Wall Street has delivered another year of solid gains in 2025, but U.S.-based investors who poured money overseas would have significantly outperformed domestic benchmarks.
The S&P 500 – tracked by the Vanguard S&P 500 ETF (NYSE:VOO) – has risen 15% year-to-date through Dec. 18, supported once again by strength in large-cap technology stocks. The sector has continued to benefit from sustained enthusiasm around artificial intelligence, cloud investment, and semiconductor demand.
Tech stocks, which account for roughly one-third of the S&P 500's weight and are tracked by the Technology Select Sector SPDR Fund (NYSE:XLK), have rallied nearly 30% year to date.
Even so, U.S. equities have lagged far behind a number of overseas markets, where returns have surged amid improving growth expectations, valuation catch-up, and stronger performance from cyclical and financial sectors.
“International outperformance was an underappreciated story of 2025,” said Helen Jewell chief investment officer at BlackRock.
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Equities in South Korea and Peru lead global returns, both rising more than 80% year to date. Korean stocks have benefited from a sharp rebound in semiconductor earnings and improving export momentum, while Peru's market has been lifted by higher metals prices.
Southern Europe has also been a standout. Spanish and Greek equities are up more than 75%, while Italy has gained 54%.
Resource-rich economies delivered equally eye-catching returns. South Africa, Colombia, Chile, and Brazil all posted gains well above 45%, reflecting rising commodity prices, currency stabilization, and improved earnings outlooks for miners and energy producers.
Meanwhile, easing trade and tariff-related concerns helped markets such as Vietnam, Mexico, and Canada outperform the S&P 500's gains by more than doubling them.
What To Expect Next
According to J.P. Morgan Asset Management's latest Investment Outlook, investors should "ensure their portfolios are not overly concentrated in U.S. tech, even if the U.S. rally could successfully extend into 2026."
Karen Ward, market strategist at J.P. Morgan Asset Management, said the next phase of global equity performance is likely to favor markets where earnings growth and valuations, rather than narrative momentum, drive returns.
European equities remain attractively valued relative to U.S. stocks and other asset classes, while China — despite rallying nearly 80% from its early-2024 lows — could continue advancing at a more moderate pace, supported by earnings recovery and valuation expansion.
Markets such as South Korea, Taiwan and Hong Kong have historically performed well during Federal Reserve rate-cutting cycles, given their cyclical exposure and concentration in long-duration sectors including technology, capital goods and healthcare.
Japanese equities also stand out, but Ward warns that yen volatility could affect total returns.
The firm added that "regional diversification does not just mitigate risk; it can also be return-enhancing," particularly if enthusiasm around U.S. artificial intelligence themes begins to cool.
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