As 2025 draws to an end, we revisited the 2025 market outlooks by some of the leading financial institutions1. Consensus prevailingly expressed caution toward European stocks, while China was labelled “un-investable”, as recent as January 20252. Yet, the trajectory of actual market performance this year highlights the difficult nature of predicting global market directions.
In his poem “Sepharad, 1492”, Mexican poet Homero Aridjis is quoted saying: “There are centuries in which nothing happens and years in which centuries pass”. The adage captures a profound truth: history- and markets- sometimes move in bursts. Extended periods of stability can be shattered by sudden shocks that reshape the landscape.
Defying last year’s predictions, European markets have returned a striking 27.5% in 2025 and outperformed the U.S. by 13.3%3. This is an anomaly in recent years: since 2008, the U.S. has outperformed Europe in 13 of the 17 years (excluding 2025) and you would have to go back to 2006 for double digit EU outperformance. This dynamic extends beyond Europe – compared to rest of the world, the U.S. market is lagging in 2025 by the widest margin since 2009 (Figure 1).
Figure 1: Total return: U.S. equities vs. Rest of the world4
Source: CIO Office (data via Refinitiv). As of Nov 28, 2025.
So, what explains the unprecedented U.S. market relative outperformance from the global financial crisis up until 2024? Two major factors drove the shift: superior U.S. earnings growth and sustained U.S. dollar strength, underpinned by an era of ultra-low interest rates. The post-crisis fallout hit international index profits and returns more strongly given their higher exposure to banks and financials. The U.S. market, however, is home to some of the best technology companies in the world, which have displayed superior earnings and strong competitive advantages. The U.S. dollar also appreciated roughly 34% against other currencies from 2007-2024, amplifying U.S. outperformance5.
We believe the robust International market performance in 2025 reflects one of the aforementioned “burst moments” – a fundamental reshaping of the global economic landscape. This shift reflects the accelerating de-globalization of the world order, driven in part by President Trump’s “America First” trade and defence policies. In response, countries around the world are increasingly prioritizing self-sufficiency and reducing their dependence on the U.S. consumer, as they recalibrate their fiscal and expansionary policies.
Similarly, Canada has taken some steps in 2025 toward positioning itself for economic autonomy and growth. Canada’s 2025 budget under the liberal platform includes $115B in Infrastructure spending over five years6. Reinforcing this vision, Prime Minister Mark Carney launched a Major Projects Office (MPO), designed as a one-stop shop to expedite approvals for large-scale infrastructure and industrial projects deemed to be in Canada’s national interest. The first tranche of announced projects includes the LNG Canada Phase 2 project, aimed at doubling Canada’s liquified natural gas export capacity. On November 27th, 2025, the Prime Minster signed a Memorandum of Understanding (MOU) with Alberta Premier Danielle Smith, committing to work toward building a new bitumen pipeline from Alberta to British Columbia’s northern coast. This pipeline is intended to open access to Asian markets, reducing Canada’s dependence on U.S. exports. It is starting to look like Canada is open for business again and hopefully foreign capital is taking notice – only time will tell. However, early signs are encouraging for our economy and future productivity.
Other countries are pursuing similar ambitions. Germany, Europe’s largest economy and the third-largest globally, is committing €500B on infrastructure projects over the next decade. China’s response, amongst other measures, is launching a third state-backed fund, totalling approximately US$47.5B, as part of a semiconductor self-sufficiency strategy to mitigate the impacts of U.S. export controls.
For our clients, this unpredictability reinforces a timeless principle: you can’t predict, but you can prepare. Diversification is the anchor in these turbulent seas. By spreading exposure across sectors and geographies, you build enduring portfolios and enhance your long-term outcomes. The International Pool exemplifies this objective, delivering competitive returns over the mid- and long-term time horizons (Figure 2).
Figure 2: International Pool Performance vs. Peer Returns
Sources: NBIN, Bloomberg, RBC Investor Services Pool Fund Survey. As of Sept 30, 2025.
The past year has shown that markets—and the forces shaping them—rarely follow a linear path. For investors, this reinforces a simple truth: while we cannot predict the future, we can prepare for it. International equities are not the only tool our clients should use for portfolio diversification, however, over the years it has proven to be an important one.
1 Including Goldman Sachs, Morgan Stanley, JP Morgan, Blackrock, etc.
2 Source: Bloomberg
3 Total Return in Canadian Dollars. Source: Bloomberg. As of Dec 3, 2025, expressed in CAD.
4 MSCI ACWI ex U.S. – All Country World Index ex U.S. (in USD)
5 WSJ.com – U.S. Dollar Index (DXY)
6 Mcmillan.ca- Major Infrastructure Aspects of Budget 2025, November 6, 2025
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The opinions expressed do not necessarily reflect those of NBF. The particulars contained herein were obtained from sources we believe to be reliable, but are not guaranteed by us and may be incomplete. The opinions expressed consider a number of factors including our analysis and interpretation of these particulars, such as historical data, and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein. Unit values and returns will fluctuate and past performance is not necessarily indicative of future performance.
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