Why Global Country ETFs Outperformed the Magnificent 7 in 2025

In 2025, a seismic shift in global markets saw global country ETFs outperform the so-called "Magnificent 7" tech stocks, a group that once seemed invincible. While the Magnificent 7-Alphabet, Apple, Amazon, Microsoft, Meta, Nvidia, and Tesla-dominated headlines, their returns were uneven, and their concentrated influence created distortions in broader indices. Meanwhile, ETFs tracking emerging and developed markets outside the U.S. delivered superior returns, driven by diversification benefits and a confluence of tailwinds in emerging economies. This divergence underscores a critical lesson for investors: spreading risk across geographies and sectors can unlock opportunities that even the most dominant stocks cannot match.

The Magnificent 7's Mixed Performance

The Magnificent 7's 2025 performance was marked by stark contrasts. Alphabet surged 66%, fueled by AI-driven advertising revenue and cloud computing growth. However, this outperformance was an outlier within the group. Apple and Amazon lagged due to the ripple effects of high U.S. tariffs on their global supply chains, which dampened profit margins and consumer demand. Microsoft and Nvidia, while resilient, faced regulatory scrutiny and market saturation in key segments.

The group's dominance also skewed global indices. For instance, the Bloomberg 500 index appeared less dynamic when excluding the Magnificent 7, revealing how their outsized market capitalizations distorted perceptions of broader market health. This concentration risk became a liability for investors relying solely on U.S. tech megacaps, as geopolitical and economic shifts exposed vulnerabilities in their business models.

Global Country ETFs: A Diversified Alternative

In contrast, global country ETFs offered a more balanced approach. Eight ETFs tracked stocks in countries like South Korea, Spain, and Greece, delivering returns exceeding Alphabet's 66% gain. The iShares MSCI South Korea ETF (EWY), for example, surged 87% in 2025, driven by AI-related chipmakers such as Samsung and SK Hynix. Similarly, ETFs focused on commodity-driven economies like South Africa and Peru benefited from rising demand for precious and industrial metals, reflecting a broader trend of global economic rebalancing.

This outperformance was not accidental. By diversifying across sectors and geographies, these ETFs mitigated risks tied to U.S. macroeconomic policies and regulatory pressures. For instance, while U.S. tariffs hurt Apple and Amazon, ETFs in countries with less exposure to trade tensions-such as India and Southeast Asia-thrived. India's ETFs, in particular, capitalized on the country's demographic dividend, economic reforms, and a surge in technology adoption.

Emerging Market Tailwinds: The Hidden Catalyst

The 2025 outperformance of global country ETFs was further amplified by a perfect storm of emerging market tailwinds. First, the EM-DM (emerging vs. developed market) growth gap widened to 2.5%, with emerging market central banks easing rates to stimulate growth. MSCI EM earnings growth accelerated to 17% in 2025, up from 10% in 2024, as stimulus measures in China and de-escalating U.S.-China trade tensions boosted investor sentiment.

Second, U.S. dollar weakness-a 9% decline year-to-date-made emerging market assets more attractive to foreign investors. The Federal Reserve's rate-cutting cycle began in mid-2025, further reducing the cost of capital for emerging economies, enabling them to fund growth initiatives without triggering currency crises.

Third, valuations in emerging markets became increasingly compelling. The MSCI EM index traded at 12.4x earnings in 2025, near its 25-year average, offering a discount to developed market counterparts. This, combined with higher yields in emerging market bonds, attracted income-focused investors seeking diversification.

Regional Growth Trends Beyond the Giants

While China, India, and Argentina dominated headlines, other regions also contributed to the ETF outperformance. Southeast Asia's internet economy, projected to reach $600 billion by 2030, drove growth in digital infrastructure and e-commerce. In Africa, fintech innovations in Nigeria, Kenya, and South Africa expanded financial inclusion, creating new markets for mobile payment systems. Latin America, meanwhile, saw increased investment in manufacturing and logistics in Mexico and Colombia, bolstered by political stability and strategic trade agreements.

Sustainability also played a role. Countries like Brazil and India prioritized renewable energy and green infrastructure, aligning with global decarbonization trends and attracting ESG-focused capital. These developments highlighted the adaptability of emerging markets in addressing both local and global challenges.

Implications for Investors

The 2025 performance of global country ETFs offers a blueprint for future investing. By diversifying beyond the Magnificent 7, investors can access growth in sectors and regions that U.S. tech stocks cannot replicate. Emerging markets, in particular, present a compelling case for long-term outperformance, provided investors adopt a strategic approach to risk management.

Analysts from Ninety One and JPMorgan have already noted that the momentum seen in 2025 could extend into 2026. For investors, this suggests that global country ETFs-especially those targeting high-growth emerging markets-will remain a cornerstone of resilient, diversified portfolios.