2025 Market Recap: Top Performers, AI Shocks & What’s Coming in 2026

Hello and welcome back to what is the last of the Markets Inspired Market Maker podcast episodes of 2025. And at this time of year, what we normally do is we bring up the heat map of the S&P 500 and we'll have a look at some of the top performing sectors in the US equity market. So namely, we are going to talk a little bit today about technology. We're going to talk about financials, defensives, healthcare, and some of the themes and rationale of why they've had a decent and then also look at some of the other asset classes. So not to mention fixed income, forex, commodities, we'll touch on. And then importantly, how we set up for next year. What are the core consensus views and what could derail those views and be potential risks? Or in fact, a cheeky black swan might appear at the end of the episode. But Piers, how are you?

Yes. Very good. Looking forward to a bit of time off next week. Bit of Crimbo action.

So I'll let the audience guess, where do we think Piers Curran is going for Christmas? What do we reckon? Hawaii, or what are we thinking?

I'll let the listeners guess.

Could be Tooting. Or it could be Hawaii.

I don't know.

He's a man of many tastes.

But I wanna, I wanna give a quick shout out before we get stuck in. Joshua Betts. What a legend. We did an episode, well, it's actually a few weeks back now, um, about Electronic Arts, uh, the computer game maker and how, uh, you know, big, big kind of leveraged buyout, um, kind of PE deal. Well, biggest ever PE deal. On record if it lands. And that'll be perhaps a story for the first part of 2026. But we were talking about that as a deal. And then I confessed that part of my youth was wasted. Well, was it wasted? Well, was spent playing Tiger Woods Golf on the Xbox, which was one of the EA Sports games. And yeah, then, so Joshua Betts, he then Anthony Cheung was moving house. I mean, and look, he'd done some Amplify stuff, he'd done some Sims. We'd helped him along his way, like trying to find his path in asset management. And he's just flying now and it's awesome to see. But he was kind of moving house like you do and like you're clearing out your boxes in the attic and he found Tiger Woods Golf, the game, like the physical, we used to have physical games back then that you plugged into a computer console, old school. Anyway, he posted it to me with a nice little letter. Actually, if you want to read it, go onto my LinkedIn and I did a post on it earlier this week where I kind of show his letter. Anyway, yeah, such a, such a nice touch. And yeah, really made my year, actually, that letter.

Small gestures, eh? It goes a long way.

Yeah, I just need to find a console now that can still play this thing.

Your best bet, I reckon. What console do you need?

I think it's a, I think I need an Xbox, like, but like Xbox version 1.

I've got an Xbox version 1 in a loft.

There you go.

Literally have it in the loft and I was going to take it to the charity shop.

Well, that's my Christmas present right there.

Okay. So here's a guy who has high demand and I have what he needs.

So.

Yeah, that Xbox, £500. No deal.

I'll go on eBay. Thanks. We'll sort that out.

All right, well look, let's dive into this. And yeah, for anyone who's not familiar with a heat map, it's quite a good visual way of looking at an equity market. I remember sitting on the desk, and when you do have access to a Bloomberg terminal, it's often how you would look at the marketplace when you're looking at it from a what we used to be, which is kind of macro guys, if you like, when we're not single stock equity traders, but you definitely get a vibe of market conditions, or when we were operating in the intraday markets, definitely sentiment. You get signals off of correlations from patterns across different asset classes, but you also see that layered down into how a different areas or corners of the S&P 500 performing. And so the heat map then looking at on the year to date, there are some definite clear areas of green, let's say. And the way a heat map generally works is that the bigger the squares are, or the larger the companies, and obviously tech stocks, these mega-cap tech stocks really dominate the space. So why don't we start there, Piers, before we go into the rest. So Yeah. What's the general theme then? I think people talk about, we have indeed talked about this a lot, but main takeaways from the tech space for this year, 2025.

Yeah. I mean, main takeaways are the big dominant giants, the kind of the hyperscalers have had a phenomenal year and they're such massive stocks, like from a market cap point of view. That they have a very dominant outsized influence on how indices perform. So like if you're looking at the S&P 500, look, we're, what are we, a couple of weeks off year end and we are 15% up on the year. Yeah. So obviously that means, you know, you might immediately think, okay, well that means obviously most stocks in the index have gone up and on average by 15%. But I mean, yes, that is a general overview, but kind of diving in, it's your big, big, big guns that have actually gone up way more than, well, have they gone up more than 15%? Actually, here's the question. So, I mean, I think Nvidia again is obviously, you know, what's happened in 2025, they became the biggest company on the planet. They broke the $4 trillion ceiling. And so, you know, clearly, you know, you can't say that they're not one of the, you know, the stories of 2025 as they were in 2024, as they were in 2023. But I think they're going to, well, right now as of today, they're 27% up on the year. So beating that 15% index average. But then if you look around, it's actually out of the big, big, big guns. It's actually Google that have performed the best. They're up 57% year to date. So they're the outperformers. You then look at Microsoft, which is rough, near average. So they're up 13%. Then you've got Meta up 11%, Apple up 8%, and actually Amazon rounding off the year about flat, pretty much zero, 0.8%. So you get quite a lot of divergence obviously in amongst the Mag Seven. I think that's been a real feature of this year, 2025. The Mag Seven are no longer, it's no longer a thing. That was a 2024 story when those stocks were—

Do we drop Mag7 then next year?

Yeah.

Let's just drop it.

That's gone. That's the last time I'm ever going to say Mag7. It's just not a thing anymore. They've broken up.

Okay. Can I take an option out that that's not the case?

Okay. We'll see. But they've broken up. It's like, you know, it's like I was going to say take that, but that's a reference that Well, you gotta be of a certain age to, maybe One Direction is a better analogy for the supergroup breakup. So yeah, and look, that's, you know, why has that happened? You know, I think the AI revolution has rolled on another notch, right? And I think this year has been different where it's not just, oh my God, this is amazing. No one quite understands it. Let's just buy everything that has anything to do with it. That was kind of 2023, 2024. Now it's a bit more nuanced and right, obviously there's huge kind of capital outlay going on. And if you think about companies like Apple, so they've underperformed 8.5%. That's because they're just not in the race. They are not in the AI race. Now, is that going to turn out to be genius in a couple of years' time? Who knows? And this is one of the beauties of this AI story that, you know, Fine. There's a narrative that it's going to be, this is the secular shift of this decade, two decades, right? It's a bit like the internet coming along back at the turn of the century. So they're just not in the race. Now we'll see because the other big tech firms are, and they're spending like it's going out of fashion. And actually I've got some stats here in terms of capital expenditures from the, what we call the hyperscalers. So Alphabet, that's Google, Amazon, Meta, Microsoft. I've got Oracle in there as well, right? As one of these players who's trying to compete in this race. You notice NVIDIA's not on that list. That's because NVIDIA, they're the beneficiary of this race because all these hyperscalers need data centers and they need GPUs, and it's NVIDIA that are providing that infrastructure. So NVIDIA's the winner out of all of this. The hyperscalers are trying to build out compute power so that they can win ultimately the AI game, the AI race, which is basically, you know, creating apps and software that can leverage AI to help companies and individuals all around the planet, you know, do things better. It can kind of drive automated vehicles. You know, if you want Elon Musk to kind of get his Optimus Primes out and get that robotics revolution going, all this AI stuff is going to feed that. But these hyperscalers, right, in terms of their capital expenditure, I think right top of the list at the moment is actually, is Amazon in terms of the dollars spent. So we're looking at $120 billion, okay, for the year. And then you've got kind of Alphabet and you've got Microsoft clocking in at around about for the year, around about sort of $70 to $80 billion. Meta are trying to keep up. They're around about $60 billion. And then Oracle have joined the race a little late, but they're around about, well, not just under $40 billion in terms of money spent, right? And so this is the race. But actually, if you just look at it like dollars spent, it doesn't quite tell the story because you've gotta think, well, how big is the company? What are their revenues? What are their cash flows? 'Cause they're not all the same. And so actually when you kind of split it out and have a look at capital expenditures rolling 12 months, then, and think about the amount of, you know, relative to what they were spending before the AI revolution, then actually you've got the likes of Alphabet and Microsoft who are looking pretty solid even though they're spend is really ramping, their cash flows are ramping. So actually from a free cash flow point of view, they're about steady and flat, even though they've just tripled. So Alphabet have tripled their CapEx spend pre-AI revolution to now, they've tripled it, and yet their free cash flow's flat, which just speaks to the phenomenal sort of cash-spewing machine that is their business of search, right? So Microsoft and Alphabet are looking really nice. Then you start to think, you go down the list. So Meta, they've, again, they've kind of tripled their spend as well, but they had less, got less cash flow and their free cash flow is actually starting to trend down. One story for 2026. May be, are players going to start stumbling in this race and are you going to start to see this big CapEx spend really show up meaningfully on their balance sheet? Is it going to show up in their kind of EBITDA figures negatively? And so I think the slightly smaller guys like Meta might stumble a little bit, but the real one to look out for is Oracle. And it's already happened because Oracle's share price has been absolutely savaged in the last few weeks. And that's because investors are like, oh, whoa, hang on a minute. You want to play in this game? They think so. If you think about Alphabet tripling their CapEx, Oracle are 11x, they're spending 11 times more than they were pre-ChatGPT, let's say. And this is now proper, their free cash flows are trending down. They are eating into their cash reserves to try and keep up with this race. The problem is it's not sustainable. And that's ultimately the unknown. You know, where's the, where's the gold at the end of this AI kind of rainbow? And we don't know if when it comes, that's the big unknown. When are, when's all this investment going to actually translate into revenues to make it worth the spend? The problem for Oracle, they don't have unlimited time. Alphabet and Microsoft, well, yeah, I mean, unlimited is a strong word, but their free cash flows are actually nice and solid. So I think we'll probably see that race evolve next year. And it all kind of, look, the whole of this thing, the whole of 2026 rides on AI. It rides on, that's it. It's all, everyone's all in. And I mean the whole planet basically from a, certainly from a kind of stock market performance point of view. And so as long as that carries on as a strong growth story, then fine, Oracle might get away with it. But yeah, there's some winners and losers in that race, and we're starting to see the share prices of the players diverge as people start to pay more attention to that. Yeah.

And within that kind of race, there's Yeah, there are winners and losers. And actually thinking about the second, third order connections to the hyperscalers, you know, one that was on, one that was flashing green like no tomorrow this year has been Micron. They were up when I last checked, I think they're up 170% on the year. I mean, you're talking about Google's absolutely smashed it. but these guys are up 100% more than that in terms of their price change. And that immediately, I mean, I don't follow these smaller stocks a great deal, but I was kind of interested and it was this acronym HBM. And I was like, when I was reading that, I was like, okay, am I assuming that people are supposed to know what that is outside of tech people? But what that is, is high bandwidth memory. And the context here is that traditional memory chips aren't fast enough for the new AI supercomputers. So you need these HBMs, and Micron has HBM3E chips, and lo and behold, they're being used by NVIDIA's latest Blackwell AI GPUs. So that was the kind of validation point, if you like, that really triggered that price move. And What happened and what really lifted their share price was that they apparently sold out of those for the entirety of 2024 and most of the early part of this year. So just absolutely pure pricing power being demonstrated there. And so yeah, really interested. But like you said though, so much is being hung on the hat of AI because Micron, like Oracle, obviously pivoting aggressively to try and make hay while the sun shines. So in their case, moving away from those low margin consumer storage. So you remember old school cameras? I mean, people, a lot of people probably don't because they use their phones, but in the day of the digital camera, you had an SD card in your camera, right? But there's no point being in that business anymore because you want to make high margin data center infrastructure. And that's definitely within that kind of toolbox, if you like. So yeah, they've been a standout. Another one I wanted to shout out.

Before you move on, sorry, I've got a bit of an anecdote here about Micron.

Oh yeah.

Because I mean, I stand here at the end of the year and I'm patting myself on the back because this is one of my, this was one of my key trades this year. Micron.

Okay.

It's never as easy as, oh my God, they're up. What did you say?

70%.

70%. Oh, you know, you're like, oh, damn it, missed that one. If you did miss it, well, I came in on that trade at the start of 2025. Okay. April, the start of April, that stock dumped 30% down off the back of the Donald Trump, you know, What was the day called again? I forget the name of it. Liberation. Liberation Day. So, 'cause that stock was trading around about $100. Okay. And it got, it actually went down, it was more than 30%. Sorry. It got down, it bottomed at $65. That was a painful ride. Now normally I would cut these trades, I'd have some kind of stop loss scenario, but I was almost like so stubbornly convinced about my sort of rationale for the trade and fine, this Donald Trump thing. I mean, I always, I'm generally on the side of the fence that the media tend to sensationalize everything to do with Donald. And so I always believe that there's going to be a market reaction that's probably outsized compared to what the reality is. Anyway, I stuck in the trade, got back to flat by kind of end of May. So by the end of May, that's 5 months of the year This thing's done zero. You are zero on the year having at one point been down 30% or more, right? Then it came good and actually it really started to tear when we got into September actually is when it really started to ramp. So fine, you sit here at the end of the year, oh, it's up 170%. What an amazing trade. But the best part of my trade was staying in it actually, because I would say most people probably got Got scared out.

That's why they call him the Iceman. Yeah. And the other one actually that talking about that timeline is quite interesting because there was another stock that was a bit of a dog for most of the year, and that was Intel, which was literally on the cusp of being no more. It felt like not so long ago. But they've had an incredible turnaround. I mean, I was just looking on the chart. Intel were trading sub-$20 back in August. And then earlier this month they were trading $44. So they've had a monster comeback, which was surprising. But a couple of things there was about their— basically they've created this new process and Apple have been sniffing around about potential future entry-level chips for iPads and lower-end MacBooks, and that just sent it soaring. And then also, so from a business strategy perspective, Intel sold a majority stake, 51%, in its programmable chip unit, Altera. That was one of those big deals that we saw earlier this year to private equity Silver Lake for $4.5 billion. So Nothing like a little lifeline, bit of cash injection, and then almost the world's biggest client coming in with potentially a whole stream of orders. But the other final part with tech was the kind of, so we've talked about hardware and there's probably, you know, that's obviously been the story on the software side. What's been really interesting is this divergence, that divergence being, say, Palantir up 150%. So heavily rewarding these kind of AI data integration type names. Losers, SaaS. Yeah. Salesforce, ServiceNow, the beasts in the SaaS market, they're down what, 25% apiece?

Yeah.

So yeah, that's been quite interesting. Yeah.

Your big, your big, I want to say all like pre AI SaaS platforms, Salesforce being the best example, and those platforms not evolving along with the AI story. Yeah, they've been killed. Yeah. What did you say? So Salesforce down 24% this year because ultimately their business model is obsolete in a way. But the issue is You know, a platform like that is so integrated and embedded into a business's functioning on a day-to-day basis that it is sticky stuff. It's hard to untangle yourself as a company from that type of, you know, SaaS-type platform. But it's happening and, you know, companies, you know, are finding AI kind of solutions to kind of, yeah, just do it better, quicker, cheaper. And so Salesforce down 24% is a really good example of the losers, the losers side of the equation here in the AI game.

Alright, well look, plenty to get through. So let's move to financials. And I know in financials there's kind of probably 5 themes. All of which are quite macro-orientated, which I know is definitely in your wheelhouse. So what's the story there?

Well, let's start yield curve. Yield curve steepener has been a real feature of the year.

I love your face whenever you say that. I can just imagine you going into a bar, going up to a girl and saying yield curve steepener, and then her walking off.

It's what I did for a living. All right, we traded the curve. Yeah, it doesn't work so well as a chat-up line, I'll give you that. But look, it's steepened like a beast this year, right? And this is just about, A, on the one hand, the Fed started cutting. So you'll remember, I mean, this feels like such an old story now, but you'll remember at the end of 2024, the Fed cut, sorry, yeah, the end of 2024, the Fed cut rates a couple of times, right? And then they stopped. And we kind of went into the Donald Trump year. Donald Trump year, meaning he entered into the White House and started his thing. And then there was a lot of uncertainty around tariffs and right, would tariffs be inflationary? Would tariffs impact economic activity? All this uncertainty. And so the Fed was like, we got no visibility here. Powell famously said, you know, when you're driving in the fog, you hit the brake. Which is what they did. So they stopped cutting rates. Okay. But now here we are, back end of the year, and they started cutting again. Okay. Now what does that mean for the yield curve? It means that the short end of the yield curve, that's your, let's just say a 2-year duration. The yield came down as the Fed was cutting rates and we're expecting more rates to come, right? That's the short end. The long end, then that's more about the inflationary situation. And inflation has, it's stayed stubbornly high. And you could say there's other stuff going on, on the long end of the curve with regards to the US running a massive deficit. And so, you know, lots of supply of US bonds coming to the market as the government issue more bonds and sell more bonds. So this is driving, keeping prices low because supply's high. So the long end has seen the yield, yields stay high relatively or tick a little bit higher. So you've had this swing up. Okay. Why am I telling you all of this related to financials? The banks, a steepening yield curve is perfect for their kind of loan books because they typically borrow on the short term. That's us consumers. Paying deposits into our account. They pay us for that, a super small percentage, right? But they're borrowing on the short term and short-term rates have dropped, and then they're lending on the long term. Think mortgages. And so the divergence between short-term rates and long-term rates has widened, and that's your bank's profit margin if they're in the business of lending money, which most of these big banks are. So yeah, a steepening yield curve. Because of interest rate cuts, but inflation staying high has really fed nicely into more profits on their loan book.

And then, yeah, the, the, what about the actual economy? So this idea about a soft landing. Yes. So how, how does that complement what you've described?

Yeah, so I would say that from an economic point of view, again, mainly because of Trump, There was a lot of uncertainty at the start of the year. What's gonna happen with all this aggressive tariff talk? Are we gonna have a recession as a result? Well, now we know the answer at the end of the year is no, definitely not. And actually, never mind a recession, the economy's actually looking pretty solid.

Okay?

So when the economy's doing well, we tend to have an appetite to borrow money. So this is talking about loan demand, right? It's all very well and good, the banks having this profit margin because of the yield curve when they're lending money. But does anyone want to borrow? So that's the demand side of the loan book, and that's been really strong because the economy hasn't crashed and has actually stayed solid. So strong demand for loans, nice profit margin on these loan books because of the yield curve steepening. So you got like banks like good old-fashioned Wells Fargo, big US bank that's kind of more on that sort of lending book side of the kind of banking sort of remit. And they're up 32% this year predominantly because of that.

And then some of the pure play investment banks, so your GS or MS, JP, so on. I saw GS.

Morgan Stanley's. Yeah.

Yeah.

Well, they're benefiting from two things. Number one, deal flow. And deals are back, baby. The M&A space, certainly, again, back end of the year as interest rates started to get cut, we're starting to see a real revival in the M&A space and in the IPO space. And look, these big banks, these big investment banks, I should say, earn huge fees off these deals. And so that's really come roaring back. Combine that with market volatility, So Trump again has spiced things up, you know, Liberation Day and then the crazy recovery that we've seen from that since. This is trade volumes being high and these investment banks help hedge funds and the like facilitate their trades and they earn money from that trade flow. And so trade flow high, you know, trading floors revenues, record levels. Combined with the M&A deal flow picking up again, perfect sweet spot. Both sides of the investment bank really delivering. Goldman's up 59%, their share price this year. Morgan Stanley up 43%. Yeah, big winners.

Yeah. And all of this in the kind of shadow of the administration who obviously lots of hopes on the deregulation side of things to unlock some of this capital. Less onerous on capital requirements to hold so they can start to be more free to lend and so forth. And conditions, as you described, seem to suit that. So earning more on every loan margins, writing more loans volume, collecting huge fees, M&A, IBD. And then we were talking about what the largest IPOs about to hit the ECM divisions are looking pretty tasty going forward. And then yeah, a bit of, little bit of potential cockroach scenario with some private credit. But otherwise, if you would leave credit quality strong for some of the things that you mentioned, or broadly speaking, well, and the, the, the wealth management arms of these banks have also smashed it.

Mm-hmm. Because generally that's about assets under management and earning fees off the value of the assets that you manage. And when generally global stock markets go up, which they have, then we're, hey, our fees increase. So the wealth management arms have really delivered. It's literally been every part of the bank has smashed it.

Right. And you know, that kind of sums up why then when you are all in tech and everyone's been talking AI bubble and everyone's a little bit fearful of it getting a bit, maybe not the endgame, but due to a pullback. Well then, is that a value trade that's helped the banks as well from a rotation allocation?

Definitely. There's been a rotation out of that. As I said, that I'm going to, I said I was never going to say it again, but I'm going to say it again.

I got paid out in 30 minutes.

That's the best trade ever.

That's my trade of 2025 right there.

The MAG7 trade of 2024. Ended where some of the elements of the Mag 7 kind of people booked profits and came out of those trades. Well, where are you going to put your money? Well, these other sectors were really underloved, right? And the financials were definitely one of them. We'll come on to healthcare in a second. They were definitely another, right? And so some of the money's got pumped into those more kind of value plays and they've become really good. And as just a very brief aside, 'cause all we've talked is US here. Very brief aside is where has some of that money gone? It's actually gone to other parts of the world. So if you look at stock market performance in 2026, yes, S&P's up 15%, but you know what? It's not that good relative to some of the rest of the planet. And I'm looking down the list here. Well, here's a pop quiz for you. Like outta the big economies, let's say, What's the best performing stock market this year?

Italy.

You can't Google that.

I'm pressing my mute button. Thank you very much.

Okay. All right. I saw some action towards the keyboard there. Italy is obviously very strong. 29%. Well, let's round it 30% up. Okay. It's actually on my list. Yeah, they're, they're like in fourth place. You're very close though, geographically.

Okay. Okay. So, so, uh, I'm gonna put you out of the mix geographically. Okay. Spain.

Spain, baby. 47%. Like their stock index is up 47%.

It's so funny, isn't it? Like the media is so obsessive about US stocks. There's always US stocks because, and particularly that's compounded because of the AI conversation. And then behind the scenes, good old-fashioned Spain.

Yeah. Well, look, I'm going to rattle off the list here. Spain, 47% up. Who's next? You got Saudi Arabia, they're up 36%. You've got Brazil are up 31%. You've got Italy, as we said, up 30%. You got Germany up 21%. You've got Japan, they're up 23%. I mean, even the FTSE 100 is up more than the S&P, which has gotta be the first time this century. Maybe you might have to fact-check that. Is this the first year this century that the FTSE 100 has beaten the S&P? 'Cause that's up 20%. And the list goes on, right? I mean, so most of the rest of the world has outperformed the US this year. Which is extraordinarily unusual. So that's been a real feat. I wanted to just do a slight aside because that's been a real, real key feature of 2025. All right. You want to switch back to US? Yes. Let's do the next sector.

Yeah. Let's finish off these sectors and then talk some different asset classes. So healthcare, there was two interesting things that I'd pulled out of that looking, you know, in a bit of research. One was quite a good phrase actually that I saw someone, some analyst mention, and they were saying that people are going to the doctors again. They're getting knee replacements and heart valves and surgeries. And it was so in a sense then that's good for device makers, hardware revenue up, bad for insurers because they have to pay bills. I guess that's one way of looking at it. But what that meant was that Medtronic Boston Scientific, that's a name you might have heard of. They saw some decent gains. Whereas UnitedHealth and CVS Humana are quite the opposite in that respect. So yeah, I thought that was interesting. And then the other theme was the kind of have and have-nots. And I know you and I've had a few M&A-inspired conversations in the healthcare scene, which has been a big benefactor of like consolidation within the of the sector. But here you had a rising tide is not lifting all boats, and that's because the unique thing about pharma stocks is a lot of this is about investors rewarding growth and pipelines. So Eli Lilly's weight loss dominance, J&J's medtech boom, and then punishing patent cliffs is what they call it. And this is why there is such demand for M&A because you have Pfizer and Merck of the world where they only own these patents for a period of time and then what next? And if they can't develop the next thing in-house, well, they've got to acquire something to then keep that momentum going. And so that's been super interesting as well in terms of how that's played out. Eli Lilly up 36%, J&J up 44%, Pfizer, Merck flat. I mean, that's just, that's a big divergence.

Yeah. And that's it. This patent cliff thing. 'Cause look, it takes years to develop these drugs, right? Through the clinical trials and all the rest of it, and then getting regulatory sign-off. And it's such a— but then if you manage it and it works and you get it to market, well then you get a patent typically for 10 years, right? So that just means you are legally, you are the only one able to sell it. It's just that when the patent expires, then it's free game. Any other company can come in and replicate your drug and sell that as well. And so that's why you've always gotta be working on the pipeline to have new drugs coming through to make up for the fact that the cash cows that you are relying on today are gonna drop off the patent cliff. And so if your pipeline's not good, like the Pfizers and so on, then you're gonna get punished for that. But then there's two ways to get that pipeline rammed full of potential. You either develop it in-house, as you said, or actually a real feature of this year has been acquisitions within that healthcare space. And you've got a lot of consolidation, you've got a lot of some of these big guns buying up, certainly in the kind of the weight loss space, there's been a lot of kind of M&A action going on. And so I think that's part of the reason why healthcare as a kind of sector has done really well generally. Is because A, it was unloved. You know, it had a really bad, like, 2023, 2024, you know, that sector was generally trending lower coming off the back of the COVID tidal wave of demand for a lot of COVID drugs and stuff. So they were down, down, down. Valuations were super low. So when you're booking profit on your high-valued tech Mag 7 trade, you are going to switch out of something that's overvalued in your mind. And you're going to buy stuff that's undervalued. And healthcare was like right sweet spot on that list of undervalued. And then yeah, a lot of consolidation players really helped to kind of spice things up. But it's had a great year, healthcare generally, apart from those few that have not. Yeah. Winners and losers.

The insurers. But well, let's finish with the sectors, with industrials and specifically aerospace and defense. And I think this is a This is what I love about talking about these sectors is the strategy part of it. I mean, I've never really been the financial statement kind of person. It's always been like, okay, and I was with a group of students have been throughout this week and it was a lot of them are quite new to all of this. And I was like, okay, just think of a company and think of the context of it. And then think about all of the the things that you know. So for example, we were talking about, I think it was Walmart. And I was like, okay, Walmart's had a breakout year. What is Walmart? And they were sort of thinking, okay, yeah, brick and mortar and these types of things. And then I was sort of saying, okay, so why do you think they, how they could they have turned their business around? And then the conversation, you just get them thinking, these are people like one was a psychology student, the other's a history student. And they're like, well, I guess, you know, people would downsize in terms of they won't go to an expensive place, for example, they'll go somewhere cheaper. I was like, okay, so how then, you know, talking about consumer behaviors, the stickiness, Walmart. I mean, you go into Marks Spencer's food court these days in certain more modern ones, and it's amazing. And then you look at them, then the foot flow traffic coming in because now you're attracting certain people and now they're going to go and look at the clothes. Now the clothes range is changing. And it's like, okay, so now you're sticking customers now in that way with these premium labels. So you're capturing your current market and a new market is remaining within your sphere. Then you've got the kind of e-commerce aspect of it, which is a competitor. And you think, and then we were talking about, okay, how many locations do you think Walmart has? And it's like, okay, loads. And you're like, okay, what's the average time of delivery do you think for a grocery shop? And it's actually a third of grocery deliveries in e-commerce for Walmart is done in 3 hours to door, order to door, which is insane. So it's like from a logistics point of view, it's like utilizing that infrastructure. Then obviously their pivot to digitize, one strategy moving from the NYSE to the NASDAQ for the optics and perception company. That is this big pivot to advertising and advertising twofold, your digital footprint and your manual physical footprint in shop. And then that's high margin business. And so it was like, you don't need to know finance to have this kind of thought path. And this is why I find it so interesting and talking about these aerospace and defense, obviously we've had a super volatile year from geopolitics. So as you would imagine, companies like Raytheon RTX have been a big standout. You know, they manufacture a lot of the weaponry, the armory and things like that. But more so I was looking at GE. That was a really good example, I think, of a company who's reevaluated its business and been pretty aggressive at just streamlining. I.e., spinning off underperforming assets like energy and healthcare and just thinking, right, let's just double down on aerospace. And one of the, I guess the one person's loss is another person's gain because Boeing has had a continuation of absolute horrendous shockers. Meaning then, do you want to buy a whole new fleet of Boeing airplanes? Probably your appetite has diminished because you might fall out the plane next time you're on one. So the point being there is that, okay, think about as a student, think about then, well, what would you do? Let's say I own the Piers Curran airline and I have a fleet of aircraft that need replacing. I can't replace the plane, but they're getting old. What would I do? I would get the maintenance in. I'd have the engines tuned up. I'd have them maybe possibly replaced. This is all GE's work, and that's a big growing emerging part of their business. And so yeah, it's been, that was quite interesting, I thought, just from the defensive side. There's been the geopolitical kind of headwinds. So the commercial side is booming. People are flying, all planes are in need of parts. The defense side is booming. Governments are rearming at the fastest pace since the Cold War. And yeah, that's had its own kind of tailwinds, I would say. So yeah, that was the final sector. But look, let's move over to fixed income, which is again more your bag.

Yeah.

In that way. So what were some of the key themes there, do you think, as an overview?

Well, I think the key theme is it was just a pretty dull year from a volatility point of view.

Isn't that the nickname of fixed income?

Well, exactly. So it's kind of reverted back to its proper place in the world, in the world of kind of asset classes. And again, you go back to Trump and the start of the year, and I guess that's been the big part of 2025. The mindsets and the fears at the beginning compared to where we are now has been a major shift. All that panic at the start has gone away. So from a bond market point of view, volatility's dropped. So people are thinking more about, well, okay, the income that you get from an asset like a bond, it's called, it's in the fixed income asset class, right? So remember, bonds are just loans. Okay. So if you are an investor, you are buying a bond, you are essentially lending the money to the borrower, and so you are getting an interest income off that. But because of the volatility in bonds over the last few years, and that's because we've had crazy stuff going on with inflation, crazy stuff going on with massive rate hikes and rate cuts, and it's all been kicking off. And so you've had price volatility, you know, the Liz Truss episodes and all the rest of it, right? And so bond markets have almost been a bit more like, well, I'm going to trade these assets to try and profit from the price movements. That's not really what the asset class is for. It's for solid, you know, stable price and right, I'll just take the income off that as I'm going along with relatively very low risk from a sort of, you know, capital point of view. So we've almost returned like the second half of the year, we've returned back to really quite low volatility in from a price point of view. But yields staying relatively high, and I think we're finishing the year with yields generally. I might talk about the yield curve moving, but if you just think about yields generally, they've stayed relatively high and that's because we've still got that nagging concern about inflation. Inflation's clocking at 3%, let's just say. So it hasn't come down to 2%, but you've had the Fed cutting, but they haven't cut anywhere near as many times as we thought they were going to cut at the start of the year. So, right. And the economy's solid, right? So generally you got yields staying pretty high and so there's low volatility but relatively high yields and people are going, well, fine, great. I'll go back to the old school way of trading this asset by just, great, lock in some low risk income return.

Okay. And then let's move to commodities and then forex. So commodities, I thought there was another good phrase as how to put it, which was if you could drop it on your foot, it went up. If you can burn it, it went down. So yeah, the themes here is gold, silver. I've had like huge years, possibly one of the best performing assets in some respect. And then you've got copper, which is benefiting from this AI infrastructure kind of build out, i.e., you know, let's say the AI revolution without the plumbing. If you haven't got copper, you know, copper is in everything. And then there's the energy slump, which is much more of an oversupply. Not being, well, demand nowhere near matching in that. Extent in the world awash with too much oil, which has pushed actually, as we're recording this, it's pretty much at a multi-month low as we speak. So yeah.

Yeah.

What's, what's, what was, I guess for commodities, let's just focus on this kind of debasement insurance argument. What is, what is that and why is gold being so stellar this year?

Yeah. So gold has gone to a record high. It's up 65% on the year. I mean, it's literally one of the best performing markets across all assets, which is kind of crazy. But look, there's been some themes behind the scenes that have been driving this. So number one is kind of, I would say broadly speaking, an ongoing scenario where foreign governments are trying to wean themselves off the dependence of the dollar. You know, the dollar has been the global reserve currency for many decades. And look, I would say maybe you could point to things like the Russia-Ukraine war that kicked off in 2022. One of America's responses to that from a sanctions point of view was to use the dollar. They basically weaponized the dollar because everyone's so reliant on it. And so I think that was one trigger point a few years back. For governments to go, okay, that's an interesting sort of weapon that the US have against us. Let's start to work on a multi-year kind of strategy to kind of wean ourselves off that kind of stuff. And so where'd you go? You go to stuff like the gold, right? So there's been a lot of gold purchasing going on from governments and from actually central banks, foreign central banks. So that's been one underlying kind of theme, I'd say. Doesn't get often talked about much, but I'd say also crypto plays a role here with the stablecoins. So some of the stablecoins have gold as their kind of underlying kind of tangible fixed asset. And so as the growth of stablecoins go up, then these stablecoin businesses have to buy more gold. Cause they've gotta have that stable physical asset on account to underpin it all. So that's been something else that's driven it. So yeah, I mean, and then you could point to the, you know, the usual arguments around gold going up, which is inflation. And as I said, inflation has stayed relatively high, so that's kind of helped. And also finally, the dollar has weakened. And normally commodity prices are correlated to the dollar, particularly gold. So because The dollar's gone down. That's also fed into gold upside. So it's kind of, again, all those possible factors you can think about that might influence gold. It's just one of those perfect storms where all factors are all pointing positively. And so that's generally why this thing's ramped and really surprised people, I would say. 'Cause I don't think many had gold at the top of their list of best performing assets in 2025 at the start of 2025. I don't know. No one was talking about that.

So maybe it's a good segue to finish then on this part, talking about the dollar. 'Cause I remember it was only a few months ago people were talking about de-dollarization, devaluation. It was like the end of the dollar. It was like there was a bit of a talk about that at one point during this past 12 months.

Yeah.

So where do you stand with that?

Well, I've got a very, very specific stance on this, that everyone's getting way over the top carried away with themselves, in my opinion. Yes, the dollar's down 10% this year. Yes, that's really unusual because the dollar, when does the dollar ever weaken, right? It's supposed to be the strongest, but yes, it's dropped 10%, but it's just given back the sort of post-COVID strength. So the dollar was the strongest currency post-COVID and gained in value. Where we are now, we're basically back into the range that we're used to seeing for the dollar and that we've seen for the last X number of decades. So I would say it's just reverting back to normal here this year. But because everyone's time horizon's so blinkered, all they can see is, oh my God, it's down 10%. It's the end of the dollar. I just think it's a reversion back to the long-term mean. That's my view.

Yeah. And just to finish kind of tying in this general theme throughout of AI, what's quite interesting is the countries who are very dependent exporting nations of these types of products. And there's definite winners and losers there. We've talked just momentarily about oil prices slumping on a wash of supply globally. And one of the kind of players that feels that pain is Canada, is Canada pumps oil and oil prices slumping. The loonie has struggled to keep pace. On the flip side, the Aussie, not only did it have Piers Curran come and visit for one part of the year and juice the balance sheet, but Australia digs up a lot of copper and lithium. And obviously we talk about data center buildouts, infrastructure. Yeah, this has been massive. That CapEx spend, where does it go? Well, goes into building and you need these core ingredients in order to do that. So yeah, that's been a winner.

And you did just say the loonie. Can I just qualify that? That's gotta be one of the best nicknames for a currency on the planet, hasn't it? The loonie. That's what we call the Canadian dollar. I'm not quite sure why.

Why is it called the loonie? It's a bird, isn't it? Isn't it like a heron? Like a Canadian heron or something like that? Someone will leave a comment and shoot me down. I think it is. I think a loonie, because it's on a coin, it's on a Canadian coin, I think.

I mean, you've sold that to me. I believe you.

Well, there you go. It's fact. Say it enough times. That's right. Well, let's, so let's finish then by having a quick look at some of the general consensus views because something that happens at the end of the year generally is that a lot of people circulate bank outlooks and things like that. So how about we save everyone a lot of time and effort here? Just talk about what are the core market expectations and then also what could derail the consensus view. So what are a couple of other things that could be potential stumbling blocks?

All right, so we talk about the Street. So all the big banks issue their 2026, you know, year ahead macro research reports. And I guess the best sort of barometer is, right, what's your year-end S&P 500 target? And then that, you basically use that as a barometer, right? Who's bullish, who's bearish on the street, right? And so you've actually got Oppenheimer and Deutsche Bank are super bulls. So Oppenheimer have got the, so this is the end of 2026 S&P 500 target. They've got that at 8,100. Sorry, 8,100 points, I should say. And look, just bear in mind it's currently trading at 6,768. Okay, so 8,1 Deutsche Bank are at 8,000, and their thesis is more of the same. AI CapEx supercycle is nowhere near done, is their view. And they're talking about the comparing it to the Roaring Twenties, that's the 1920s. Before then, by the way, we had the kind of depression.

I was going to say, you know what happened at the end of the Roaring Twenties.

Yeah. But they're basically saying this thing is just going to keep on giving is what they're saying. I mean, you got the people in the middle, which is a bit more dull, but Morgan Stanley and Goldman Sachs, I say in the middle, they're still talking about 1,000 points of upside. For the S&P. So you've got Morgan Stanley at 7,800, you've got Goldman's at 7,600. They're saying that this will be the year of broadening. So I can't believe I'm going to say it again, but the Mag Seven won't carry the whole market anymore, and which we've already just discussed. And they're talking about rotation into other stuff, industrials, financials, mid-caps, exactly what we've been talking about for most of this episode. So that's kind of their view. Then you've got the bears, obviously. So, and this is really interesting, the bears, Bank of America are in that category, but they're still calling for not bad rally. 7,100 is their year-end target. Basically no one, no one is saying the S&P's going to go down, which to me hits the big red alarm bell button. Cause if everyone's bullish, yeah, there's only one way, one way to go. Yeah. I'm a little bit nervous about that cause they've already bought. So what's going to be the driver for more upside? So that's all I'm, yeah, that's all I'd say. So it kind of takes, you know, what can go wrong in 2026.

So here you're saying then there's that it's sensible to diversify within the sector mix and within geographies.

Yeah.

In 2026.

Yes.

Okay.

For sure. And that's been the story of the back end of 2025 as well. It's not just right now, do that. That's been a real theme for the last 3 months. So, you know, a continuation of that theme, I think, is the right, it's the consensus call. I think that's probably going to happen. Right.

And is there any like bullish factor coming out of the midterms? Like what's the pattern of history from what tends to happen in the second half of a—

So this is it. You've obviously got the AI story continuing. Fine, fine, fine. But it's the midterm elections in the US next year. Not until November, I should hasten to add. So this kind of might be a story more for the second half of the year, but Typically what happens is you get incumbent governments giving massive fiscal giveaways, cutting taxes, spending more to try and make the people think they're great and so they do better in the elections. I mean, it's, this is the way of politics. And so if the midterms in 2026 goes the same way as every other midterm's ever gone, which it definitely will, then you're going to get fiscal expansion. So from a, in the short term, from an economic point of view, that can be bullish. But I would say that could really snap and be bearish as well because we're already worried about the big, big, big debt, monstrous debt pile and the widening deficits. And if yields stay high, as we've talked about, so I'm talking, I'm sliding into the risks here now. If yields stay high and look, if this AI boom continues or even accelerates, it might feed into inflation, right? And if inflation starts going up, well, forget about the Fed cutting rates. I mean, dare I say the big outlier for 2026, the Fed hikes rates. I mean, that will really be a game changer, right? Inflation going higher is definitely a big risk. And if the government's going to pump and juice it with more stimulus, that's just going to play into that inflationary narrative. Okay. So I think for sure inflation's one of my kind of things to definitely be monitoring next year. The other one would probably—

So you've got inflation risk. Yeah. There's always an AI bubble risk. So that's kind of a known risk. What else?

You got the Fed and not just interest rates now and what they do. You've got a big move at the Fed 'cause Powell's out, he's rotating off, and who's coming in is still the unknown question. And are you going to get someone in Trump's back pocket at the steering wheel of the Fed? And what does that mean, A, for interest rates, but also what does it mean, I think more importantly, for kind of Fed credibility? And just central bank credibility more generally. So that's a risk.

I think what's quite interesting actually, what you're saying then, I'm just trying to think of the calendar year and where these risks might emerge. 'Cause I don't see the AI bubble risk happening in Q1, let's say. I think we still plenty of positivity to run at this point. Mm-hmm. Inflation, you, you were kind of tying into the potential then with the midterms and the fiscal expansion. So that's at the end of the year.

Yeah.

Fed transition's happening right at the beginning of the year. So it's almost like you've got a beginning, a middle, and an end here. The Fed transition followed by the AI bubble risk, probably midway through, and then an inflation side at the end. Would that be how you see it?

Yeah. Well, that with the Fed transition, remember that currently the timetable is that we're expecting Trump to announce his choice at the start of the year, but Powell doesn't rotate off until May. You might get this weird sort of limbo period where Powell's still there and you never know the relationship with Powell and Trump. The relationship between Powell and Trump is not good. So what's Powell's kind of, does he have a parting shot of like, I can't see that happening. Screw you, Donald.

He's too well mannered, too well intentioned.

Anyway, it'd be very interesting to see how he deals with that limbo period, but But yeah, so that'll be more front end of the year. But I think more like stepping out of the US, I think my big thing to look out for is with Japan and this whole carry trade unwind. And does that begin to happen in a more meaningful way? We talked about this on our previous episode, so you can go back and dive into that to get the finer details. But essentially, do Japan accelerate their rate hiking cycle? Does it start to unnerve the carry trade and those leveraged positions in some of those higher risk assets like crypto? Do you get crypto? Do you get like Bitcoin? I mean, that's had a shocking year. It's down 11% on the year, right? But does it break down towards levels we haven't seen for a few years? It could break down to $60,000, which is where we were trading kind of 2024. There's a really key area around broadly around 60,000. So does it step down to there? You know, is, is, and, and the thing is about that carry trade thing, if, if it really does start to get unwound, the momentum of that unwind can, can accelerate rapidly. If there's a real whiff of that store, that, that trade's done, that can very, very, very quickly escalate into something massive. So my kind of big outlier for 2026 is that carry trade unwind, and if it starts to accelerate a little bit, it could then accelerate a lot. Something to look out for.

Okay. So summing up the base case for 2026, higher markets on AI earnings stimulus, but a lot of emphasis still on inflation staying quiet. The AI narrative holding together. And then as you said, keep an eye on that unwinding of the carry trade as a bit of a banana skin. I did ask AI, I won't say which one, but I was talking to it going, go on, throw me out some black swan events for 2026. To be honest, they were pretty lame, but there was one I quite liked. So here it is to finish. What do you think of this one? So they're calling it the great AI energy blackout, the scenario. So this is it. Get your script, get your script writing hat on here. Let's get your Netflix guy on the phone.

What we have here— Stranger Things is ending. We're going to need something else for 2026.

So 2026, a severe heat wave or a cyber attack hits an overstressed power grid. Leading to a multi-week blackout in Northern Virginia, the world's data center hub. Of course. So all clouds go, literally go dark. And we have the contagion effect from that dependency, which we've had little blips of that, right? Haven't we? What was the one the other day? It was the Cloudflare went down and it's like, oh, I can't use Zoom. Oh, I can't do that. And you're like, oh my God. Like so many things are interconnected. But yeah, what do you think of that one?

Okay. Well, I think we're going to need to open an office in Virginia because we need someone on the ground to be monitoring that in real time. So can we set that up ASAP?

Yeah. Well, if anyone's bored over Christmas and you want to watch a Netflix program, check out Leave the World Behind. It's a Julia Roberts film on Netflix and it's about an apocalypse psychological thriller. That's basically exactly what I've described. So if you actually look at the way cinema works, here's a little fact for you, is that it tends to follow the cycle of whatever's being the biggest fear facing society at that point in time. So if it was the Cold War, if it was something else, if it was COVID, then you start to have all those Brad Pitt type, you know, films come out. And then this one happened when AI, this film came out this time last year. No, it came out in 2023 when AI just came out.

Right.

And it was like the worst case scenario.

Interesting.

And so, yeah, it's very much tapping into the human fear and psyche, but yeah, Leave the World Behind. Check that out. This is not an advert, by the way. Wish it was. I wish Julia threw a few of those dollars our way, but no, not quite.

Julia Roberts, she's a friend of the pub, so, you know, just thought we'd help her out. No, no, well, no, she's not.

That's not true. Ethan Hawke is though.

Oh, okay.

Yeah. Ethan loves a bit of paddle. All right. Thank you so much everyone for listening. We do have in fact one more episode coming out. Super interesting student I met when he was 15. He's now 19 and he's from the UK, but he's now studying in the US and he's got an internship in New York with Goldman Sachs. In 26, and he started a podcast during his student days, of which he has interviewed Justin Rose in the golfing world. He's interviewed people off of Stranger Things. He's interviewed people. He's interviewed the CTO of Citadel. He's like, and he's just a student. So pretty amazing story. So check that out. That will come out on the 29th of the month. But from me and Piers, Thank you so much for listening to us drone on for the last hour, number one, but no, honestly, the whole year we've had so many nice, kind messages at the end of the year, because I think a few people were kind of finding out about job offers and things like that. So yeah, please do let us know if that has been the case. It's really just so nice to see and hear and exactly the mission that we're on and the reason why we do this. So yeah. Thank you so much. Enjoy your Christmas, all the best for the new year. And yeah, we will see you with lots more new content and guests to come in the year ahead.

Look forward to it. Thanks, everyone.