Market Lessons from Early 2025

By Ben Dolan, CFP®

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Mid-last year my 14-year-old son, Benjamin, started asking interesting, oddly specific questions about investing. My face lit up. Finally, finally, I thought, after hundreds conversations about compounding interest, after the countless times I’ve shown him his 529 balance and explained how it works, after all the time spent providing guidance (unsolicited, mind you) in the car about how capital markets work, he’s interested (and will think that what his Dad does for a living is exciting)!

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Me (proudly): Why do you ask son?

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Benjamin: My friend at school showed me his stock picks on his phone. Looks like fun. Can I do it, too?

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I hid my disappointment well (I think). After swallowing my pride, we had a nice conversation about investing and markets. To my delight, Ben had been saving quite a bit (he has been pet/plant sitting for neighbors) and decided he would like to put some money into the stock market. We opened an account together, he transferred in some cash, and I matched his contribution to help get things started.

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Ben’s next question: what should he invest in and how much return he should expect? I pulled out my book of long-term stock returns and we dug in. While reviewing returns, Ben noticed that, over the last 10+ years, stock returns outside of the US have been dwarfed by stock returns inside the US. He quickly stated that he did not want to invest outside the US. I didn’t fight him on this point, but suggested he put some money into international equities, which he did. But most of the cash was invested in US stocks.

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One of the lessons from early 2025 is the stark difference in performance between US stocks and international stocks. With most of the financial media focused only on the US, you may be surprised to hear that international stocks are having a good year. According to Morningstar, total return of the MSCI World ex US Index as of 4/30 is 11.04% (with Poland leading the way by country, up over 30% in Q1 according to Dimensional Fund Advisors). Compare this to the S&P 500 total return of -4.92%, and that’s an outperformance of 15.96% over four months.

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In the long run, this outperformance might mean very little. But there is a strong argument that the outperformance may persist, as noted by Jason Zweig in his April 25^th article in the WSJ: “Even after their recent run-up, international stocks are relatively cheap, trading at less than 16 times earnings over the past 12 months and under two times book value, or net worth; U.S. stocks are at roughly 24 times earnings and more than four times book value.” If price matters, and I think it does, international stocks are attractive.

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Investing by looking in the rearview mirror is a dangerous game because there will always be an asset class, region, sector doing better on its own than you could have predicted, and the financial media will throw it in your face (you weren’t buying Poland while shorting the Mag 7, what’s wrong with you!). A better approach is to understand the global opportunity set and diversify your holdings across US, International, and Emerging Markets, capturing the returns of each of these markets as they come.