With three-and-a-half weeks of trading left for 2025, all the major asset classes are holding on to gains, based on a set of ETFs through Friday’s close (Dec. 5). The top-down view of the bullish trend, however, masks weakness in some corners that could accelerate in 2026.

Let’s start with the good news. As the end of the year comes into focus, positive returns dominate the playing field, led by stocks in developed markets ex-US. The Vanguard FTSE Developed Markets ETF has been leading for much of the year, and still enjoys a wide premium via a 32.0% year-to-date gain. That’s sizable return over the second-place performer: stocks in emerging markets (VWO), which are up 24.7%.
 

Foreign stocks are also outperforming the Global Market Index (GMI) by a wide margin this year. GMI, which up a strong 18.4% year to date, is an unmanaged benchmark (maintained by CapitalSpectator.com) that holds all the major asset classes (except cash) in market-value weights via ETFs and represents a competitive, forecast-free benchmark for globally diversified multi-asset-class portfolio strategies.

Tilting toward foreign stocks, in short, has been a winning strategy this year. Although US shares (VTI) are posting a solid 17.6% year-to-date rally, that’s no match for the rise in offshore stocks.

If the across-the-board gains hold through Dec. 31, the results will mark an improvement over last year’s mixed calendar-year profile.

Although all the major asset classes have rallied since the end of 2024, a closer looks reminds that in some areas a wobbly state of affairs prevails. Consider this year’s weakest performer: US real estate investment trusts are up a relatively weak 3.9% so far in 2025, which is below our long-term performance outlook for these shares. After rebounding from the April selloff, Vanguard Real Estate (VNQ) has been stuck in a tight trading range ever since. 
 

A key question for investors in the new year: Will international stocks ex-US continue to lead? A key factor is how the US dollar fares. In 2025, the greenback has lost ground, providing a tailwind for non-dollar assets after translating prices in dollars.
 

Although the US Dollar Index has recovered rebounded lately, the broad trend still looks weak, and so the currency factor still skews bullish for the near-term outlook for foreign equities from a US-investor perspective. The downside bias looks set to continue if the Federal Reserve cuts interest rates, as widely expected, at Wednesday’s policy meeting. The Fed funds futures market is currently pricing in an 89% probability for a third straight round of dovish policy adjustment this week.

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