Can 2026 match 2025?

Katie Martin (0:06)

Pushkin. It's the most wonderful time of the year, folks, when investment banks and asset managers roll out their big predictions for markets in the year ahead. Are these predictions right? Not necessarily, but trawling through these outlooks is a fantastic way to judge the market mood. Right now, let me tell you, that mood is very warm and fuzzy. In 2025, markets have swatted off a whole range of horrors, tariffs, geopolitical splits, institutional degradation, all the scary stuff. And that means that now, even with what seems to be a big fat AI bubble inflating in plain sight, investors are feeling pretty good about what markets will deliver next year. Today on the show, we're going to run you through the key calls on Wall Street, where the consensus is, what can go right and, of course, what can go wrong. This is Unhedged, the Markets and Finance podcast from the Financial Times and Pushkin. A very warm welcome to new listeners today who are tuning in as part of the FT's Global Boardroom event. I'm Katie Martin, a markets columnist here at the FT in London, and I'm joined by two of my favourite colleagues. In the studio with me, I have FT Markets workhorse, Ian Smith, one of the fine people here who does the hard work of reporting on what markets are up to every day, and my usual co-pilot, Rob Armstrong, who harvests the organs of all that reporting and pontificates on it from his perch on the Unhedged newsletter.

Rob Armstrong (1:39)

I'm going to get a business card. Rob Armstrong, organ harvester.

Katie Martin (1:44)

Organ harvester.

So both of you, I think it's kind of important that we pause just for a tiny second here and reflect on how incredibly resilient markets have been this year. One investor put it to me the other day that if you'd said to her in April, the stock market was absolutely a meltdown. And if you'd said, right, by now, by the end of the year, stocks will be at all time highs, bonds will be nice and well behaved. She would have said, come on, you're bonkers. So, I mean, let's start with Rob. What went right here?

Rob Armstrong (2:23)

Well, I hate to toot my own horn, but I will invoke taco here. Trump always chickens out that that moment in April was a moment when it looked like the president had lost his damn mind and was going to be, it was going to be an absolutely crushing tariff regime. And since then, he has consistently shown willingness to back off whenever tariffs really pinch. And he's also shown that when other countries negotiate hard with him, he backs down there too, right? Brazil, China, they've mixed it up with him and it's gone okay. So I think when you look at the market since April, that's the market saying we can live with the president's ill-considered trade policies.

Katie Martin (3:22)

For listeners who may have missed this little, Rob Armstrong's 15 minutes of fame earlier this year.

Ian Smith (3:28)

How could they have missed this?

Katie Martin (3:30)

How could they? Because it went kind of nuts. Like Rob was the person who coined the taco trade, right? Trump always chickens out. It started off as a lame joke on one of your newsletters and then it became just like canon on Wall Street and then the president was upset about it and there were TikTok videos of people singing taco songs. Rob, this is your single greatest contribution to human knowledge, is it not?

Rob Armstrong (3:54)

It's true. And the whole thing has culminated, as regular listeners will know, with Taco the Reindeer, who is the show's mascot, who was bought by one of our colleagues, found it on the street. It's a reindeer with a label around her neck saying taco. And that's kind of where it all, this is for me, that's where the whole thing peaks.

Katie Martin (4:14)

Yeah, you must be so proud. So Trump does pretty regularly chicken out, Ian, but it's not just that, right, that investors have been quite positive about this year. Like the main thing is you just cannot argue with the corporate earnings, all the kind of, you know, chaotic politics aside. Companies are doing fine.

Ian Smith (4:39)

Yeah, earnings, as one investor put it to me a few weeks ago, has been the rocket ship for the stock market. They've just been amazing in terms of that strong performance in the US. It's a good reason why the US, which underperformed Europe at the start of the year, caught right back up if you look just on local currency terms. I would add that, you know, the US is still behind Europe when you kind of look in constant currency terms. But yeah, this AI theme in the markets has just been absolutely dominant, and it's helped stocks come back from that trade shock, and it's helped these stocks shrug off worries over valuation, because the earnings are coming through and the investment is there.