3 surprising market winners in 2025
Investors brave enough to peek at their account statements know that it's been a rocky 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.
___
Dan Lefkovitz is a strategist for Morningstar Indexes
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This activity could also cause or avoid an increase or a decrease in the market price of the Class A common stock or the Notes which could affect a noteholder's ability to convert the Notes and, to the extent the activity occurs during any observation period related to a conversion of Notes, it could affect the number of shares, if any, and value of the consideration that a noteholder will receive upon conversion of its Notes. The Notes and any shares of Class A common stock issuable upon conversion of the Notes have not been and will not be registered under the Securities Act, any state securities laws or the securities laws of any other jurisdiction, and unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws. This press release is neither an offer to sell nor a solicitation of an offer to buy any of these securities nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification thereof under the securities laws of any such state or jurisdiction. About Tempus Tempus is a technology company advancing precision medicine through the practical application of artificial intelligence in healthcare. With one of the world's largest libraries of multimodal data, and an operating system to make that data accessible and useful, Tempus provides AI-enabled precision medicine solutions to physicians to deliver personalized patient care and in parallel facilitates discovery, development and delivery of optimal therapeutics. The goal is for each patient to benefit from the treatment of others who came before by providing physicians with tools that learn as the company gathers more data. 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These forward-looking statements are based on Tempus' current assumptions, expectations and beliefs and are subject to substantial risks, uncertainties, assumptions and changes in circumstances that may cause Tempus' actual results, performance or achievements to differ materially from those expressed or implied in any forward-looking statement. These risks include, but are not limited to market risks, trends and conditions. These and other risks are more fully described in Tempus' filings with the Securities and Exchange Commission ('SEC'), including in the section entitled 'Risk Factors' in its Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 24, 2025, as well as other filings Tempus may make with the SEC in the future. 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