Latest / Markets with Megan: A Quick Financial Markets Update / 2025 Recap: A Strange Year That Paid Off | S3 E111 | 01-05-26

Transcript

2025 Recap: A Strange Year That Paid Off | S3 E111 | 01-05-26 · Markets with Megan: A Quick Financial Markets Update

• 0:01
  Megan Horneman: Welcome to 2026.
• 0:03
  Megan Horneman: It is Monday, January the 5th, and this is Markets with Megan.
• 0:06
  Megan Horneman: Thank you so much for all the support and listening to our podcast that we got in 2025.
• 0:11
  Megan Horneman: And we look forward to giving you more up-to-date economic information, market-moving events, and what all this means for your investments in the upcoming year.
• 0:20
  Megan Horneman: If you like this podcast, you can subscribe, hit that alarm bell that you see, or share it with your friends, any family members or colleagues that just want to try and make some sense out of the underlying story, not necessarily some of those headlines that we see in the news that move the markets.
• 0:36
  Megan Horneman: Let's get started.
• 0:37
  Megan Horneman: We thought we'd kick off the year with giving a review of what we saw in 2025, which was quite an impressive year from an investment perspective.
• 0:46
  Megan Horneman: First of all, the US economy, despite the many headwinds, we had the longest government shutdown on record.
• 0:52
  Megan Horneman: We had a complete uprooting of global trade.
• 0:55
  Megan Horneman: And then we also had basically muted job creation.
• 0:58
  Megan Horneman: All of this, we still were able to produce almost 4% growth in the second and third quarter of this year.
• 1:05
  Megan Horneman: And economic growth is on pace to post about 2% growth for the year.
• 1:09
  Megan Horneman: Now, from a um from an economic perspective, the job creation, as we mentioned, was small.
• 1:16
  Megan Horneman: When you look at the the amount of jobs that were added for the calendar year, it was the least amount of jobs since 2020 when we were dealing with the pandemic fallout.
• 1:25
  Megan Horneman: The unemployment rate also rose to a five-year high.
• 1:29
  Megan Horneman: Inflation, which is a major thing the Fed's watching, as well as the labor market, that was stubborn.
• 1:35
  Megan Horneman: It's still growing well above the Fed's target.
• 1:37
  Megan Horneman: The core prices in this economy are growing about 2.8%.
• 1:42
  Megan Horneman: We also saw the consumer continue to be resilient, and this is a big diversion from the confidence readings that we've seen throughout the year.
• 1:50
  Megan Horneman: Consumer confidence continued to be weak.
• 1:53
  Megan Horneman: Real disposable income only grew about 1.5%, but yet consumer spending was very strong, especially in those quarterly GDP numbers.
• 2:02
  Megan Horneman: Now, what did that all mean from an equity equity and bond market perspective?
• 2:06
  Megan Horneman: Well, equities really cheered the economic weakness, not necessarily because the economy was weak, but because the Fed was able to cut interest rates as well as some other global central banks.
• 2:17
  Megan Horneman: This helped fuel that momentum rally we saw in technology and gold.
• 2:21
  Megan Horneman: These things also led the market to actually get some dispersion outside of the U.S.
• 2:28
  Megan Horneman: We saw some rotation into the international markets.
• 2:32
  Megan Horneman: When you look at the MSCI, all country world index, which looks at all of the global equity markets, and then you strip out the US, that index actually outperformed the US's major index here, the SP 500, by the most since 2009.
• 2:48
  Megan Horneman: So we did start to see some rotation out of that technology trade.
• 2:53
  Megan Horneman: Within the US, we saw the rotation into some of those small and mid-cap names.
• 2:58
  Megan Horneman: These are the areas of the market that have lagged this large cap growth tech rally.
• 3:03
  Megan Horneman: Well, in the second half, we saw some rotation there.
• 3:06
  Megan Horneman: But internationally, it was really led by the European markets and the emerging markets specifically.
• 3:12
  Megan Horneman: We saw big outperformance from countries like Brazil, Mexico, Korea, Taiwan.
• 3:18
  Megan Horneman: All of this was around some of that tariff tension starting to ease and some clarity there.
• 3:23
  Megan Horneman: We saw some big rebounds there in those markets.
• 3:26
  Megan Horneman: From a fixed income perspective, it was the third consecutive year of bond returns for investors.
• 3:32
  Megan Horneman: We saw this primarily in the global markets, though.
• 3:35
  Megan Horneman: The global aggregate index, excluding the US, was higher.
• 3:39
  Megan Horneman: And then we saw emerging market debt outperformed.
• 3:42
  Megan Horneman: All of this was on, again, easing tensions, lower central banks, a weak dollar.
• 3:47
  Megan Horneman: This helped investors go internationally, not only for equities, but also for bonds.
• 3:53
  Megan Horneman: We also saw here in the U.S.
• 3:55
  Megan Horneman: credit continue to outperform treasuries.
• 3:58
  Megan Horneman: We've seen that extra yield or spread that you earn over treasuries to take on that risk of buying high yield or investment grade debt.
• 4:06
  Megan Horneman: That continued to shrink.
• 4:08
  Megan Horneman: And we've seen now three consecutive years where both investment grade and high yield outperform treasuries.
• 4:15
  Megan Horneman: We haven't seen that since 1995 to 1997.
• 4:19
  Megan Horneman: But the main story for the year was really the precious metals.
• 4:22
  Megan Horneman: We saw commodities higher.
• 4:33
  Megan Horneman: We saw gold make over 50 record highs for the year.
• 4:36
  Megan Horneman: Silver prices rose over 100%.
• 4:39
  Megan Horneman: A lot of this has to do with geopolitical uncertainty, tariff uncertainty, a weak US dollar, central bank's cutting rate.
• 4:47
  Megan Horneman: And also some of these precious metals have been roped in with this momentum trade, the fear of missing out.
• 4:53
  Megan Horneman: So we're seeing that we saw the precious metals have a significantly good year last year.
• 4:58
  Megan Horneman: Now we look forward to this year coming back to you with all of the economic data.
• 5:03
  Megan Horneman: We'll be back regularly, a few times a week, to update you guys on any market moving events as well.
• 5:08
  Megan Horneman: And again, if you want a history of our podcast, you can go to markets with Megan.
• 5:13
  Megan Horneman: Thank you.