International Stocks Lead a Stunning Reversal
Picture this: for over a decade, American investors smugly watched their portfolios outpace the rest of the world. US stocks have outperformed international stocks for over 16 years, by far the longest run of outperformance in history. But 2025 has delivered a gut punch to this American dominance. So far this year, we’re seeing the opposite, with international stocks up 5.8% vs. 2.9% gain for the S&P 500. This reversal isn’t just a blip – it’s reshaping how investors think about global diversification. While the S&P 500 has been volatile and is flat so far in 2025, the MSCI ACWI ex. US Index, which tracks global stock markets excluding the US, is up by double digits for the year. Smart money is finally waking up to opportunities beyond America’s shores, and the numbers are becoming impossible to ignore.
Germany’s DAX: The Unexpected European Champion
While Germany’s economy stumbles through recession, something extraordinary is happening in Frankfurt’s stock exchange. The DAX (.GDAXI), opens new tab index, which comprises the 40 largest companies listed in Frankfurt, is up 25% since the beginning of 2024, more than twice as much as the EURO Stoxx 50 (.STOXX50E), opens new tab, and is hovering around historical records. This mind-blowing performance comes despite Germany being labeled as Europe’s economic basket case. German stocks have soared even though the country has turned into an economic basket case, with GDP shrinking by a combined 0.4% in 2023 and 2024. The rally cannot reflect confidence in future economic performance either: Germany will grow by 0.2% this year, according to the central bank. The secret sauce? Germany’s largest companies have successfully decoupled from their struggling homeland, thriving in global markets while their domestic economy withers. SAP, Germany’s largest technology firm, has seen its shares soar 65% year to date, making it one of the DAX’s top performers. SAP has become Europe’s largest tech company and the second-largest European firm overall, surpassing Dutch chip equipment maker ASML in market valuation.
Europe’s Broader Renaissance Gains Momentum
Germany isn’t fighting this battle alone – the entire European continent is staging a remarkable comeback. European stocks have staged their best performance in a decade against Wall Street in the first six weeks of 2025, but hopes among some they can finally end years of underperformance could yet be dashed by long-standing structural challenges. The numbers tell a compelling story of European resurgence. Gains in Frankfurt, Zurich, London, Milan and Paris so far this year have propelled the broader STOXX 600 (.STOXX), opens new tab up by more than 5.5%, while the S&P 500 has risen only 2.7%. What’s driving this turnaround? European stocks are finally getting the respect they deserve, trading at bargain-basement valuations compared to their American cousins. At 14 times expected earnings, the MSCI Europe (.dMIEU00000NEU), opens new tab trades at a near record discount of 37.5% to the MSCI USA (.dMIUS00000PUS), opens new tab, LSEG data shows. Even better, European earnings growth this year is expected to accelerate significantly, to 7.9% from just 1% last year and following a 3.9% decline in 2023, LSEG IBES forecast show.
Taiwan’s Tech Powerhouse Dominates Asia
In the tech-obsessed world of 2024, Taiwan emerged as Asia’s undisputed champion. Taiwan was Asia’s best-performing market in 2024, while South Korea was the worst. Taiwan’s Taiex led gains in the region, up 28.85% as of Dec. 23, while Hong Kong’s Hang Seng Index came in second with 16.63%. This wasn’t just luck – it was the payoff from Taiwan’s strategic position in the global AI revolution. Heavyweights Taiwan Semiconductor Manufacturing Company soared 82.12% in 2024, and major Apple supplier Foxconn — traded as Hon Hai Precision Industry advanced 77.51%. The island nation has become the beating heart of the artificial intelligence boom, with TSMC manufacturing the chips that power everything from ChatGPT to autonomous vehicles. Academia Sinica forecasts a 3.1% increase in GDP, attributing this to sustained demand for high-performance computing and AI technologies. Similarly, the Taiwan Research Institute (TRI) anticipates a 3.16% growth in GDP, driven by the booming AI market enhancing its export performance. Despite Trump’s tariff threats looming over 2025, Taiwan’s dominance in cutting-edge semiconductor technology makes it nearly irreplaceable in the global supply chain.
The United Kingdom’s Record-Breaking Surge
While Brexit chaos dominated headlines for years, British markets have quietly been building one of the most impressive rallies in recent memory. London’s FTSE 100 index, which has gained more than 5% since the beginning of the year, rose by 1.25% on Friday. It marked the fifteenth consecutive day of gains for the index, its new longest run ever. This isn’t just a short-term bounce – the fundamentals are solid and getting better. The main stock market index in the United Kingdom (GB100) increased 599 points or 7.33% since the beginning of 2025, according to trading on a contract for difference (CFD) that tracks this benchmark index from United Kingdom. What’s particularly impressive is how the UK market is benefiting from being overlooked by international investors. “The FTSE 100 has significantly more power in reserve and could have further to run, given that the index is not yet regained the record levels reached in March,” she told CNBC via email on Friday. However, she noted that uncertainty over U.S. trade policy and the extent of the effect on the global economy, had the potential to put a lid on further gains. The combination of attractive valuations, expected interest rate cuts, and resilient corporate earnings is creating a perfect storm for British stocks.
India’s Growth Story Hits Speed Bumps
India’s stock market has been one of the decade’s biggest success stories, but 2024 brought a reality check that’s reshaping expectations. Indian benchmarks blazed to record highs in the first few months of 2024 but slowing corporate earnings and an exodus of foreign funds curtailed their annual gains to about 8.5%, the least among major global peers, and even pushed stocks into correction territory. The Nifty 50 (.NSEI), opens new tab and Sensex (.BSESN), opens new tab rose 8.8% and 8.2%, respectively, this year, logging their ninth straight year of gains, mostly on support from domestic institutional investors and policy continuity after India’s ruling party returned to power. Despite the relative underperformance, India’s long-term fundamentals remain rock-solid. Since the low of the pandemic in March 2020, the blue-chip NSE Nifty 50 has climbed over 200%, with the total market cap of India’s stock market now around $5 trillion, as investors have grown increasingly positive on India’s long-term economic growth potential. The country’s massive demographic dividend continues to fuel optimism, The so-called demographic dividend is expected to persist until at least 2055–56 and to peak around 2041, when the share of the working-age population (20–59 years) is expected to reach 59%. While short-term headwinds persist, India’s structural growth story remains intact, making temporary setbacks buying opportunities for patient investors.
China’s Surprising Comeback Gathering Steam
After years of disappointing investors, China is mounting what could be the most unexpected comeback story of 2025. The unprecedented stimulus announced by China’s government was a significant catalyst for China’s equity market broadly in the second half of 2024. In this outlook, we will explore the potential trajectory of China’s economic policy and equity market in 2025, why we think measures from 2024 will not be felt until later in 2025, important structural reforms that could begin this year, and global investors’ potential path to reallocation. The numbers are starting to tell a different story than the doom-and-gloom headlines. Mainland China’s CSI 300 added 0.31% to close at 3,772.82, after China’s economy expanded by a better-than-expected 5.4% in the first quarter. This comes even as U.S. tariff threats have prompted major investment banks to slash the country’s annual growth outlook. What’s particularly compelling is China’s financial firepower for additional stimulus. China’s overall government debt remains low at 62% of gross domestic product (GDP), with most of the debt coming
