Stock Funds Hold a 11% Gain for 2025 So Far
If the market’s rally holds, it’ll be a third straight year of double-digit gains. Plus: A Financial Flashback to 20 years ago, the Refco commodities debacle.
Is it time for fund investors to do a home-run trot yet?
With stock indexes smashing records, the average U.S.-stock fund rose 7.2% in the third quarter, to push the year-to-date gain to nearly 11%, according to LSEG data. Those are gaudy numbers for mutual funds and exchange-traded funds compared with earlier in the year, when it looked as if the stock market would register a poor year.
In fact, stock funds are now on pace to rise in double digits for three straight years, even though the 2025 performance won’t likely match last year’s 17.4% gain or the previous year’s 21%.
Stocks have shaken off the tariff-induced negativity of earlier in the year, and interest rates are declining.
“Stocks defied the typical September weakness,” says Adam Turnquist, chief technical strategist for LPL Financial. “Earnings momentum, a good-enough economy, the resumption of the rate-cutting cycle and continued signs of runway for the AI secular growth theme have been the primary catalysts.”
But some analysts caution that, like in baseball, those homers for stock investors could start turning into singles, or outs. Stock rallies that might be stretched, like this one, have a tendency to fizzle.
“October is known to be a volatile month for stocks, and with elevated valuations and stocks at record highs, investors should always expect pullbacks,” says Charlie Amato, chairman and co-founder of SWBC. Still, he adds, ”The backdrop for stocks remains strong, with growing corporate profits, the prospect for additional Federal Reserve rate cuts, and fading tariff uncertainty.”
Among fund categories, funds that hold stocks of large-capitalization “growth” stocks like Nvidia and Facebook parent Meta Platforms are strong, with the category up 15.2% for the year so far, including the third quarter’s 7.7% advance. Their counterparts, large-cap “value” funds—focusing on stocks believed to be trading below the companies’ fundamentals—have also stirred, and are up 12.9% so far in 2025.
International-stock funds rose 6.3% in the third quarter, to push their year-to-date advance to 17%. “While stock valuations are expensive, U.S. stocks have still underperformed overseas stocks so far in 2025 and have some catching up to do,” says Amato.
Bond markets continue to be heated, as investors buy corporate debt. Bond funds that are focused on investment-grade debt (the most common type of fixed-income fund) were up 0.8% in the quarter, and are now up 3.8% for 2025 so far.
Fund flows
Bond funds and international-stock funds drew cash in the third quarter, as some wary investors pared their exposure to U.S.-stock funds—particularly in July, when there were intense concerns over tariffs, a market worry that has since abated.
Investors sent a net $27.8 billion to international-stock mutual funds and ETFs in the third quarter, based on Investment Company Institute estimates, and $213.8 billion to bond funds.
But flows to U.S.-stock funds were a negative $345.6 billion for the quarter, including $299.5 billion pulled in July.
Winners’ Circle
Managers of large-cap growth funds again took most of the top positions in our latest Winners’ Circle review of the top-performing actively managed U.S.-stock mutual funds.
Taking the crown was Morgan Stanley Institutional Growth Portfolio (MSEQX), with a 72.4% total return for the past 12 months, based on Morningstar Direct data. Morgan Stanley Insight Fund (CPODX) was a close runner-up, with a 70.2% return.
These and other funds in the large-cap growth category benefited from the interest in artificial-intelligence companies and other tech stocks.
In the No. 3 position was Transamerica Capital Growth (IALAX), with a 66.4% return. The survey included 1,189 funds, which together posted an average 12-month return of 10.6%.
Few people outside Wall Street pay too much attention to commodities traders. But on Oct. 10, 2005, one of the world’s largest commodities brokers, Refco, collapsed. It was shocking news about a seemingly ever-present fixture in the commodities world.
“It was kind of like a smaller version of the Enron collapse,” says Art Hogan, chief market strategist at B Riley Wealth Management. It came on the heels of the 2002 Sarbanes–Oxley Act, a bill designed to prevent accounting fraud.
The first news of the Refco collapse began when its CEO, Phillip Bennett, stepped down, following the firm’s discovery that another company controlled by Bennett owed Refco $430 million. The debt was described to investors as “receivables,” aka money owed to Refco. There was no indication in filings that Bennett’s company owed the cash.
Following the discovery of the debt, Refco advised that financial statements from 2002 onward shouldn’t be relied upon. Refco stated that Bennett had repaid the debt, and the company had notified authorities. Refco stock dropped 45% to $15.60 a share in a single day, on the news.
“The decision for Refco to go public in August of 2005 was what opened a Pandora’s box,” Hogan says. “Bennett was able to get around all the bankers and auditors.” The IPO raised $583 million but was full of accounting malfeasance.
Refco filed for bankruptcy in October 2005. Bennett was sentenced to 16 years in prison in 2008.
“Despite the best of intentions, I made an unacceptable and appalling error,” Bennett said at sentencing. He was released in 2020, a judge calling him a “model prisoner.”