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