2025 Recap: A Strange Year That Paid Off | S3 E111 | 01-05-26

Welcome to 2026. We’re kicking off the year by unpacking one of the most surprising market environments in recent history.

In this episode of Markets with Megan, Megan Horneman recaps 2025, a year marked by economic headwinds, weak job growth, stubborn inflation, and global uncertainty,  yet one that still delivered strong returns across equities, bonds, and commodities.

Despite muted job creation and rising unemployment, the U.S. economy posted solid growth, consumers kept spending, and markets responded to easing monetary policy rather than gloomy headlines. Rate cuts from the Fed and global central banks fueled momentum in technology, gold, and international markets, while investors finally saw long-awaited rotation into small caps, mid caps, and non-U.S. equities.

📈 In this episode:
➡️ Why markets thrived despite economic weakness
➡️ How rate cuts reshaped investor behavior
➡️ The rotation away from U.S. mega-cap tech
➡️ Why international and emerging markets outperformed
➡️ What drove the explosive rally in gold and silver
➡️ Key takeaways investors should carry into 2026

With precious metals posting record highs, bonds delivering their third straight year of gains, and global diversification finally paying off, 2025 reminded investors that markets don’t move on headlines — they move on policy, liquidity, and expectations.

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👉 https://marketswithmegan.fm

🔔 Subscribe, hit the bell, and follow along as we break down the economic data and market-moving events that will shape portfolios in 2026.

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https://youtu.be/7w-xAin5bG8

Disclaimer:  material was prepared by Verdence Capital Advisors, LLC (“VCA”). VCA believes the information and data in this document were obtained from sources considered reliable and correct and cannot guarantee either their accuracy or completeness. VCA has not independently verified third-party sourced information and data. Any projections, outlooks 
or assumptions should not be construed to be indicative of the actual events which will occur. These projections, market outlooks or estimates are subject to change without notice. This material is being provided for informational purposes only and is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice. Past performance is not a guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance 
that the future performance of any specific investment, investment strategy, or product or anynon-investment related content, made reference to directly or indirectly in these materials will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any 
discussion or information contained in this report serves as the receipt of, or as a substitute for, personalized investment advice from VCA. Due to various factors, including changing market conditions and/or applicable laws, the c...

Transcript

2025 Macro Recap And Growth

Labor, Inflation, And Consumers

Equities Cheer Rate Cuts

Global Rotation And Leadership

Fixed Income And Credit Spreads

Precious Metals’ Breakout Year

Looking Ahead And Updates

Megan Horneman 0:01

Welcome to 2026. It is Monday, January the 5th, and this is Markets with Megan. Thank you so much for all the support and listening to our podcast that we got in 2025. 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. 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. Let's get started. 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. First of all, the US economy, despite the many headwinds, we had the longest government shutdown on record. We had a complete uprooting of global trade. And then we also had basically muted job creation. All of this, we still were able to produce almost 4% growth in the second and third quarter of this year. And economic growth is on pace to post about 2% growth for the year. Now, from a um from an economic perspective, the job creation, as we mentioned, was small. 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. The unemployment rate also rose to a five-year high. Inflation, which is a major thing the Fed's watching, as well as the labor market, that was stubborn. It's still growing well above the Fed's target. The core prices in this economy are growing about 2.8%. 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. Consumer confidence continued to be weak. Real disposable income only grew about 1.5%, but yet consumer spending was very strong, especially in those quarterly GDP numbers. Now, what did that all mean from an equity equity and bond market perspective? 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. This helped fuel that momentum rally we saw in technology and gold. These things also led the market to actually get some dispersion outside of the U.S. We saw some rotation into the international markets. 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. So we did start to see some rotation out of that technology trade. Within the US, we saw the rotation into some of those small and mid-cap names. These are the areas of the market that have lagged this large cap growth tech rally. Well, in the second half, we saw some rotation there. But internationally, it was really led by the European markets and the emerging markets specifically. We saw big outperformance from countries like Brazil, Mexico, Korea, Taiwan. All of this was around some of that tariff tension starting to ease and some clarity there. We saw some big rebounds there in those markets. From a fixed income perspective, it was the third consecutive year of bond returns for investors. We saw this primarily in the global markets, though. The global aggregate index, excluding the US, was higher. And then we saw emerging market debt outperformed. All of this was on, again, easing tensions, lower central banks, a weak dollar. This helped investors go internationally, not only for equities, but also for bonds. We also saw here in the U.S. credit continue to outperform treasuries. 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. That continued to shrink. And we've seen now three consecutive years where both investment grade and high yield outperform treasuries. We haven't seen that since 1995 to 1997. But the main story for the year was really the precious metals. We saw commodities higher. We saw gold make over 50 record highs for the year. Silver prices rose over 100%. A lot of this has to do with geopolitical uncertainty, tariff uncertainty, a weak US dollar, central bank's cutting rate. And also some of these precious metals have been roped in with this momentum trade, the fear of missing out. So we're seeing that we saw the precious metals have a significantly good year last year. Now we look forward to this year coming back to you with all of the economic data. We'll be back regularly, a few times a week, to update you guys on any market moving events as well. And again, if you want a history of our podcast, you can go to markets with Megan. Thank you.