As we review the market landscape of the second quarter of 2025, one theme remains consistent: navigating volatility through diversification.

At the heart of our Q2 analysis is the continued strength of diversified portfolios composed of equities, fixed income, commodities, and REITs. The good news is that most asset classes were positive in Q2, resulting in strong year-to-date returns for 2025.

Let’s take a closer look at what drove performance this quarter.

International and Emerging Markets Lead the Way

International and emerging markets delivered standout performances, driven by robust fiscal and monetary policy implementations overseas, as well as evolving geopolitical dynamics. In local currencies, returns were strong across the board. However, when converted to the U.S. dollar, returns became even more impressive due to currency movements. The U.S. dollar weakened significantly—down over 11% against the Euro and around 2% against the Chinese Yuan—enhancing returns for U.S. investors.

Within developed markets, Germany led performance, benefiting from increased government spending. In emerging markets, Taiwan, South Korea, and Mexico showed outsized gains in Q2. Asian markets were propelled by semiconductor production and advancements in AI-related technologies, while Mexico benefited from strengthened trade relations with the United States.

Asset Allocation Proves Its Value

Client portfolios achieved strong returns, both in Q2 and year-to-date, led primarily by international equities. This quarter once again reinforced the importance of maintaining a globally diversified portfolio to capitalize on varying economic and market dynamics.

Stay tuned for more insights from the Investment Research Team in the months ahead.

Sources
MSCI, YCharts. Data as of 6/30/2025
Bloomberg. YCharts. Data as of 6/30/2025