Global stock markets' winners and losers of 2025 — and where they're headed

Published Wed, Dec 31 202512:38 AM EST

Lee Ying Shan @in/ying-shan-lee @LeeYingshan

Key Points

The MSCI All Country World Index climbed over 21% in 2025, hitting a record high recently.
European stocks surged on bank-heavy gains, but valuation resets may limit upside in 2026.
Asia’s outlook hinges on policy support and AI demand, with gains uneven across markets.

Global stocks have seen a stellar run in 2025, yet widening performance gaps and rising expectations suggest the new year may separate durable winners from fleeting momentum trades. The MSCI All Country World Index , which measures the performance of over 2,500 large and mid-cap equities from developed and emerging markets, has climbed over 21% since the start of the year, hitting a record high of 1,024 on Dec. 26, data from LSEG showed. The standout performer in 2025 was Colombia. The Latin American country's equity market has surged more than 91% year-to-date, emerging as the world's best performer, according to data collated by Morningstar for CNBC. At the opposite end was Denmark, whose stock market fell by more than 13%, making it the weakest performer globally. South Korea and Greece came in second and third, respectively, as emerging markets dominated the top of the performance tables. Deutsche Bank described 2025 as a market defined by "bursts of momentum, but risks of sudden course corrections," with global reflationary forces lifting asset prices broadly, even as valuations, sector concentration and policy differences drove sharp regional gaps. Latin America's surge Beyond Colombia, markets in Chile, Peru, Mexico and Brazil all gained more than 45%, making the region the standout global performer. Colombia's rally was amplified by a combination of low starting valuations, concentrated index exposure and improving investor sentiment, said analysts. "The market entered 2025 at historically depressed valuation levels and was meaningfully under-owned, so even modest inflows had an outsized impact," said Jablonski Todd of Principal. The MSCI Colombia index is heavily weighted toward financials, particularly its largest bank, amplifying gains. Political expectations have further fueled optimism. President Gustavo Petro cannot seek re-election, and investors are increasingly betting on a shift toward a more market-friendly government. EM equities have performed strongly in 2025 and are on track to outperform developed markets for the first time in five years. Cambridge Associates "Colombian assets still remain penalized with a relatively high political risk premium; therefore, there could still be room for that premium to decline," said Alejandro Arreaza, Latin America economist at Barclays. The Colombian peso has strengthened by almost 15% to 3744.3 against the dollar this year, supported by central bank rate cuts and economic growth of around 2.5% to 3%. "The Colombian peso significantly appreciated relative to the USD this year, contributing to the strong total return," said Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth. Beyond Colombia, Latin America as a region stands out in terms of performance this year. "EM equities have performed strongly in 2025 and are on track to outperform developed markets for the first time in five years," Cambridge Associates wrote in a year-end report. The firm expects the trend to continue into 2026, citing deeply discounted equity and currency valuations, solid momentum and improving macroeconomic conditions. Latin American equities are trading at near 20-year valuation lows, while regional currencies remain attractively priced, with real exchange rates around 11% below their long-term median. Denmark's drag Denmark's underperformance contrasted sharply with broader European gains. "Denmark's position as one of the world's worst-performing equity markets this year is best understood through index concentration," said Sutanya Chedda, European equity strategist from UBS. Novo Nordisk accounts for roughly 40% of the MSCI Denmark index, which effectively turns it into a "single-stock proxy." "When 40% of your index sells off, diversification is a rounding error," she said. Novo's shares have tumbled almost 48% this year amid concerns over U.S. pricing for GLP-1 drugs, a cooling pipeline outlook and earnings downgrades . Elsewhere, European markets such as Hungary, Spain, Austria and the Czech Republic delivered solid gains, ranking among the world's top performers Despite worries over trade tensions and a stronger euro, economic growth in Europe surprised to the upside, inflation cooled closer to the European Central Bank's 2% target , and interest rates settled at levels that are highly supportive for bank profitability, said strategists. Countries with high banking sector weights have been major beneficiaries of this dynamic, said Bjarne Breinholt Thomsen, head of cross-asset strategy at Danske Bank. The STOXX Europe 600 Banks rose about 65% in 2025. "Smaller European markets are naturally more sector-concentrated, and in 2025 that concentration has worked in their favor where it has been financials-heavy, in contrast to Denmark's healthcare-heavy structure," said Thomsen. Europe's big "catch-up" rally may be over, but the backdrop still looks healthy next year, with growth improving and inflation closer to target. While returns may not be as strong in 2026 as in 2025, the environment remains supportive, especially for cyclical sectors like banks, which should continue to benefit from steady growth and improving credit demand, Thomsen added. Asia's mixed picture Asia, by contrast, has delivered uneven results. South Korea was the region's standout , surging around 80% to rank second globally, while markets such as India, Thailand and Malaysia posted single-digit gains. Korea's rally has been driven by its technology heavyweights. "Korean markets outperformed largely due to a recovery in Samsung Electronics' share price along with continued outperformance in SK Hynix," said Lorraine Tan, equity research director at Morningstar. The two companies account for more than one-third of Korea's benchmark index and have benefited from higher memory chip prices, as well as optimism around improved shareholder returns. .KS11 YTD mountain South Korea's stock market was a standout performer in 2025 Looking ahead, Deutsche Bank said that Asia's outlook will depend on policy flexibility, currency trends and the sustainability of AI-related demand, warning that earnings expectations in parts of the region may be vulnerable as global trade momentum fades. Goldman Sachs and State Street see improving fundamentals in the region heading into 2026. Goldman noted that Asia stands to benefit from easing global financial conditions, renewed fiscal support — particularly in China and Japan — and a gradual recovery in domestic demand, with Japan emerging as a relative bright spot due to corporate reform, wage growth, and rising capital investment. Where does the U.S. stand? U.S. equities' gains were powered largely by artificial intelligence-driven earnings growth and resilient consumer demand, even amid concerns about an AI bubble, major financial houses echoed. While its modest 16% gains were eclipsed by other major markets in 2025, per Morningstar data, the S & P 500 and Nasdaq surged to fresh highs, driven by mega-cap technology firms. Strong capital spending, particularly among technology and infrastructure-linked firms, benefited U.S. equities, State Street noted, even as valuations moved to historically elevated levels. Looking into 2026, outlooks remain constructive but more selective. Goldman expects earnings growth to continue, supported by AI investment and easing monetary policy, but warned that high valuations and concentration risks could cap upside. State Street shared that view, noting that the U.S. remains the core engine of global equity returns. However, it cautioned to be more discerning as the market becomes increasingly sensitive to earnings performance, policy shifts, and any slowdown in AI-related spending.