Podcast Summary: Merryn Talks Money – “Gold’s Shine, Small Cap Hopes and What to Watch in 2026”

Date: December 19, 2025
Host: Merryn Somerset Webb (Editor at Large, Bloomberg UK Wealth)
Guest: John Stepek (Senior Reporter at Bloomberg & Author of Money Distilled Newsletter)

Episode Overview

This year-end episode of "Merryn Talks Money" reviews 2025’s surprising market performance, explores the dynamics behind standout asset classes like gold, small caps, and energy, and looks ahead to what could drive returns in 2026. Merryn Somerset Webb and John Stepek discuss the apparent shift in global market leadership away from the US, the resurgence of value stocks, and key trends to watch in the new year, particularly for UK and European investors.

Key Discussion Points & Insights

Market Review 2025: A Year of Surprises

• Unexpectedly Strong Returns: Despite a year that “felt mostly negative,” global markets are up nearly 20%. The FTSE 100 is up around 20%, UK all-share 17%, and gold an astonishing 63% (03:00–03:40).

  • Quote: Merryn: “So much going on, mostly negative, yet global markets are up nearly 20% across the board... When you look at how we started the year, this is kind of extraordinary.” (03:10)

• Gold and Miners Dominate: Gold delivered standout returns (up 63%) and the gold miners’ index rose over 150%. In contrast, Bitcoin fell roughly 8%, with companies holding Bitcoin also falling. (03:47–04:11)

  • Quote: Merryn: “You look at our favorite gold. Well done gold, 63% the back… Gold miners index up over 150%... and then there is poor Bitcoin.” (03:40)

• Bitcoin’s Outlier Status: Bitcoin underperformed despite risk assets generally rising, raising questions about its current correlation with other asset classes. (04:02–04:50)

US Exceptionality Broken? Signs of Rotation

• US markets showed “rotation” away from relentless outperformance. NASDAQ rose ~18.7%, but the FTSE 100 actually beat it for GBP investors. (05:05–05:16)

  • Quote: John: “It is fair to say when you look at the markets, [US exceptionalism] did end this year.” (05:27)

• Is this the Start of Value’s Comeback? The panel wonders if “things that have performed horribly over the last couple of decades” might get their day in the sun—particularly value stocks and small caps. (05:47–06:51)

  • Quote: Merryn: “Maybe, just maybe, we really are getting to the point where value might have its day in the sun. We’ve seen gold have its day… Maybe small caps will finally have their time.” (05:54)

Small Caps: Contrarian Play or Value Trap?

• Small Cap Cyclicality: Small cap stocks massively underperformed at periods but historically offered substantial outperformance during recoveries. (14:38–17:24)

  • Historical Perspective: US small caps outperformed by 2.85%/year over the last century, but have suffered decade-long droughts (notably 1982–1999 and the current spell since 2018, -1.7%/yr) (14:53–16:05).
  • Quote: Merryn: “Inside those long term averages you’ve got some really, really nasty and lengthy periods of underperformance… We are deep in one now.” (15:02)
  • Quote: Merryn: “The optimistic take is that’s where the growth is, that’s where the value is, that’s where the long term outperformance is. So maybe next year I would think.” (17:15)

• Outlook for 2026: Small caps are cheap, unloved, and ignored—conditions often preceding leadership turnarounds. (07:32–08:02, 14:38–17:15)

  • Quote: Merryn: “As soon as you get to the point where an area is completely ignored, it begins to look quite interesting.” (07:32)

• Growth vs. Value Debate: The dominance of the US “Magnificent Seven” large-cap tech reflects big companies growing at rates typical of small caps—but that may change. (17:24–17:41)

UK Economy & Policy: Rate Cuts and Stagflation Fears

• Bank of England Rate Cut: The first rate cut in a long time (down to 3.75%). However, the move reflects weak growth rather than optimism. (08:09–08:29)

  • Quote: Merryn: “It’s really more to do with bad stuff, isn’t it?” (08:21)

• Stagflation Concerns: Persistent inflation (still 3.2%) combined with stagnating growth raises the spectre of “a mini bout of stagflation.” (09:45–09:47)

  • Quote: Merryn: “Like a mini bout of stagflation.” (09:45)

• Policy Headwinds: Structural issues stem from policy decisions unlikely to be reversed under the current government. Both suggest no meaningful economic improvement until there’s a change in direction. (10:02–10:25)

The Net Zero Debate & Energy Sector Contrarianism

• UK Net Zero Policy: The UK maintains aggressive net zero targets even as other countries backtrack. High energy (especially electricity) prices are deterring investment. (10:25–11:05)

  • Quote: Merryn: “You can’t be an outlier in this area. So I think that will be one of the things to watch in the UK next year...” (10:48)

• Energy Sector Laggard: Energy, especially fossil fuels, was a laggard in 2025. Both hosts suggest it could be the classic contrarian bet if attitudes shift in 2026. (11:05–11:43)

  • Quote: John: “If you’re looking for a contrarian bet… the energy sector is probably the place to look at this point.” (11:12)

Gold and Silver: Sun or Eclipse?

• Gold as Insurance: Strong demand came from central banks; investors sought insurance amid an “OK but anxious” bull market. (18:12–18:45)

  • Quote: Merryn: “Gold is insurance and silver is a warning… it is the basement trade and… it’s this new regular price insensitive buyer in the form of the world central banks.” (18:05)

• Silver Speculation: Silver surged, even overtaking oil in value for the first time since 1980 (20:06). There’s concern that the rally might be running hot, citing anecdotal evidence of silver scrap being brought for cash. (19:18–20:48)

  • Quote: John: “Silver is now worth more than a barrel of oil… that’s not happened since 1980.” (20:06)
  • Quote: John: “[A reader] took the family silver down to a smeltery and got them turned into hard cash… makes me think we’re certainly in the later stages of this silver mania.” (19:18)

What to Watch in 2026

• Watchlist for Investors: Gold, silver, energy sector, UK’s approach to net zero, small cap/value stocks.
  • Quote: Merryn: “Watch the gold price. Watch the silver price. Maybe don’t bother with the bitcoin price. Watch energy. Really interesting. Watch what happens with net zero in the UK. Watch small caps and keep an eye on the growth-value intersection.” (20:48–21:35)

Memorable Quotes & Timestamps

• “So much going on, mostly negative, yet global markets are up nearly 20% across the board... When you look at how we started the year, this is kind of extraordinary.”
  — Merryn Somerset Webb (03:10)

• “You look at our favorite gold. Well done gold, 63% the back… Gold miners index up over 150%... and then there is poor Bitcoin.”
  — Merryn Somerset Webb (03:40)

• “Maybe, just maybe, we really are getting to the point where value might have its day in the sun. We’ve seen gold have its day… Maybe small caps will finally have their time.”
  — Merryn Somerset Webb (05:54)

• “The optimistic take is that’s where the growth is, that’s where the value is, that’s where the long term outperformance is. So maybe next year I would think.”
  — Merryn Somerset Webb (17:15)

• “If you’re looking for a contrarian bet… the energy sector is probably the place to look at this point.”
  — John Stepek (11:12)

• “Gold is insurance and silver is a warning… it is the basement trade and… it’s this new regular price insensitive buyer in the form of the world central banks.”
  — Merryn Somerset Webb (18:05)

Important Timestamps

• 03:00–04:50 – Review of 2025 market winners and losers (global equities, gold, gold miners, bitcoin)
• 05:05–06:51 – US market rotation and speculation about the future outperformance of value & small caps
• 07:32–08:02 – The “contrarian” opportunity in small caps
• 08:09–10:25 – UK rate cuts, stagflation risks, and structural policy concerns
• 10:25–11:43 – UK net zero policy and implications for energy sector investing
• 14:38–17:41 – Deep dive into small cap stock cycles and whether a turnaround is due
• 18:05–20:48 – The gold and silver surge: structural changes & speculation risks
• 20:48–21:35 – Investing watchlist and closing recommendations for 2026

Final Takeaways & Recommendations

• Rotation and Contrarian Bets: Both guests suggest that the classic winners—large-cap US tech—may cede leadership, with value stocks, small caps, and energy primed for possible outperformance.
• Gold Holds, Silver Caution: Gold remains a favoured hedge given geopolitical risk and central bank demand. Silver’s recent mania warrants caution.
• Policy Watch: UK investors face a “mini stagflation” scenario unless government policies change, especially regarding energy and investment.
• Key 2026 Trends: Keep an eye on “ignored” sectors, the evolution of net zero policies, and cracks in the AI-driven narrative.

Closing Note

“Watch the gold price. Watch the silver price… Watch energy. Really interesting. Watch what happens with net zero in the UK. Watch small caps and keep an eye on the growth-value intersection.”
— Merryn Somerset Webb (21:13–21:35)

Wishing listeners a very Merry Christmas and a prosperous investing year ahead!