developers, installers and manufacturers. The proposed addition over the weekend of the tax on some wind and solar projects stunned the industry, prompting shares to slide Monday. But now, with the excise tax's removal, shares popped on a day that would otherwise have threatened the pace of the growth of renewable energy in the US. Clean energy trade groups had warned that without changes, Trump's 'Big, Beautiful Bill' would have threatened some wind farms and solar arrays already under construction. The changes weren't enough to satisfy renewable developers who on Tuesday said the Senate-passed bill still poses a major threat to the industry. 'Despite limited improvements, this legislation undermines the very foundation of America's manufacturing comeback and global energy leadership. If this bill becomes law, families will face higher electric bills, factories will shut down, Americans will lose their jobs, and our electric grid will grow weaker,' Abigail Ross Hopper, president of the Solar Energy Industries Association, said in a statement. --With assistance from Erik Wasson. America's Top Consumer-Sentiment Economist Is Worried How to Steal a House SNAP Cuts in Big Tax Bill Will Hit a Lot of Trump Voters Too China's Homegrown Jewelry Superstar Pistachios Are Everywhere Right Now, Not Just in Dubai Chocolate ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
15 minutes ago
- Bloomberg
Senators Came to Their Senses on AI Regulation Ban
Some sense has prevailed in the Senate — a 99-1 vote against a provision in its huge tax and spending bill that would have banned state-level artificial-intelligence laws for the next 10 years. It's been just 944 dizzying days since ChatGPT was launched into the world — imagine what might have happened over the next 3,653. A last-gasp effort to amend the bill, which included reducing 10 years to five, also failed. The new wording would have been more onerous than the original, decimating existing state laws on facial recognition and data privacy. New laws will need to tackle AI-triggered issues on discrimination, recruitment and mental health. The matter is simply too urgent to be left only in Washington's hands. Senators rightly saw through the moratorium as doing the bidding of big tech companies that want free rein to do as they please in the insatiable race to build and sell AI.
Yahoo
15 minutes ago
- Yahoo
Official: Monza sale brings end to Berlusconi ownership
AC Monza has officially been bought by American investment fund Becket Layne Ventures, which will bring an end to the Berlusconi family's reign over the club. Official: Berlusconi family agree to sell Monza to US investors Monza, who were relegated from Serie A at the end of the 2024-25 season, have been bought out by new American investors. Becket Layne Ventures have purchased an initial 80% stake in the club, and have agreed to purchase the remaining 20% of the shares by June 2026. Advertisement For the meantime, Fininvest, the holding company owned by the Berlusconi family, will remain minority shareholders, and will remain on the board 'in line with its remaining shareholding', it has been confirmed. epa10119403 Silvio Berlusconi (L) and Adriano Galliani before the Italian Serie A soccer match between AC Monzaa and Torino FC at U-Power Stadium, 13 August 2022. EPA-EFE/Roberto Bregani Once Becket Layne have bought out the remaining 20% of the shares from Fininvest, the Berlusconi family will no longer have control over the club. Monza was officially bought by Fininvest, then under the control of former Prime Minister of Italy and ex-Milan President Silvio Berlusconi in 2018. Along with the guidance of former Milan CEO Adriano Galliani, Monza earned promotion to Serie A for the first time in the club's history at the end of the 2021-22 season. The club remained in possession of Fininvest after the death of Silvio Berlusconi in 2023. The holding company remained under the control of the Berlusconi family, who have since agreed to sell 100% of their shares in the club following the team's relegation to Serie B at the end of the 2024-25 campaign.
