Diversification is one of the most time-tested principles in investing. It often proves most valuable during moments when it feels least necessary. For years, U.S. stocks outshined their international counterparts, leading many to quietly question whether global investing was still worth it.
Then came 2025.
Throughout the year, international stocks have significantly outpaced the U.S. market. While the S&P 500 posted strong gains of 6.2% in May alone, international markets have dominated year-to-date performance, with European markets posting some of their strongest relative performance in a decade. Poland surged 47.6%, Austria climbed 34.3%, Greece advanced 32.7%, and Spain gained 32.5%, while the U.S. market showed only modest year-to-date returns through mid-May.
By February, global equities had already returned 7.2%, outpacing the S&P 500's 4.5% gain, with European equities delivering their most substantial monthly returns against the S&P 500 in a decade during January. This dramatic reversal caught many investors off guard—those who had gradually reduced international exposure during years of U.S. dominance suddenly found themselves underexposed to the year's best-performing markets.
Suddenly, portfolios with global exposure weren't just patient. They were prepared.
A Tale of Two Markets
What made this month especially revealing was the difference in what drove returns. In Europe, investors responded positively to easing inflation data and anticipated boosts in defense spending. In contrast, U.S. stocks faced headwinds from renewed tariff uncertainty and sticky inflation expectations.
It was a clear example of why geographic diversification matters: different economies respond to different catalysts. When one region is struggling, another might be thriving (and that can cushion your overall portfolio).
Beyond Borders, Beyond Countries
Global diversification today isn’t just about investing in different countries, it’s also about investing in different risk factors. Modern investing tools, like the Fama-French Five-Factor Model, help us understand what really drives long-term returns. This model looks at:
- Market returns (broad exposure to equities)
- Size (smaller companies vs. larger ones)
- Value (undervalued vs. growth stocks)
- Profitability (companies with strong vs. weak earnings)
- Investment behavior (conservative vs. aggressive reinvestment)
What’s remarkable is that these factors behave differently across regions. For example, the value factor (buying undervalued stocks) tends to act more independently across markets than the broad indexes themselves. That means when markets are moving together, these factors still offer pockets of opportunity and protection.
The Hidden Power of Currency Diversification
International investing also gives you exposure to other currencies, which often move differently than the U.S. dollar. In May, favorable currency trends amplified international returns. This is an added benefit that most investors don’t even realize they’re getting.
Currency movements can feel like background noise, but over time, they add a valuable layer of diversification, especially when the dollar is weakening or inflation is rising.
Patience with a Purpose
When international stocks lagged the U.S. market for years, it was easy to ask: Why bother with global exposure? May 2025 answered that question decisively. Diversification isn’t about timing markets. No, it’s about being prepared for what’s next, even when we can’t predict what that will be.
Looking Ahead
Global diversification reminds us that strong portfolios are built not on predictions, but on preparation. As markets continue to shift, we remain committed to helping you stay globally balanced, thoughtfully allocated, and aligned with your long-term goals.
Part 2: Rebalancing—The Discipline That Builds Wealth
If diversification is the “what” of portfolio construction, rebalancing is the “how.” And just like diversification, it tends to shine most when things feel uncertain.
With international stocks leading the way in recent months, it might be tempting to lean harder into what’s working. But history and research tell us that discipline beats prediction. That’s where rebalancing comes in.
What Is Rebalancing?
Rebalancing is the process of returning your portfolio to its original target mix. For example, if your goal is a 60/40 split between stocks and bonds, and stocks surge ahead, your portfolio might shift to 70/30. That means more risk than you intended. Rebalancing brings you back to your original strategy.
The beauty of this process is that it quietly encourages you to sell high and buy low. Think of it as trimming recent winners and adding to areas that may be temporarily out of favor.
Rebalancing Adds Value Over Time
According to research, portfolios that rebalance systematically can generate a small but meaningful rebalancing premium. It’s not about market timing, it’s about staying true to a strategy.
Consider this: a 60/40 portfolio left untouched from 2003 to 2022 would have become roughly 80/20 by the end, dramatically increasing risk without intention. That’s not evolution—it’s drift. (Wellington Management Study, 2023)
How Often Should You Rebalance?
The goal and aim for rebalancing is to strike the right balance. It’s frequent enough to stay on course, but not so often that you rack up unnecessary trading costs or taxes.
More importantly, it adds a regular, structured review process. It takes emotion out of the equation; a key advantage in noisy, fast-moving markets like those we saw in May.
Beating the Behavioral Bias
Rebalancing also protects against one of the most common investor traps: performance chasing. It’s natural to want more of what’s working. But long-term success depends more on sticking to the plan than chasing last month’s headlines.
That’s why at Golden Spread Wealth, we view rebalancing as a form of risk management just as much as a return enhancer. It helps ensure your portfolio continues to reflect your values, your goals, and your tolerance for risk and not just the latest market trend.
We’re Here to Guide, Support, and Steady the Ship
In times like these, when markets shift and headlines distract, it helps to have a team in your corner. At Golden Spread Wealth, we do more than manage portfolios. We act as the central hub of your financial strategy—bringing together your CPA, attorney, and investment plan to ensure your wealth is:
- Protected from unnecessary risk
- Minimized for tax exposure
- Positioned for future generations
A successful wealth strategy isn't just about chasing returns. It's about staying grounded. That’s why our role isn’t just to invest; our aim is to help you stay focused, make informed decisions, and keep the bigger picture in view.
No matter what the markets are doing, you don’t have to navigate them alone. We're here to provide the feedback loop and perspective you need to move forward with confidence.
Disclosure:
Golden Spread Wealth is a Registered Investment Advisor (RIA) registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. The information in this newsletter is intended for informational purposes only and should not be considered investment, tax, or legal advice. Past performance is not indicative of future results. All investing involves risk, including the potential loss of principal. Always consult with a qualified financial advisor before making any investment decisions.
Sources
Yahoo Finance. "Stock market today: S&P 500 logs best May since 1990 as Nvidia leads tech higher." May 31, 2025.
CNBC. "S&P 500 is flat to close out a 6% May gain." May 31, 2025.
Advisor Perspectives. "The S&P 500 closed May with a monthly gain of 6.2%, the largest since November 2023." May 2025.
Visual Capitalist. "Ranked: The Best and Worst Performing Stock Markets in 2025." May 13, 2025.
MarketWatch. "Poland's WIG index achieved a 30.5% increase so far in 2025." 2025.
Trading Economics. "Warsaw Stock Exchange WIG Index increased 22074 points or 27.74% since the beginning of 2025." 2025.
Under30CEO. "Global equities have returned 7.2%, outpacing the S&P 500's 4.5% gain as of February 19." February 2025.
Confluence Investment Management. "European equities delivered an impressive return of 6.4% in January." January 2025.
Vienna Stock Exchange. "EUR 18.5 billion in Q1 2025, a substantial 30% increase." Q1 2025.
Athens Stock Exchange. "More than +3.7% in the first weeks of 2025." Early 2025.
The Economist. "Europe's Stoxx 600 index has risen by 16% in 2025, compared with 3% for the MSCI World." 2025.
AGF Investments. "European equities have played second fiddle to the U.S. for years now with the S&P 500 forward P/E at 22 compared to 13 for the STOXX Europe 600, representing a 40% discount – a multi-decade low for European stocks' comparative valuation." 2025.