Investors are brave enough to peek at their account statements to know that this is the toughest in 2025.

Even before tariff-related volatility, DeepSeek AI’s launch range obscured the main technical themes that drove the market in 2023 and 2024, as AI stocks entered a bear market in March.

However, there will be an increase in equity in 2025. When I looked at the annual returns across the index, I noticed some surprising stars: European stocks, Latin America and REITs.

Connect three general threads? All of this has performed poorly in the past few years.

European stocks are getting great again

Morningstar's European stock index is getting higher this year as the macroeconomic environment has been improving. The financial services sector in particular is a key beneficiary.

Then, the Donald Trump administration stimulated Germany's new discoveries on deficit spending and the continent's focus on military self-sufficiency.

The U.S. tariff announcement caused a sharp sell-off in Europe, but the recovery was V-shaped. The weak dollar has expanded earnings in European stocks, detrimenting to U.S. investors. The European Central Bank and the Bank of England are actually lowering interest rates and there is no harm.

My research and investment colleagues call Europe “the most attractive developed market region in the world”, which makes European stocks worthy of being included in a diversified portfolio.

Latin America: Can the revival last?

In the southern U.S. border, stocks are rallying.

Morningstar's Latin American stock index has risen more than 22% so far in 2025 due to smaller markets in Brazil, Mexico, and Colombia and Chile. Here, the weak dollar also increases equity returns for U.S. investors. This marks a loss of more than 25% in USD in 2024, which marks a loss of more than 25%.

As far as Brazil is concerned, it faces serious financial challenges. In Mexico, election results on both sides of the border have affected emotions.

Entering this year, my colleagues on the research and investment team at Morningstar believe that Brazil is the highest potential global stock market for the next 10 years. Stocks in Latin America are volatile but can maintain higher space.

Real estate investment trusts, especially those outside the United States, outperform

Real estate investment trusts have also increased their double-digit numbers outside the U.S. this year. Many geographic locations are dynamic and supported at low interest rates or at a rate of decline.

What about the United States? Morningstar's U.S. REIT index lags far behind Morningstar's top global REIT index in 2025, but it is located on positive territory and ahead of the wide range of U.S. stock markets. The U.S. interest rate that seems to be stuck longer is seen as a negative for real estate. That is, the yield of REITs is attractive, and property is a "real asset" that can act as an inflation hedge.