What segments of the market outperformed in 2025?
Posted on January 9, 2026
I like arranging the most recent calendar year returns in the 3 by 3 matrix of the Investment Style Box. I get a snapshot of what outperformed and what underperformed the US stock market as a whole. This post is a repeat of the prior two years. Real stock returns were far greater than their long run average or expected return rate. Large Cap Growth stocks beat the other eight squares in the matrix.
What this means for you: the winning tactic is to hold a bland, Total Market Index fund
• Ten years ago you could have chosen to overweight one of the boxes in the matrix. Only one in nine handily beat the returns of a Total Market Index fund. You would have clearly been wrong to overweight seven of the boxes. Keep it Simple. Don’t try to tilt your portfolio overweight a sector.
Details:
• The real return for US stocks of ~14% is the third year of double-digit real returns. We have put 2022 behind us. We are up about 25% from where we were at the end of 2021.
• Large Cap Growth again was the most attractive segment again. It’s been the leader for longer time periods. I show the style box for returns relative to US Total Market returns for 2025 and five, 10 and 15 years here.
== 2025 World stocks +22.1% ==
The total world market stock index, MSCI All Cap World Index was 22.1% for 2025. US stocks are roughly 60% of market value of all stocks in the world. Total International Stocks (VTIAX) were +32.2% in 2025. (Patti and I own the ETF of this: VXUS = +32.3%.)
Conclusion: 2025 was a terrific year for US stocks on top of two prior excellent years. The real return for US stocks was ~14%. That’s ~double the long run or expected return rate for stocks.
Every year some segments of the market outperform and some underperform. In 2025, the return for Large Cap Growth stocks again beat the other eight boxes in the 3 by 3 matrix that describes market returns.
Over a five, ten, and 15-year history, Large Cap Growth has outperformed all other styles. It’s basically the only box that has outperformed a Total Market fund.