In a remarkable display of resilience, US stock funds concluded 2025 with an average return of 14.6%, marking the third consecutive year where returns have exceeded 10%. This continued upward trajectory showcases strong investor confidence despite the fluctuating global landscape and shifting market sentiment.
Data from LSEG highlights that US stock funds recorded a gain of 2.5% in the fourth quarter alone, contributing to the impressive annual figure. This year’s performance follows returns of 21% in 2023 and 17.4% in 2024, solidifying a trend of robust gains over the past few years.
The gains for 2025 were heavily bolstered by a select few technology stocks, particularly those tied to the burgeoning artificial intelligence sector. While broader market participation lagged behind expectations, the dominance of these tech giants drove market sentiment. Ellen Hazen of F.L. Putnam Investment Management noted, “The market dramatically narrowed again,” reflecting the intense concentration within the tech sector.
This shift became particularly pronounced following President Donald Trump’s announcement of sweeping tariffs in April, heralded as Liberation Day. This policy shift abruptly redirected market leadership back to large-cap tech stocks after initial signs hinted at a more diversified market.
Hazen emphasized that while there are concerns regarding AI-related stocks, these challenges have not dampened overall optimism heading into 2026. The prevailing sentiment remains optimistic for tech-driven growth, suggesting that investors are eyeing potential expansions beyond the current market leaders.
On the international stage, global stock funds outperformed their US counterparts, soaring by 29.8% in 2025 after a drift of just 4.8% in 2024. This shift points to changing capital flows, driven by early-year tariff disruptions, as investors navigated toward more stable investments amid global unrest.
As alarm bells rang in the US markets, many investors opted to reallocate their assets. The Investment Company Institute reported that US stock funds and ETFs saw a significant outflow of $391.6 billion in 2025, predominantly from July onward. In contrast, global equity funds attracted $102.1 billion in net inflows, while bond funds lured a remarkable $669.4 billion in new investments, as investors sought the relative safety of fixed-income securities.
The Federal Reserve played a notable role, cutting interest rates three times throughout the year, which fed into a positive narrative for bond markets, as shown by a 7.3% return on bond funds.
In the realm of actively managed funds, large-cap technology and AI-focused portfolios dominated. Notably, the Permanent Portfolio Aggressive Growth Portfolio (PAGRX) led the pack with a remarkable 36.9% return, followed closely by PrimeCap Odyssey Growth Fund (POGRX) at 33%. The Alger Capital Appreciation Portfolio (ALVOX) also made headlines with a return of 32.9%, reflecting an ongoing trend towards aggressive growth strategies despite broader outflows.
Overall, while the year saw significant outflows from certain sectors, the underlying performance across various fund categories remained robust. Investors continued to reinforce their commitment to core holdings amidst economic uncertainties and policy changes, keeping the door open for diverse growth opportunities in 2026.
As the financial community looks ahead, technology earnings and macroeconomic policies will undoubtedly remain in the spotlight, shaping the investment landscape in the coming year.
