Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.
Portfolios have generally delivered solid gains in 2025, even against a backdrop of alarming headlines.
We have updated our quilt-like colour-coded table of returns from the different assets to give you a mid-year check-in of progress.
European stock markets led the charge, led by powerful rallies in Germany and Spain. Asian Pacific markets and emerging markets were close behind.
As ever with markets, it has not been a linear journey. The sharp sell-off in many markets, sparked by the US ‘Liberation Day’ tariffs in April, was swiftly reversed as investors regained their nerve and returned to equities by May. The rally has continued, helped by the prospect of interest rate cuts from the Federal Reserve, possibly starting in September.
2025 has been a reminder of markets’ familiar rhythm: shocks arrive, sentiment sours, prices fall — only for confidence to return just as quickly, lifting values once more.
As our chart shows, European stock markets led the 2025 performance race in the first six months, registering a top gain of 9.7% in those first six months.
The figures show the year-by-year returns for the assets commonly held in funds by DIY investors. The numbers are priced in British pounds so they are more like the returns UK investors would experience. They therefore differ from actual index movements. The numbers for the 2025 column are for the first six months of the year.
To highlight the impact of currency movements, a strengthening of the pound against the US dollar in 2025 will have reduced returns from American investments for UK investors. And a fall in the pound from €1.20 to €1.16 will have nudged returns higher on our European holdings. When investing in foreign assets you are investing in both the asset and the currency.
Here, we summarise reasons for the performance of the top three assets:
- European stock markets were the best performer in our table by mid-2025. Investors finally began to question allocation to a highly value US market and move money to Europe, where valuations are far lower. Surging demand for defence stocks also helped. European governments, especially Germany, are expected to spend more on defence but also on infrastructure projects. Germany, Spain, and Poland posted some of the strongest returns globally in the first half of the year.
- Like Europe, Asia Pacific markets also benefited from a growing belief in waning economic American exceptionalism. The falling dollar is also good for countries holding US debt, which is common among emerging markets. But performance has been a mixed bag in Asia. China has emerged from the tariff war less scathed than expected, and with some added optimism about its AI capabilities in the wake of its DeepSeek tool breakthrough. India, which started the year on a very high valuation, has been weaker. Thailand’s stock market has hit a five-year low.
- Emerging markets have been another beneficiary of the weakening dollar and hope of falling US rates - they tend to hold more dollar debt, which becomes cheaper to service. But many also had lower valuations at the start of the year, particularly China and Latin American countries. It is worth noting that EM has been one of the more volatile assets in its annual jump around in the colour-coded table.
To help give some more context we have included data below on the actual returns, based on local currency, for key markets. The chart reflects the impact the tariffs spate had in April.
| Market | Year to date (%) |
|---|---|
| Spain (Ibex 35) | 32.0 |
| Hong Kong (Hang Seng) | 25.2 |
| Germany (Dax) | 22.7 |
| MSIC Asia Pacific ex Japan | 14.1 |
| UK (FTSE 100) | 12.4 |
| MSCI World | 12.1 |
| China (Shanghai Comp) | 11.2 |
| MSCI Europe | 10.8 |
| Japan (Nikkei 225) | 9.2 |
| US (S&P 500) | 9.0 |
| India (Sensex 30) | 4.5 |
Source: LSEG DataStream, as at 19.8.25, price returns in local currency
The long-term picture
Over the 10 years, one critical conclusion can be drawn: it is rarely the same winner every year. Yes, it has been a strong period for the US stock market, which has delivered exceptional returns in some years. Likewise, no asset class stays at the bottom consistently. For example, UK equities were among the weakest in 2016, but near the top in 2024. Commodities were particularly volatile: up 33.5% in 2016, down 11.0% in 2018 and up 28.3% in 2021. Essentially, commodities and EM equities add diversification but also add volatility.
Cash and government bonds rarely lead, but they limit losses in down years. Government bonds returned 14.9% in 2022 when most stock markets fell.
The data serves as a reminder of the power of diversification - and the dominance of equities. The pattern of the past 10 years is a repeat of what’s happened over decades - that stock markets tend to outperform bonds, cash and property. But these other assets do have better years. The weight of evidence shows how a portfolio made up mostly of stock market investments but balanced with some diversifiers will have worked well for most investors’ needs. Past performance is not a guide to future returns but it provides food for thought.
- Read: Investing in the UK stock market: 5 British ISA fund ideas
- Read: 5 essential charts on investment trust discounts
- Read: Is it too late to buy the Magnificent 7?
| Annual performance to 31 July (%) | 2020-2021 | 2021-2022 | 2022-2023 | 2023-2024 | 2024-2025 |
|---|---|---|---|---|---|
| S&P 500 | 36.5 | -4.6 | 13.0 | 22.2 | 16.3 |
| FTSE 100 | 23.3 | 9.6 | 7.8 | 13.0 | 13.2 |
| STOXX Europe 600 | 33.0 | -2.1 | 11.1 | 13.6 | 8.9 |
| MSCI Emerging Markets | 21.0 | -19.8 | 8.8 | 6.6 | 17.9 |
Past performance is not a reliable indicator of future returns
Source: Refinitiv from 31.7.20 to 31.7.25. Total returns in local currency
Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. An investment in a money market fund is different from an investment in deposits, as the principal invested in a money market fund is capable of fluctuation. Fidelity’s money market funds do not rely on external support for guaranteeing the liquidity of the money market funds or stabilising the NAV per unit or share. An investment in a money market fund is not guaranteed. Eligibility to invest in a SIPP or ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. Withdrawals from a SIPP will not normally be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.
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