Why Stock Market Diversification Still Works in 2025

This is a quick exercise we often do with clients to illustrate why we don’t try to guess the market—and why having multiple areas of the stock market in your portfolio really matters.

Below is a chart showing annual asset class performance over the past decade:

View the interactive chart on BlackRock's website

Here’s the demonstration:

Cover any given year and try to guess which asset class came out on top. If you follow the market closely, you might get a few right. But for a real challenge, try predicting which asset class will lead in 2025—or even 2026!

Here’s an industry reality: the vast majority of investors, portfolio managers, advisors, hedge funds—you name it—are wrong when they try to guess what will outperform next - so why would you try with your hard earned money?

The Power of Stock Market Diversification

There’s another important takeaway from this chart: diversification can make your investment journey much more manageable.

Let’s look at international equities—specifically European stocks.

For most of the past decade, U.S. stocks have outpaced international stocks by a wide margin. But 2025 is shaping up differently: European markets are up around 20% year-to-date, while U.S. markets are up about 6% (based on BlackRock’s data as of 6/12/25).

Earlier this year, during the tariff turmoil, U.S. markets dipped into negative territory. Some clients were understandably worried about needing to sell during a downturn to fund withdrawals.

Enter international stocks—like a white knight.

From April to June, we sold positions in international markets—after significant gains—to meet client withdrawals. This meant avoiding the need to sell U.S. stocks at a loss and helped smooth the overall experience during a stressful market stretch.

Stick With What Works

Investing isn’t about trying to predict the next hot asset class. It’s about sticking with time-tested principles—like diversification, patience, and balance. Those are the strategies that help investors stay the course and meet their long-term goals.