Beyond the Bull Run: Why Global Markets Are Now the Smart Money’s Play
For years, the mantra was simple: invest in America. But 2025 delivered a stunning reversal. While US stocks enjoyed a solid year, global markets didn’t just keep pace – they surged ahead, with the MSCI All Country World ex-USA index gaining 29.2% compared to the S&P 500’s 16.39%. This wasn’t a fluke; it was a signal. A shift is underway, and investors who ignore the growing opportunities outside the US risk being left behind.
The AI Effect: Asia’s Explosive Growth
Much of the international outperformance was fueled by the relentless march of artificial intelligence. But unlike the US, where AI gains were largely concentrated in a handful of mega-cap tech firms, the benefits spread wider in Asia. South Korea, Taiwan, Japan, and China saw explosive growth in their tech and chipmaking sectors, driven by surging demand. South Korea’s Kospi index, for example, soared nearly 76% – its best year since 1999. Shares of Samsung jumped almost 130%, while Japanese memory chip maker Kioxia saw an astonishing 536% increase. This isn’t just about technology; it’s about entire economies being reshaped by the AI revolution.
Taiwan Semiconductor: The Cornerstone of the AI Boom
At the heart of this Asian surge lies Taiwan Semiconductor Manufacturing Company (TSM), the world’s leading contract chipmaker. Its shares gained 46.54% in 2025, hitting record highs as demand for its advanced chips skyrocketed. As Arun Sai, senior multi-asset strategist at Pictet Asset Management, noted, “The AI trade has broadened materially…extending globally, particularly into markets such as Korea and Japan.” This expansion beyond US borders is a key trend to watch.
Europe’s Unexpected Resilience: Defense Spending and Recovery
While Asia rode the AI wave, Europe benefited from a different set of catalysts. A significant increase in defense spending, particularly in Germany, provided a major boost to European stocks. German manufacturer Rheinmetall, a key player in the defense industry, saw its shares climb a remarkable 154%. But the story doesn’t end there. Improving economic prospects in countries like Greece, Spain, and Poland, coupled with a resurgence in European banks like Santander and Deutsche Bank (both up around 126%), contributed to a broader rally. Spain’s IBEX 35 index, for instance, enjoyed its best year since 1993, gaining 49%.
Greece and Poland: Comeback Stories
The recovery in Greece, finally shaking off the shackles of a decade-long debt crisis and regaining an investment-grade rating, was particularly noteworthy. As David Russell, global head of market strategy at TradeStation, pointed out, “Greece is finally recovering…It’s a classic comeback story.” Poland, offering a unique blend of growth and value, also stood out. These examples demonstrate that opportunities exist beyond the usual investment hotspots.
The Dollar’s Decline: A Tailwind for International Investments
A crucial, often overlooked, factor driving international market gains was the weakening US dollar. The dollar index fell by roughly 9.4% in 2025, its worst performance since 2017. A weaker dollar makes investments denominated in other currencies more attractive to US investors, boosting returns when those investments are converted back into dollars. This currency dynamic could continue to play a significant role in 2026 and beyond.
What Does This Mean for US Investors?
Despite the strong performance of international markets, many US investors remain hesitant. Some, like Sameer Samana at Wells Fargo Investment Institute, believe the fundamentals still favor the US, anticipating dollar stabilization. However, the argument for diversification is becoming increasingly compelling. As Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, argues, “Overweighting the US has served global investors well the past 15 years…That said, we believe shifting geopolitical, monetary and fiscal policy regimes…are creating a need for diversification beyond US stocks and bonds.”
The outperformance of international markets in 2025 wasn’t just a temporary anomaly. It was a reflection of changing global dynamics, driven by technological innovation, geopolitical shifts, and currency movements. Investors who recognize this shift and adjust their portfolios accordingly are likely to be best positioned for long-term success. The era of US stock market dominance may not be over, but it’s clear that the world is becoming a more competitive – and more rewarding – place for investors willing to look beyond American shores.
What are your predictions for the future of international investing? Share your thoughts in the comments below!
