Stock Funds End Roller Coaster Quarter on a High Note

President Donald Trump’s tariff announcements roiled stock markets and mutual funds in 2025’s second quarter, but they’re still up for the period.

The initial tariff news sent US stocks down nearly 12% from April 2 to April 8, but then hopes for less draconian trade deals triggered an incredible comeback. From April 9 through the end of the quarter, the Morningstar US Market Index gained 25.3% and reached a fresh all-time high. From the quarter’s start to finish, the index rose more than 11%, its best quarter since 2023’s third.

Cyclical, high-growth fund categories fared the best in the second quarter. The digital assets Morningstar Category’s 27.9% gain topped all categories. Technology funds followed closely behind with a 22.9% gain. Meanwhile, more value-oriented fund categories, such as energy, real estate, and consumer defensive funds, were among the biggest laggards and posted modest declines.

Artificial intelligence mania continued to propel technology stocks, particularly semiconductor stocks. Over the quarter, the Morningstar US Semiconductors Index gained 43.3%, which was its best quarter since 2001’s fourth quarter. Companies such as Nvidia NVDA, Broadcom AVGO, and Advanced Micro Devices AMD gained more than 35% each.

This boom in high-growth, technology stocks boosted performance for aggressive, growth funds. ARK Innovation ETF’s ARKK 47.9% gain in the quarter was among the best in the US. Top-10 holdings such as Coinbase Global COIN, Roblox RBLX, Robinhood HOOD, and Palantir Technologies PLTR gained more than 60% each. After falling 16.3% in the first quarter, the fund’s 23.8% rise through the first six months of the year topped 98% of its mid-growth category peers.

Roblox also contributed to Dennis Lynch-led Morgan Stanley Institutional Growth’s MSEQX 32.9% gain over the period. Cloud services provider Cloudflare NET, which was nearly 11% of the March 2025 portfolio’s assets, gained 74% and was the fund’s biggest contributor.

A pair of Alger funds also stood out in 2025’s second quarter. Alger Spectra SPECX and Alger Capital Appreciation ALARX, both managed by Ankur Crawford and Patrick Kelly, each gained 29% and were among the top-performing large-growth funds. Both portfolios owned semiconductor stocks such as Nvidia, Taiwan Semiconductor Manufacturing TSM, and Broadcom, which boosted performance.

While most growth managers emerged from the volatile quarter on their feet, Baron Growth BGRFX stumbled. Its 0.8% rise was among the worst in the mid-growth category. Top-five holdings such as Arch Capital ACGL, Gartner IT, and Kinsale Capital Group KNSL fell during the quarter and were among the worst-performing holdings. The Rajiv Jain-led GQG Partners US Select Quality Equity GQEIX fell 1.0% over the quarter and was also among the worst-performing large-blend funds. While it held mega-cap tech names such as Meta Platforms META and Microsoft MSFT, top holdings such as Progressive PGR and Verizon Communications VZ fell more than 3% each, and the portfolio’s nearly 10% cash stake also hurt in the rally. Through the first six months of 2025, the fund’s 1.6% decline trailed 98% of its large-blend peers.

Value-oriented funds tended to underperform their growth counterparts. American Century Equity Income TWEIX and Ave Maria Rising Dividend AVEDX each fell during the quarter and were among the worst-performing funds in the large-value and large-blend categories, respectively. Both portfolios owned Chevron CVX, which fell more than 13% over the period.

International Stocks

International stocks also proved relatively resilient. The Morningstar Emerging Markets Index’s 12.5% rise narrowly beat the Morningstar Developed Markets ex-US Index’s 12.4% gain.

Similar to the US market, growth stocks tended to outperform their value counterparts. However, unlike the US, where large-cap stocks outperformed small caps, small-cap international stocks outpaced their larger-cap peers. The foreign small/mid-growth category’s 18.6% return over the second quarter was tops among all international-equity categories. Foreign small/mid-blend and foreign small/mid-value followed with respective 16.9% and 15.2% returns.

European stocks led the strong period for international companies. Greece had among the strongest equity returns over the quarter; after gaining 20.5% in the first quarter, the Morningstar Greece Index posted a 27.9% return in the most recent quarter. Meanwhile, the Morningstar China Index’s 3.0% gain was respectable but lagged other emerging-markets countries.

WCM Focused Emerging Markets’ WCMEX 19.7% gain topped 97% of its diversified emerging-markets category peers. Its March 2025 portfolio held Brazilian companies such as Nu Holdings NU and Totvs TOTS3, which gained more than 30% over 2025’s second quarter. American Beacon IMC International Small Cap’s TIVFX 24.6% gain also landed it in the top decile in its foreign small/mid-growth category. Its March 2025 portfolio owned Korean companies such as PharmaResearch 214450 and Hyundai Rotem 064350, which gained roughly 60% and 100% over the period, respectively.

Meanwhile, a pair of global large-stock growth funds fared poorly. GQG Partners Global Quality Equity GQRIX trailed nearly all its category peers, posting a 1.3% return in the second quarter. US-based holdings such as American Electric Power AEP, Progressive, and Verizon Communications were among the fund’s largest laggards. Guardian Fundamental Global Equity’s GFGEX 2.8% return was also among the global large-stock growth category’s worst performers, thanks, in part, to stumbling US businesses such as Mastercard MA, Colgate-Palmolive CL, and UnitedHealth UNH. Both funds landed in the bottom decile in the category through the first half of 2025.