Although U.S. stocks had a strong showing in 2025, global markets truly captured attention.
The MSCI All Country World Index, which focuses on stocks outside the U.S., surged by 29.2%, significantly surpassing the S&P 500’s increase of 16.39%.
The rise of artificial intelligence has been a boon for Asian markets, with a notable demand for tech firms and semiconductor companies. Meanwhile, Europe benefited from government plans to boost defense spending along with improving economic prospects.
A weaker dollar had also played a role, providing support for international stocks. When the dollar goes down in value, other currencies gain strength, making those investments more appealing.
In fact, the U.S. dollar index fell by about 9.4% in 2025, marking its worst performance since 2017.
Heading into 2025, U.S. stock valuations already seemed high compared to global counterparts. This sparked interest among investors seeking better returns elsewhere.
“Many factors aligned favorably for the international stock market in 2025,” noted a vice president of investment strategy at Glenmede.
He highlighted that foreign stocks posted significant earnings growth this year, despite having struggled in previous years. This was largely influenced by fiscal stimulus in Europe and the AI sector’s expansion in Asia.
Asian markets are notably benefiting from the AI trend.
Tech firms and semiconductor manufacturers in South Korea, Taiwan, Japan, and China saw substantial gains as investors turned their focus to AI-driven growth.
For instance, South Korea’s Kospi index climbed about 76% in 2025, marking the best year since 1999. The Nikkei Stock Average in Japan also rose by 26%, fueled by advancements in technology and semiconductor sectors.
Japan’s Kioxia, a memory chip producer, saw its stock skyrocket by 536%. Meanwhile, South Korea’s Samsung experienced nearly a 130% increase in its share price.
“AI trading has really taken off this past year,” remarked a senior strategist at Pictet Asset Management. “That enthusiasm is being reflected in markets beyond the U.S., especially in places like South Korea and Japan.”
Taiwan Semiconductor Manufacturing Company (TSM) also shone, with its stock up 46.54% last year. In contrast, Alibaba’s shares in China surged 75.81% after the firm embraced AI and unveiled its chatbot.
Growth and Defense
European stocks began 2025 with gains as Germany unveiled sweeping reforms aimed at enhancing defense expenditures. German defense manufacturer Rheinmetall, for example, saw its stock rise by 154%.
Additionally, positive economic shifts in Greece, Spain, and Poland bolstered their respective markets. Major European banks like Santander and Deutsche Bank also thrived, each seeing increases around 126%, contributing to broader market growth.
Spain’s IBEX 35 index climbed 49%, achieving its best performance since 1993. Italy’s FTSE MIB increased by about 32%, demonstrating similar success. Germany’s DAX and Greece’s ATHEX composite indexes rose 23% and 44% respectively, both enjoying their strongest years since 2019, while Poland’s WIG index saw a 47% increase.
“With a declining dollar, investors were eager for global exposure, and Poland represented an attractive mix of growth and value,” said the global market strategy head at TradeStation.
On Greece, he noted, “The country is emerging from a prolonged debt crisis, regaining a Moody’s investment-grade rating and enjoying a tourism upswing. It’s quite the comeback story after so many years of struggle.”
The FTSE 100 in Britain rose 21.51%, marking its best year since 2009, and it kicked off 2026 with a strong performance, briefly surpassing the 10,000-point mark for the first time.
Analysts emphasize the dollar’s significance when evaluating international stock returns for U.S. investors.
“If the dollar continues its downward trend, foreign stocks may continue to benefit,” mentioned Reynolds from Glenmede.
Still, despite the impressive performance of international markets, some investors argue that the fundamentals in the U.S. still look promising.
“Our stance remains America first, international second,” stated the head of global equities at Wells Fargo Investment Institute. “We believe the dollar will stabilize, which could lessen the appeal of emerging market stocks.”
Wall Street keeps a positive outlook on U.S. stocks as corporate profits remain strong, and there’s hope that AI will continue to bolster profit advancements. Regardless, many investors are looking abroad to diversify their holdings amid rising uncertainties. International markets have proven to be wise alternatives, both in developed and emerging sectors.
“One of the unexpected highlights of 2025 was the remarkable performance of emerging market (EM) stocks,” said the chief investment officer at Morgan Stanley Wealth Management in a recent note.
She added, “For the past fifteen years, focusing primarily on the U.S. has been lucrative for global investors. Nevertheless, shifts in technology and policy, along with economic constraints in developed nations, necessitate diversifying portfolios beyond just U.S. stocks and bonds.”
