2025’s Winners and Losers, From Gold to Small-Cap Stocks to the 60/40 Portfolio

This year’s uncertainty is producing a somewhat surprising group of winning and losing asset classes. And there are still two months to go in 2025.

Why it matters: Many investors are rerouting their investments into different asset classes because of geopolitical risks like the US trade war, elevated inflation, and high interest rates. A more recent development is the budget battle in Washington, D.C. While the macro environment is pressure-testing portfolios, it’s also serving as a reminder about the benefits of diversification. So, which asset classes are leading and lagging as 2025 prepares to wrap up? And how’s the classic 60/40 portfolio holding up? Morningstar portfolio strategist Amy Arnott has examined the data.

11 Questions on 2025’s Winning and Losing Asset Classes

1. Market volatility has recently increased. Can you talk about what’s fueling it?
2. We’re going to talk about asset classes that are winning and losing so far this year. Let’s start with the leaders. Gold hit record highs this year, but a sharp selloff this week has stopped the rally. Who’s been buying gold?
3. Cryptocurrencies have been on a tear despite a recent big selloff due to the US trade war. The volatile sector has rebounded. What’s driving its performance?
4. We’ve talked on the podcast in the spring about the outperformance of international stocks. Is the streak still going, and do overseas opportunities still exist?
5. We’re now focusing on the three losing asset classes. The real estate sector is having a tough year. Can you give us the details?
6. Why are US small-cap stocks and some bond segments lagging?
7. How is the government shutdown affecting the demand for US Treasuries? Could this affect their safe-haven status?
8. The US dollar isn’t having a great year either. Could the world’s reserve currency weaken even more?
9. How has the popular 60/40 portfolio—made up of 60% stocks and 40% bonds—performed?
10. What about other popular portfolios, such as the three-fund portfolio or the more diversified portfolio your team looked at in the Diversification Landscape?
11. What’s the takeaway for investors as they brace for more market volatility?

Key Quote on 2025’s Winning and Losing Asset Classes

Central banks like China have been buying up a ton of gold. And the reason behind that is traditionally people have looked to the US dollar as a rock-solid reserve asset. But now that the government debt is so high, we’re at a ... debt/GDP ratio of about 120%. There are some questions about whether that is really sustainable. And the perception of the US dollar as a rock-solid reserve asset has started to shift a bit, and central banks like China and other countries have been buying gold instead.

I would also point to some retail asset flows to gold ETFs like GLD as maybe a second factor that was supporting the big runup in gold prices. And I think that some of the main factors behind that would be just ongoing concerns about overall macroeconomic instability, the potential for rising inflation, and other related issues.

The Takeaway: Think like a long-term investor. Market volatility is part of investing, according to Amy C. Arnott, portfolio strategist at Morningstar Inc. Focus less on the day-to-day headlines about what’s going on in the markets, and focus more on maintaining a diversified portfolio, rebalancing when needed, and achieving your long-term goals.

More from Morningstar on Winning and Losing Asset Classes in 2025

The weakening US dollar could be one factor behind the winning performance of international stocks and cryptocurrencies like bitcoin in 2025, says Arnott. Meanwhile, the source of US small-cap stocks’ and high-yield bonds’ underperformance is likely related to concerns about the economy. The portfolio strategist has examined what seven key indicators are saying about the market and what they mean for investors.

Coinbase Global is one of the benefactors of crypto’s surge this year. Coinbase stock has skyrocketed but is it a buy, asks Morningstar’s associate data journalist Frank Lee. Also, read about five key factors that could influence the dollar’s future from Morningstar’s associate investment analyst Muhammad Hamza Saleem. Check out this deep dive that explains why 2025 is the year to invest in international stocks.

Markets Brief moment: The hunt for cockroaches may produce opportunities for patient investors. JPMorgan Chase CEO Jamie Dimon reacted to First Brands’ and Tricolor’s bankruptcies saying, “When you see one cockroach there are probably more.” Dan Kemp, chief investment research officer at Morningstar Investment Management Europe, says people are looking for more cockroaches to emerge due to weak lending standards via private credit. Despite the bankruptcies primarily involving the US markets, European banks took the hit. Kemp says there are bargains and more could surface if there are additional bankruptcies. Read about how bond investors seem unbothered by the cockroach theory in this week’s Markets Brief.

Securities mentioned in this episode:

SPDR Gold Shares GLD

Nvidia NVDA

Broadcom AVGO

Microsoft MSFT