This Group of Stocks is Crushing 2025 So Far

With the news cycle the way it is, there has been a lot of doom and gloom when it comes to the stock market so far in 2025.   But one of the main mutual funds we use for our clients, FMNEX (international stocks) is up 7.55% as of April 18th, while the Nasdaq (US tech stocks) are down 15.66%.   I feel that this is a great reminder of the importance of diversification.  Below is the Matson Money 1st Quarter Market update, explaining further.

“During the first quarter of 2025, the S&P 500 Index fell a little more than 4%, leading to the S&P 500 and Nasdaq composite’s worst quarter since 2022. Not all companies and segments of the market contributed equally, with many of the Magnificent 7 companies and large growth indexes more broadly representing the largest declines for the period. However, global diversification led the way in the first quarter. The Stoxx Europe 600 Index outpaced the S&P 500 by almost 10% during the first quarter 2025, its largest quarterly lead since 2015, according to Dow Jones Market Data. The FTSE Germany Index jumped 15.7%, while the FTSE Poland Index was up over 32% and the FTSE Columbia Index was over 28% for the quarter. The start of 2025 is a strong reminder for investors that global diversification can serve investors quite well because trends reverse, and typically no single country or region has historically led performance indefinitely.

Uncertainty has been one of the certainties of life – along with the decades-long advance of the stock market, despite all the tumult and change. There have been sell-offs along the way, but stocks have had a way of moving higher over the longer term. In the moment, risk aversion may compel us to prepare for the worst. Investors may be experiencing this in the market today. U.S. stocks, that have been in the recent limelight, have gone down, and investors once again are aware of volatility as they grapple with uncertainty around new trade policy and its potential impacts and inflation fears.

Fear is a negative emotion arising in response to danger, whereas hope is a positive one in anticipation of reward. However, the two are similar in that control is often in the hands of other people or situations. We fear the danger of a stock market crash but can’t control the outcome, and we hope for a stock market boom but can’t control the outcome. We can only, to some degree, control staying disciplined and giving in to those emotions.

Historically, in times of anxiety, those who have maintained control of their emotions and avoided overreacting in the moment have tended to fare better than those who did not. Periods of increased volatility and market declines are part of the experience of investing in the market. These are not isolated events. They happen with higher frequency than many may realize. Decades of stock market returns demonstrate how often declines can happen. For evidence, look at the largest intra-year declines for the Russell 3000 Index (U.S. stock market) in every year from 1979 to 2023. Those declines average -14%. However, 37 of the past 45 calendar years have ended with positive returns for the U.S. stock market. In addition, from July 1926 through the end of 2021, the CRSP U.S. Market Index declined at least 5% from its previous high 90 times, or a little less frequently than once per year. The median drop among these samples was -8.7%, and the median length of time it took for the market to return to its previous high was 62 trading days. Despite these events, the market has historically rewarded disciplined investors who stay the course.

As April showers bring May flowers, investors need to understand that rain clouds are always possible but following the rain the sun will soon shine again. Nevertheless, it is surprising how many articles and other media are talking about market volatility, as if the U.S. Market while it was rising the last couple years was no longer risky. Volatility does not just show up in down markets, it is always present, but people forget about it because they are experiencing positive returns. And with those positive returns, they often forget about staying diversified and disciplined. Last year, risk was re-defined as failing to keep pace with the hottest market sector. While most investors focused on U.S. stocks the past several years, there’s far more to the investable opportunity set. Diversification in investor portfolios has well-known benefits, including the potential to benefit from some asset classes performing well while others aren’t. That’s been a silver lining for many so far in 2025. If we consider broad equity markets, exposure to markets beyond the U.S. has generally helped investors this year. It’s a short period, but those who held globally diversified portfolios will still likely be happy they did. It can be a healthy reminder to investors that global diversification still matters after an extended period of U.S. outperformance. We shouldn’t expect any single market to outperform over all periods. Diversifying across all markets means you will hold the highest performing markets as well as those that don’t do as well. Importantly, you know that you can avoid holding only the worst performers. The sun still shines above storm clouds and long-term investing involves owning assets that may be covered with clouds as well as those that are shining in the sun. In addition, just because it may be storming in one particular area, that does not mean it isn’t sunny in other places.”