2025 Q4 Review: Stocks Finish Strong as Rate Cuts Shape a Significant Year

Q4 2025 Key Takeaways

• Markets rewarded diversification. International developed and emerging markets outperformed U.S. stocks, reinforcing the value of global exposure.
• Value continued to lead. Value stocks outperformed growth across regions, while large-cap stocks outpaced small caps.
• Commodities jumped, led by silver and copper, while U.S. REITs slipped and bonds posted modest gains.

Markets closed out the final quarter of 2025 with plenty of noise, but generally constructive results. Headlines during the quarter ranged from a government shutdown in early October to gold topping $4,000, a rough week for the Nasdaq, and a Fed rate cut in December.

Market Summary

Returns (USD), as of December 31, 2025:

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: U.S. Stock Market (Russell 3000 Index), International Developed Stocks (MSCI World ex USA Index [net dividends]), Emerging Markets (MSCI Emerging Markets Index [net dividends]), Global Real Estate (S&P Global REIT Index [net dividends]), U.S. Bond Market (Bloomberg U.S. Aggregate Bond Index), and Global Bond Market ex U.S. (Bloomberg Global Aggregate ex-USD Bond Index [hedged to USD]). S&P data © 2026 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2026, all rights reserved. Bloomberg data provided by Bloomberg.

World Stock Market Performance

MSCI All Country World Index with selected headlines from Q4 2025

These headlines are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily events from a long-term perspective and avoid making investment decisions based solely on the news. Graph Source: MSCI ACWI Index (net dividends). MSCI data © MSCI 2026, all rights reserved. Index level based at 100 starting January 2000. It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.

Stocks: Value Leads, Small Caps Lag

U.S. Stocks

• The U.S. equity market posted positive returns for the quarter and underperformed both non-U.S. developed and emerging markets.
• Value outperformed growth.
• Small caps underperformed large caps.
• REIT indices underperformed equity market indices.

A few Q4 return highlights in the U.S. equity sleeve:

• Large Value: +3.81% vs. Large Growth: +1.12%
• Small Value: +3.26% vs. Small Growth: +1.22%
• Large Cap: +2.41% vs. Small Cap: +2.19%

International Developed Stocks

Developed markets outside the U.S. also posted positive returns and outperformed both U.S. and emerging markets. Once again, value beat growth and small caps trailed large caps.

Emerging Markets Stocks

Emerging markets were also up, outperforming U.S. markets, though they lagged non-U.S. developed markets. Value outperformed growth, and small caps underperformed large caps.

REITs: U.S. Falls Behind Global ex-U.S.

Real estate investment trusts diverged by region. U.S. REITs declined (-0.79%), while Global ex-U.S. REITs gained (+1.53%).

Commodities: A Strong Quarter, Powered by Metals

Commodities were a bright spot in Q4. The Bloomberg Commodity Total Return Index returned +5.85%.

Winners and laggards were especially spread out:

• Best performers: Silver +65.02%, Copper +17.40%
• Worst performers: Sugar -10.60%, Unleaded Gas -6.40%

Bonds: Modest Gains, With a Split in Rates

Fixed income posted a positive quarter overall (U.S. bonds +1.10%; global ex-U.S. bonds +0.52%). One of the defining Q4 bond market dynamics: short-term rates generally fell while long-term rates rose. In total-return terms, many core bond segments were positive, including short/intermediate Treasuries and corporates.

Global Fixed Income: Rates Mostly Higher Outside the U.S. and U.K.

Except for the U.K. and U.S., interest rates generally increased across global developed markets for the quarter.

In the U.K., interest rates decreased across all maturity ranges. In the U.S., short-term interest rates decreased, and long-term interest rates increased. In Canada, Germany, U.K., and Australia, the short-term maturity range of their yield curves was generally flat but steepened in the three- to five-year maturity range.

On aggregate, global term premiums were mixed. Realized term premiums were mixed in the U.S., as intermediate-term bonds generally outperformed shorter-and longer-term bonds. Realized term premiums were positive in the U.K., as longer-term bonds generally outperformed shorter-term bonds during the quarter. However, realized term premiums were negative in Canada and Japan, as longer-term bonds generally underperformed shorter-term bonds during the quarter.

Source:

Dimensional Fund Advisors, “Quarterly Market Review – Fourth Quarter 2025.” In USD. S&P data © 2026 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

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