Big as the U.S. stock market is, it isn’t the only place to trade stocks. Markets in Europe, Asia and Latin America have been outpacing the U.S. market in 2025. The DAX index, which tracks 40 of Germany’s most important stocks, was up nearly 15 percent for the year, led by Rheinmetall, Europe’s biggest ammunition maker, with a gain, in 2025 alone, of 113 percent. Germany is rearming, a consequence of President Trump’s America First foreign policy, and a vast anticipated increase in military spending is spurring European stock markets.
In the United States, President Trump’s tariff policy, along with his stated willingness to bring on a recession if that’s needed to achieve what he sees as a greater good, has unsettled businesses, investors and many economists. While few are predicting a domestic recession right now, the odds of one have increased because of the uncertainty radiating from Washington.
“The U.S. economy started 2025 performing well, with strong growth, low and stable unemployment, and moderating inflation and interest rates,” Mark Zandi, chief economist of Moody’s Analytics, said in a note to clients this past week. “But now, uncertainty and angst over a mounting global trade war and big shifts in other economic policies are doing meaningful economic damage, and recession risks are rising.”
Big Tech and Everything Else
For investors, these sudden problems in the United States highlight the benefits of diversification. The strategy is far from perfect: It won’t provide the best possible returns at any given moment, but it can protect you from some of the consequences of downturns in discrete markets or securities.
Consider the total return, including dividends and interest, of a few important asset classes so far in 2025:
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The overall United States stock market, represented by the Dow Jones US Total Stock Market Index (once known as the Wilshire 5000): Down 3.4 percent.
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World stock markets outside the United States, as captured by the MSCI ACWI ex USA Index: Up 6.5 percent.
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United States domestic investment grade bonds, represented by the Bloomberg U.S. Aggregate Bond Index: Up 2 percent.
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Global investment-grade bonds, depicted by the Bloomberg Global Aggregate Index: Up 2.1 percent.
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Money market funds and Treasury bills, for cash holdings, as captured by the Bloomberg US Treasury Bill Index: Up 1 percent.
What this tells us is that most of the world’s key financial markets have been prospering while the total U.S. stock market has stalled. And even within that U.S. market, it’s paid to be diversified. While big tech companies have been hit hard, most other stocks have held their own. Consider two exchange-traded funds. The Roundhill Magnificent Seven E.T.F. isolates the performance of seven U.S. tech highfliers of 2023 and 2024 — Meta, Microsoft, Amazon, Apple, Nvidia, Alphabet and Tesla. It’s down 12.3 percent this year. By contrast, the Defiance Large Cap ex-Mag 7 E.T.F. strips out the Magnificent Seven stocks, while providing exposure to the other big companies in the U.S. market. It was up 1.1 percent.