Stock Market Outlook: May 2025

Why international stocks are on a tear in 2025

It’s a new month, but U.S. stocks are still in the red. The S&P 500, Dow Jones Industrial Average and Nasdaq 100 indices are all down 3% or more year-to-date, amid uncertainty related to the Trump administration’s new tariffs.

The administration has raised tariffs on many of the U.S.’s largest trading partners, including Mexico and China. Yet Mexico’s IPC index and China’s Hang Seng index are both up more than 10% year-to-date.

Those aren’t the only two countries that are leaving U.S. stocks in the dust this year. We asked an investment strategist why international stocks are outperforming American ones in 2025 — and whether we should expect the outperformance to last.

Why are international stocks outperforming U.S. stocks?

It might seem paradoxical that many foreign stock markets — including those of countries that have been hit with U.S. tariffs — are outperforming the U.S. stock market.

But it’s worth keeping in mind why U.S. markets have been so shaken by tariffs: Many American blue-chip stocks are multinational giants whose customer bases and supply chains stretch across continents, making them very vulnerable to international trade disruptions.

According to Darius Gagne, a certified financial planner and the chief investment officer of the California-based firm Quantum Financial Advisors, foreign stock markets are different. In many cases, their largest constituents are companies that rely on domestic revenue, and don’t do much business overseas.

For example, Mexican stocks are performing well in 2025, despite Mexico being a target of Trump’s recent tariffs.

“Speaking to the subtleties of how tariffs work — the publicly-traded companies in Mexico actually don’t have a lot of exposure to exports to the U.S.,” Gagne says.

Another example is Poland. The Warsaw Stock Exchange’s WIG Index, whose largest constituents are mostly Polish banks and telecommunications companies, is up more than 20% year-to-date, despite Poland facing 20% U.S. tariffs along with the rest of the European Union.

Will the international stock boom last?

Gagne says that investors shouldn’t make big decisions based on short-term trends. But he also says there’s a good chance international stocks will continue to outperform the U.S. in 2025.

“My expected return going forward for the U.S. stocks and international stocks is essentially the same. Since international is so much ahead of the U.S. so far this year, if they grow at the same rate from here on out then I would expect international to finish the year ahead of the U.S.,” Gagne says.

There’s a case for putting a portion of your portfolio into foreign stocks for diversification. Even the simplest “lazy portfolios” typically make room for international stocks. For example, the “four-fund portfolio” popularized by Vanguard consists of a U.S. stock index fund, a U.S. bond index fund, an international bond index fund and an international stock index fund.

» MORE: Best online brokers for stock trading

Term of the month: International ETFs

International stocks may continue to thrive in 2025, but buying individual stocks from other countries isn’t always easy. One workaround is an international stock ETF — an exchange-traded fund that does the work of researching and investing in foreign stocks for you.

But what kind of international ETF may be best for you? They come in a few different varieties, including global “ex-U.S.” ETFs, continent-specific or regional ETFs, and single-country ETFs. Below, we’re taking a look at the differences between these categories, and some of the best performers from each.

Top 7 best-performing ex-U.S. ETFs

Ex-U.S. ETFs are the broadest category of international ETFs — they’re funds that invest in global stocks, but exclude American stocks, hence “ex-U.S.” Below are the seven best-performing ex-U.S. ETFs in the last year, along with their one-year returns.

1. Bancreek International Large Cap ETF (BCIL): 18.91%.

2. Brandes International ETF (BINV): 18.39%.

3. Davis Select International ETF (DINT): 14.52%.

4. First Trust RiverFront Dynamic Developed International ETF (RFDI): 13.78%.

5. Xtrackers FTSE Developed ex-U.S. Multifactor ETF (DEEF): 13.36%.

6. Dimensional International Small Cap ETF (DFIS): 13.08%.

7. Fidelity Enhanced International ETF (FENI): 13.05%.

Source: Finviz. Data is current as of May 1, 2025, and is intended for informational purposes only, not for trading purposes.

Top 7 best-performing regional ETFs

Regional ETFs invest in stocks from a specific grouping of countries, such as Latin America. Many invest in stocks from a specific continent, such as Africa, Asia or Europe. Below are the seven best-performing regional ETFs in terms of one-year returns.

1. MVIS GDP Africa Index (AFK): 18.81%.

2. Franklin FTSE Eurozone ETF (FLEU): 16.87%.

3. Franklin FTSE Europe ETF (FLEE): 15.10%.

4. Goldman Sachs ActiveBeta Europe Equity ETF (GSEU): 14.88%.

5. iShares Asia 50 ETF (AIA): 14.10%.

6. JPMorgan Beta Builders Europe ETF (BBEU): 13.10%.

7. Vanguard FTSE Europe ETF (VGK): 13.03%.

Source: Finviz. Data is current as of May 1, 2025, and is intended for informational purposes only, not for trading purposes.

Top 7 best-performing single-country ETFs

Then there are single-country ETFs, which, as their name implies, exclusively invest in stocks from a specific non-U.S. country. Below are the seven single-country ETFs with the highest one-year returns.

1. Global X MSCI Argentina ETF (ARGT): 52.71%.

2. iShares MSCI Israel ETF (EIS): 33.77%.

3. Franklin FTSE Germany ETF (FLGR): 31.76%.

4. iShares China Large-Cap ETF (FXI): 31.30%.

5. iShares MSCI Singapore ETF (EWS): 30.75%.

6. Global X DAX Germany ETF (DAX): 30.74%.

7. iShares MSCI Germany ETF (EWG): 30.67%.

Source: Finviz. Data is current as of May 1, 2025, and is intended for informational purposes only, not for trading purposes.

» MORE: Best online brokers for ETFs

Dates that could move markets this month

Economic events

• Friday, May 2: Bureau of Labor Statistics (BLS) monthly employment report. A report showing hiring levels and various measures of the unemployment rate.

• Wednesday, May 7: Federal Reserve interest rate decision. The Fed will conclude its meeting and announce the new level of the federal funds rate. It is expected to keep the rate unchanged, but it may announce a 0.25% cut.

• Tuesday, May 13: BLS consumer price index (CPI) report. A key inflation gauge. The employment and CPI reports could give investors hints about what the Federal Reserve will do with interest rates in future meetings; unexpectedly high unemployment or low inflation could indicate that rate cuts are on the way.

• Friday, May 30: Federal Reserve Bank of New York R-star estimate. The “natural rate of interest,” or R-star, is an important indicator of the future trajectory of interest rates.

• Friday, May 30: Michigan consumer survey data for May. The University of Michigan will release its preliminary data for this month’s survey on May 16, and its final data on May 30. The survey has become a closely watched indicator of ordinary Americans’ perceptions of the economy.

Earnings

Below is a table of blue-chip stocks that are reporting earnings in May, with the expected dates and average analyst estimates for their upcoming earnings reports.

We've filtered the list for companies with a market capitalization of at least $250 billion. These are high-volume stocks whose earnings reports are often major trading events for options traders and day traders.

No data above? Log in or register for a NerdWallet account to see the full earnings calendar.

Source: Nasdaq.com. Data is current as of May 1, 2025, and intended for informational purposes only.

» See our picks of the best day trading platforms.

More on investing amid global uncertainty

• Should I Buy Stocks Now Amid Tariff Uncertainty?

• Searching for Tariff-Proof Investments? Start Here

• Looking for Recession-Proof Stocks? Find the Outperformers