US stock funds average +14.6% in 2025, third year in a row above 10%

U.S. stock funds closed 2025 with an average gain of 14.6%, the third straight year above the 10% line.The numbers came from LSEG and covered returns through December 24.

The fourth quarter alone added 2.5%, even as doubts around artificial intelligence kept showing up in market chatter. Many investors stayed skeptical about what AI could really deliver. Most still stayed invested.

The run keeps cooling but refuses to break. Returns hit 21% in 2023, eased to 17.4% in 2024, then slowed again this year. The direction stayed the same. Up. The pace changed. Slower.

The Mutual-Fund Yardsticks data shows three strong years back to back. Each year pulled in less than the one before it. None of them slipped below double digits.

AI-led rallies narrowed after tariffs shook markets

“The biggest surprise in 2025 was how dominant the AI stocks were,” said Ellen Hazen, market strategist at F.L. Putnam Investment Management in Lynnfield, Massachusetts. “Everyone thought the AI trade was over, that the Mag 7 were done, and the market broadening that everyone was eagerly looking forward to was going to happen.”

That idea did not survive April.President Donald Trump, the sitting president in 2025, announced broad tariffs during what he called Liberation Day.

After that point, leadership tightened again. “The market dramatically narrowed again,” Hazen said. “And since that day the Mag 7 has trounced the rest of the market again.”

The gains stayed tied to a small group of names linked to artificial intelligence. The expected spread into other sectors did not arrive. Hazen said the outlook for 2026 remains open.

“There are more yellow flags appearing than disappearing for the AI trade, but they do not yet reach the level that makes me bearish on the markets or bearish on AI,” she said. She added that earnings growth outside technology could still widen returns if it shows up.

Global funds, bonds, and flows reshaped investor behavior

International stock funds outperformed U.S. peers in 2025. These funds posted a 29.8% gain, far above last year’s 4.8% rise. Early tariff turmoil helped drive that result. While U.S. markets pushed to records, investors sent fresh money elsewhere.

The Federal Reserve cut interest rates three times during the year. Bond funds held steady through the moves. Funds focused on investment-grade debt rose 7.3% for the year. The fourth quarter added 1.1% to that total. These funds became a preferred place for new cash.

Fund flows showed a clear split. Investors pulled $391.6 billion from U.S. stock mutual funds and ETFs in 2025, based on Investment Company Institute estimates. Most of that came in July, when tariff fears peaked. Those worries faded later in the year, but the money did not rush back.

At the same time, $102.1 billion flowed into international stock funds. Bond funds attracted $669.4 billion in net inflows as investors leaned toward stability.

Large-cap managers dominated the latest Winners’ Circle rankings of actively managed U.S. stock funds. These managers focused on artificial-intelligence names and other technology holdings.

The top spot went to Permanent Portfolio Aggressive Growth Portfolio (PAGRX), a $376.2 million fund that returned 36.9% over the past 12 months, according to Morningstar Direct. Second place went to PrimeCap Odyssey Growth Fund (POGRX) with a 33% gain.

Four funds from the Alger group landed in the top ten, including Alger Capital Appreciation Portfolio (ALVOX) at 32.9%.

Across the full survey, 1,185 funds with at least $50 million in assets posted an average total return of 11.5% for the year, keeping the long run of positive stock results intact.

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