Unpacking 2025 Market Returns
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By Ben Dolan, CFP®
When meeting with prospects, Michael and I will often bring a very large, rectangular, awkward-looking book. Published each year by Dimensional Fund Advisors, the Matrix Book is a collection of index returns through time.
Each year, when we receive the most current edition of the Matrix Book, we’ll review updates to major market indices and discuss them in detail. In early 2025, having reviewed returns ending 12/31/24, our conversation centered on the dramatic lag in 10-year performance of three indices when compared to the US: MSCI World Ex US (tracks international developed markets), MSCI Emerging Markets (tracks only emerging market economies…think Brazil, India, Mexico, etc.), and S&P Global Real Estate Investment Trust.
Over a 10-year period ending 12/31/24, according to the Matrix Book, the S&P 500 Index returned 13.1% per year. Over the same period, the annualized returns of the MSCI World Ex US index, the MSCI Emerging Markets index, and the S&P Global Real Estate Investment Trust Index were 5.8%, 4%, and 4.1%, respectively.
The underperformance was not a surprise. Somewhat surprising though, was the extent of the underperformance (e.g. the US outperformance over Emerging Markets during this period is 3.2x). While we have a bias toward the US, meaning that we overweight our portfolios to the US above its natural market capitalization, we also allocate client portfolios toward international equity markets.
When underperformance of this magnitude occurs it’s natural to ask yourself (as we did) if there are underlying factors/conditions in these markets which might cause this trend to continue. We decided immediate action was not prudent, especially given the attractive prices of these equities versus the relatively high prices of equities in the US.
As if these markets were listening in on our conversation about their poor performance, they had a blistering start to the year and haven’t looked back. Per Morningstar, the YTD returns of MSCI World Ex US Index, the MSCI Emerging Markets Index, and the S&P Global Real Estate Investment Trust, as of 11/30/2025, are 28.01%, 29.69%, and 10.10%, respectively (note, the S&P 500 has also done well, returning 17.81% YTD).
These returns are not going to close the gap in performance experience over the last 10 years. However, they are a good reminder that predicting from where returns will come on a year-by-year basis is a challenge.
Also important to remember, when reviewing historical returns (and thinking you may have a crystal ball to help predict returns), is that you don’t have to go back very far to encounter a time when the shoe was on the other foot. Known as the “The Lost Decade” in financial publications, the return of the S&P 500 from 2000 to 2009 was -0.9%, per the Matrix Book (yes, you are reading that correctly, you would have lost money over this 10-year period!). Over the same period, the return of the MSCI Emerging Market Index was 10.1%, and the return of the S&P Global Reit was 10.9% (the MSCI World Ex US Index return was less impressive, at 2%).
Good investment, in our opinion, remains diversified across capital markets to capture returns, whenever and wherever they may come.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The market and economic data are historical and are no guarantee of future results. All indices are unmanaged and may not be invested into directly. The information in this report has been prepared from data believed to be reliable, but no representation is being made as to its accuracy and completeness.
Nothing in this material should be construed as investment advice offered by Dolan Capital Advisors, Inc. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction, or investment strategy. No chart, graph, or other figure provided should be used to determine which securities to buy, sell or hold. No representation is made concerning the appropriateness of any particular investment, security, portfolio of securities, transaction, or investment strategy. You should speak with your own financial professional before making any investment decisions.
Past performance is not indicative of future results. Dolan Capital Advisors, Inc. does not guarantee any specific outcome or profit. These disclosures cannot and do not list every conceivable factor that may affect the results of any investment or investment strategy. Risks will arise, and an investor must be willing and able to accept those risks, including the loss of principal.
Certain statements contained herein are statements of future expectations and other forward-looking statements that are based on opinions and assumptions that involve known and unknown risks and uncertainties that would cause actual results, performance, or events to differ materially from those expressed or implied in such statements.
Ben Dolan and Michael Foster are investment advisor representatives of Dolan Capital Advisors, Inc., a SEC-registered investment adviser. Investment advice offered through Dolan Capital Advisors, Inc.