Anyone who has dared to take a glance at their financial records is aware of the turbulent journey that 2025 has been. Right before the unpredictable swings caused by tariff-related disruptions, the initiation of DeepSeek AI obscured the tech trends that had primarily fueled the markets in 2023 and 2024, culminating in AI shares plunging into a bear market as March rolled around. Nevertheless, 2025 has not been without its fair share of profit opportunities in the world of equities. An overview of the returns across various indexes throughout the year reveals some unexpected frontrunners: European equities, Latin America, and Real Estate Investment Trusts, all of which had a history of underperformance in the preceding years.
Looking at European equities, Morningstar’s index has seen a significant upward trend, thanks to a bolstering macroeconomic climate. The finance sector appears to be reaping the most benefits. There’s been a shift in Germany’s approach towards deficit expenditure and an increased emphasis on self-reliance in defense across the continent, largely influenced by the Trump administration. While the volatility instigated by U.S. tariff proclamations led to steep downturns in Europe, the V-shaped rebound has been mostly swift.
The weakened American dollar has amplified the increase in returns on European equities for U.S. investors who chose not to hedge. Of course, it doesn’t hurt that both the European Central Bank and the Bank of England have been in a phase of reducing interest rates. Hence, European equities appear to be a worthwhile addition to a well-rounded investment portfolio.
Changing our attention to Latin America, this region is witnessing a strong equities comeback. Morningstar’s Latin American equities index has risen more than 22% in 2025, the credit going primarily to Brazil, Mexico, and to a lesser extent, Colombia and Chile. Much like their European counterparts, U.S. investors have seen amplified returns thanks to a weakening dollar. This surge signifies a sharp turnaround from a more than 25% loss experienced in dollar terms the previous year.
Brazil is grappling with pressing fiscal challenges. In Mexico, election outcomes in both nations have dulled investor sentiment. Latin American equities, while they carry a level of volatility, may have additional growth potential.
Real Estate Investment Trusts (REITs) in regions outside the U.S. are also experiencing substantial growth this year. Property domains across several locations are thriving, fueled by interest rates that remain low or have been declining. On the other hand, the Morningstar US REIT Index isn’t faring as well as the Global Markets ex-U.S. REIT index in 2025, although it has managed to stay in the green, outperforming the broader U.S. equity market.
Higher U.S. interest rates that seem to be maintaining their trajectory are perceived negatively for real estate. Despite this, REIT yields have been alluring, and property positioned as a tangible asset can serve as a protection against inflation.
For an extended period, U.S. large-cap tech stocks exhibited such exemplary performance that investors started considering them as the only viable choice. At the dawn of 2025, imagining a scenario where the ‘Magnificent Seven’ could ever be ousted from their dominant position seemed implausible. The advancement of artificial intelligence, regarded as ‘more significant than the internet’, appeared unstoppable.
Few predicted the launch of DeepSeek AI, or the extent to which tariffs would interfere. In the realm of investment, gravity holds weight as well. US equities, especially those favoring growth, provided returns in 2023 and 2024 way beyond their historical averages. The downturn in 2025 is perceived as a correction to normal or a recalibration to the long-established averages.
It’s clear that the landscape of investment performance is ever-changing. Contrary to popular belief, making the occasional contrarian bet can yield significant profits, albeit with the caveat that results may take some time to materialize. Investors who avoid geographical, style, and market capitalization constraints tend to be better positioned to leverage from shifts in leadership.
While DeepSeek AI’s debut cast a shadow over the unmistakable tech trend that had previously powered the market, it’s not all grim. The bear market that AI stocks found themselves in doesn’t dominate the landscape.
A closer look at the overall performance image for 2025 reveals that there is still substantial cause for optimism. Certainly, investors who had the foresight or luck to cast their net wider to include previous underachievers are potentially reaping benefits now.
The success stories in European stocks, Latin America, and Real Estate Investment Trusts stand as testament to this, providing some relief in an otherwise tumultuous year. The fact that these sectors were often spurned in the past gives their success an unlikely quality.
Whether this performance trend continues in the long run remains to be seen. Economic forces and global events can be as unpredictable as they come. Yet, it’s essential to remember that market downturns such as the one in 2025 may serve as a form of ‘market correction’, bringing returns back toward long-term averages.
One thing is clear, however: the investing world of 2025 demonstrates that sticking to diversified portfolios instead of following trends or becoming overly reliant on specific sectors, such as technology, is likely the winning strategy moving forward.
The post 2025 Financial Rollercoaster: European Equities, Latin America, and REITs Emerge as Surprise Winners appeared first on Real News Now.
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