Podcast Summary: Merryn Talks Money

Episode: Why Europe’s Banks and Energy Stocks May Lead the Next Rally
Date: December 8, 2025
Host: John Stepek (Bloomberg)
Guest: Helen Jewell, CIO of Fundamental Equities EMEA, BlackRock
Setting: Live at Edelman Smithfield Investor Summit, London Stock Exchange

Episode Overview

This episode, guest-hosted by John Stepek, explores why European banks and energy stocks could lead the next market rally in 2026. Stepek speaks to Helen Jewell, a seasoned equities investor at BlackRock, about the diversification of returns across global equities, the forces behind the market’s behavior, and tactical opportunities and risks as we look ahead. The conversation takes a practical, slightly witty tone and delivers specific sector and stock insight, relevant analogies, and actionable takeaways for portfolio construction going into the new year.

Key Discussion Points & Insights

1. 2025: A Spectacular and Diversified Year for Global Markets

• Double-digit returns: 80% of major indices delivered double-digit gains in 2025; FTSE 100 returned near 20%, its best since 2009.
• Diversification by sector: While US tech and AI dominated headlines, strong returns spanned utilities, energy, and banks across continents.
  “The thing that has been really incredible this year is firstly the diversification of those returns, both across markets, but also across sectors as well." — Helen Jewell (03:15)

2. Market Resilience & ‘Buy the Dip’ Psychology

• Frequent pullbacks: Significant selloffs throughout the year (e.g., January’s “deep seek moment”, Liberation Day in April, summer corrections) were repeatedly met by strong buying.
• Underlying support: These rallies are not just momentum-driven; real company earnings and ongoing capital deployment, especially into AI, underpin the optimism.
• Behavioral driver: After several years of consistent gains, investors are less rattled by smaller corrections. “The buy the dip is being supported by actual fundamentals… These are real earnings of real companies with real cash behind them." — Helen Jewell (05:29)

3. AI: Still the Multi-Year Story – But It’s Global

• Enduring appeal: AI continues to drive massive investment (half a trillion dollars in capital deployed).
• Beyond the US: The “deep seek moment” broadened investor awareness—AI, tech, and outperformance are not exclusively American stories anymore.
• Psychological & Money Floor: A large base of investors has built significant gains, providing a ‘floor’ beneath markets.
• “The amount of capital that's currently being deployed is half a trillion dollars… supported by companies with real cash behind it. So we're just at the start of that." — Helen Jewell (05:29)

4. Europe Steps Up: Banks and Energy as the Next Leaders

• Why the catch-up?: Realization that growth and value opportunities exist outside the US, particularly in Europe and Asian markets (e.g., China tech in early 2025).
• Defence & Banks: Investors chase sectors with earnings visibility (defence on government spending) and relative value (European banks post-crisis reforms).
• “In Europe, the banks has been the key area… they look relative to their history, pretty cheap. We think these are really strong, good companies." — Helen Jewell (09:15)

5. Energy: The Real Bottleneck for AI and Infrastructure Growth

• 2026 outlook: The next AI-linked constraint is not data but energy: supplying, efficiently using, and transporting it.
• Where to find winners: Fossil fuels still play a role; clean energy companies and infrastructure (grids, networks, efficiency) are positioned to benefit.
• Examples: Siemens Energy (Germany), Iberdrola (Spain), and SSE (UK) highlighted for their roles in enabling modern energy needs.
• “Anyone who provides the nuts and bolts for wind turbines, anybody who provides solutions for energy efficiency, and anybody who provides the network…they are going to be the real winners." — Helen Jewell (11:17)

6. Banks: Staying on a Roll

• Why overweight? Despite rallying, European banks’ valuations aren’t excessive. Stronger balance sheets, resilient earnings, and imminent high capital returns (dividends, buybacks up to 25% of market cap) amid manageable rate cuts.
• “Even when they've gone up the valuations... they are still not particularly excessive versus history…return up to 25% of their current market cap to shareholders.” — Helen Jewell (20:34)

7. Sectors to Avoid and The Importance of Being Selective

• Auto sector woes: European automakers remain under structural and competitive pressure (tariffs, incoming cheaper vehicles). Cautioned as a “value trap”.
• “The European auto sector is one that we remain underweight. It feels a little bit of a value trap at the moment.” — Helen Jewell (24:38)
• Quality growth and luxury: European exporters and luxury names (e.g. LVMH) suffered from currency headwinds and tariffs. Potential for a bounce on stabilization, but requires selectivity—active investing favored over broad trackers.

8. UK Small Caps: Undervalued, Awaiting a Catalyst

• Valuation: Small caps remain unloved, but have attractive relative valuations.
• Missing catalyst: No clear event to drive a rerating, but enhanced investor appetite for underperformers and local institutional initiatives may eventually spark a virtuous cycle.
• “We've got great small cap companies in this country and the valuations of some of them are incredibly interesting. So we remain long term positive…” — Helen Jewell (25:15)

Notable Quotes & Memorable Moments

• On 2025’s breadth of performance:
  “…Over 80% of major indices have returned double digit returns this year, including as you say, the FTSE … which is incredible.” — Helen Jewell (03:15)

• On AI’s foundational difference vs. dot-com era:
  “AI is transformational across many different things. It is about defense, for example, it is about government security … if the hyperscalers ever decided actually tomorrow this is done, we're not spending. I am confident that governments would step in.” — Helen Jewell (17:17)

• On risks of market complacency:
  “The biggest risk is actually complacency… we are starting to see a little bit of softening of job data… what you see is this kind of creep of things not getting terrible, but kind of just getting a little bit worse.” — Helen Jewell (28:54)

• On energy as the bottleneck for AI:
  “Energy, I think John is going to be the real constrainer for AI in ‘26.” — Helen Jewell (12:47)

• On luxury & quality growth:
  “Quality growth is exactly the kind of area that you want to play selective and active.” — Helen Jewell (33:23)

• On the enduring value of diversification:
  “Don’t let the headlines grab how you allocate portfolios.” — Helen Jewell (33:48)

Important Segments & Timestamps

• [03:15] — Overview of 2025’s market performance and the breadth of returns
• [05:29] — Buy-the-dip psychology and the real fundamentals behind AI-linked stocks
• [09:15] — Why global markets, especially Europe, are catching up to US performance
• [11:17] — 2026’s big opportunities: energy infrastructure, fossil and clean
• [13:02] — Examples of energy/network companies to watch (Siemens, Iberdrola, SSE)
• [19:42] — European banks’ strong position: capital return, improved perception post-crisis
• [24:38] — The case against European automakers
• [25:15] — The value case for UK small caps and conditions for a rerating
• [28:54] — Big risks for 2026: market complacency, macro softening
• [31:56] — Quickfire: Banks, energy, and luxury/quality growth – how to position
• [33:48] — Closing thoughts: Ignore headlines, diversify beyond the “AI US” narrative
• [34:41] — Helen’s book recommendations: “My Friends” by Frederik Backman (gift), “Being Mortal” by Atul Gawande (thought-provoking)

Actionable Takeaways

• Energy infrastructure and networks stand to benefit greatly from ongoing AI-driven power demand; seek out “solution providers” in both fossil and clean energy, as well as grid/network-related businesses.
• European banks look set for further gains, buoyed by better balance sheets and sustainable capital returns – valuations remain attractive.
• Quality growth and luxury sector plays in Europe have been laggards due to currency/tariff headwinds but could recover with stabilization; requires active stock picking.
• UK small caps are cheap but need a catalyst—watch for improving sentiment and government policy support.
• Avoid European automakers for now; sector remains a value trap due to persistent competitive and regulatory headwinds.

Tone and Last Thoughts

The conversation is brisk, practical, and occasionally self-deprecating, with a clear focus on fundamentals (“this is about looking at companies that have earnings”). Helen Jewell emphasizes selectivity, not chasing headlines, and the enduring case for diversification within and beyond the US/AI growth story. The energy “nuts and bolts” theme recurs as the highest conviction area for 2026, especially where Europe has a lead.

Closing advice:
"Don’t let the headlines grab how you allocate portfolios... You can diversify portfolios in a really sensible way and also maintain those returns." — Helen Jewell (33:48)

Book recommendations:

• “My Friends” by Frederik Backman — “brilliant, heartwarming, readable gift” (34:41)
• “Being Mortal” by Atul Gawande — “really gets you thinking, probably not the best thing to give as a gift, but recommend reading” (34:41)

This summary captures all major sections and highlights from the episode, offering a thorough overview and actionable guide for investors considering Europe’s equity markets in the year ahead.