10:27 pm - February 4, 2026
Global markets delivered exceptional returns in 2025, outperforming US equities by a wide margin as international stocks captured investor attention. The MSCI All Country World ex-USA index surged 29.2% during the year, significantly exceeding the S&P 500’s gain of 16.39%, according to market data. This marked a notable shift in global market dynamics after years of US dominance in equity performance.
The artificial intelligence boom fueled substantial gains across Asian markets, where technology companies and chipmakers experienced surging demand. Meanwhile, European markets received a boost from increased government spending on defense and improved economic growth prospects. These factors combined to create favorable conditions for international stocks throughout the year.
Currency Movements Support International Stock Performance
A weaker US dollar provided significant support for international stocks in 2025. When the dollar weakens and other currencies strengthen, investments denominated in those currencies become more valuable when converted back into dollars. The US dollar index, which measures the dollar’s strength against six major currencies, fell approximately 9.4% in 2025, marking its worst year since 2017.
Additionally, US stock valuations were already relatively expensive compared to the rest of the world heading into 2025. This created an incentive for investors to seek returns in different markets where valuations appeared more attractive.
“A lot of things went right for international stocks in 2025,” Michael Reynolds, vice president of investment strategy at Glenmede, told CNN. He noted that after a couple years of lackluster fundamentals, foreign equities delivered strong earnings growth, highlighted by fiscal stimulus in Europe and AI-related growth in Asia.
Asian Markets Ride AI Wave to Record Gains
Markets in Asia capitalized on the wave of artificial intelligence enthusiasm that dominated investor sentiment. Technology companies and chipmakers in South Korea, Taiwan, Japan and China all benefited from heightened investor interest in AI-related opportunities.
South Korea’s Kospi index soared almost 76% in 2025, posting its best year since 1999. Japan’s Nikkei 225 gained 26%, lifted by advances in tech companies and chipmakers throughout the year.
Individual stock performances were even more dramatic. In Japan, shares of memory chip maker Kioxia surged 536%, while South Korean tech giant Samsung jumped almost 130%, according to market data.
“The AI trade has broadened materially over the past year,” said Arun Sai, senior multi-asset strategist at Pictet Asset Management. He noted that optimism has increasingly been priced beyond the US, extending globally, particularly into markets such as Korea and Japan.
In Taiwan, shares of Taiwan Semiconductor Manufacturing Company gained 46.54% and hit record highs. Meanwhile, shares of China-based Alibaba soared 75.81% as the company embraced AI and launched its own chatbot.
European Stocks Rally on Defense Spending and Economic Recovery
Stocks in Europe rallied in early 2025 as the German government enacted historic reforms to boost spending on defense. European defense stocks rallied strongly, with German manufacturer Rheinmetall gaining 154%.
However, improving economic outlooks for Greece, Spain and Poland also benefited those countries’ markets significantly. European banks like Santander and Deutsche Bank had standout years, each rising about 126% and helping lift broader market indices.
Spain’s benchmark IBEX 35 index gained 49% and had its best year since 1993. Italy’s FTSE MIB gained almost 32% and had its best year since 1998, while Germany’s DAX climbed 23%.
Greece’s ATHEX Composite gained 44%, posting its best year since 2019. Poland’s WIG index rose 47%, attracting investors seeking growth opportunities.
“In a year when the falling dollar sent investors scrambling for global exposure, Poland offered a unique mix of growth and value,” said David Russell, global head of market strategy at TradeStation. He described Greece as a classic comeback story following a period of debt problems and low valuations.
The UK’s benchmark FTSE 100 index gained 21.51% and had its best year since 2009. In contrast, the index kicked off 2026 on a strong note, briefly rising above a record high 10,000 points for the first time ever.
Dollar Outlook Key to Future Returns
For US investors evaluating international stocks, analysts say the dollar’s direction will be crucial in determining future returns. “If the dollar continues to weaken, foreign stocks may continue to have the wind at their back,” Reynolds at Glenmede said.
Nevertheless, some investors remain cautious about sustaining international market outperformance. “We still favor the US first and international second,” said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute. He indicated that expectations for dollar stabilization could dampen advantages for emerging market equities.
Wall Street remains optimistic about US stocks as corporate profits have been resilient and AI is expected to drive continued earnings growth. Still, investors in 2025 looked overseas to diversify portfolios amid heightened uncertainty.
“One of the biggest and most underappreciated surprises of 2025 has been the extraordinary outperformance of emerging market equities,” Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, said in a December note. She emphasized that shifting geopolitical, monetary and fiscal policy regimes are creating a need for diversification beyond US stocks and bonds for long-term investors.
Market participants will continue monitoring currency movements and economic indicators to assess whether international stocks can maintain their momentum. The sustainability of international market outperformance remains uncertain as investors weigh various economic and policy factors heading into the new year.
