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The Mearns & Company Monday Espresso is your essential five-minute investment briefing, equipping you with everything you need to know for the week ahead. Marlborough's Multi-Asset Solutions Investment Team summarise market events over the past seven days and preview the key events in the week ahead, while also sharing their expert insights.
Monday Espresso Podcast - 5th January 2025
[00:00:00] Edward Kennedy: Today is Monday, 5th of January, and welcome to the first Espresso Podcast of 2026. To all our listeners, Happy New Year. My name's Edward Kennedy, Head of Personal Portfolio here at Marlborough, and to kick off the new year, I'm delighted to be joined by Rory Dowie. Rory is a Portfolio Manager here at Marlborough.
[00:00:21] Edward Kennedy: Roddy, good morning and Happy New Year.
[00:00:23] Rory Dowie: Good morning, Eddie. Happy New Year to you too.
[00:00:25] Edward Kennedy: Well talk about starting a new year with a bang. We've had a lot to cover today. Clearly the major news is in the US intervention in Venezuela, but before we get to that Rory, are you able to give the listeners an update on how 2025 finished?
[00:00:40] Rory Dowie: Sure Eddie. So if we strip away the chaos of the last 48 hours, 2025 was actually a pretty solid year, and about the third consecutive year of double digit gig returns across equity markets. Global markets performed exceptionally well but interestingly, despite all the noise about AI in the US and those seven companies that have been driving the market over the last few years, the US was actually one of the relative laggards, even though it finished up 16%, 2025.
[00:01:06] Rory Dowie: And why was that? The other markets were simply much stronger. Europe achieved an 18% return. The UK was up 22%, but the standup performance were Japan, which was up 28% and emerging markets up over 30%. And the story was really about two things, the maturation of AI technology and the normalisation of inflation, which as we've spoken about on the pod, has helped to support those interest rate cuts around the world.
[00:01:30] Rory Dowie: And the recession that investors were concerned about at the beginning of 2025 that never came to fruition. So those three things really were kind of what helped to boy markets over the year.
[00:01:40] Edward Kennedy: Because at the start of 2025, everyone was a bit worried about a recession.
[00:01:44] Rory Dowie: Exactly, and that recession never came.
[00:01:46] Rory Dowie: Instead, we saw inflation settle back down near those 2% targets, which allowed central banks to cut rates steadily over the course of the year. Obviously, that cheaper money fueled a rally, not just in the big tech giants, but we saw it broaden out to smaller companies and actually more cyclical parts of the market by the end of the year.
[00:02:03] Rory Dowie: But as we learned on just Saturday, the world doesn't stay quiet for long Eddie.
[00:02:07] Edward Kennedy: Yeah, let's get to it then. Saturday morning, January 3rd, United States launch a massive military operation in Venezuela.
[00:02:15] Edward Kennedy: Rory, we know the what. Special forces airstrikes and reported capture of Nicholas Maduro. But for investors trying to make the sense of this, why now? What is it the economic driver here?
[00:02:30] Rory Dowie: It's a mix of two things really, Eddie. Firstly, national security, probably more importantly is energy security. The official line from the White House is focused on narco terrorism, sort of the importing of drugs.
[00:02:41] Rory Dowie: The US Justice Department has indictments against a Maduro regime for years now regarding drug trafficking, and they're citing an immediate threat to regional stability. Betting markets are reading between the lines. This is also about oil.
[00:02:53] Edward Kennedy: Okay, so Venezuela has the largest proven oil reserves in the world, right?
[00:02:57] Rory Dowie: Exactly right and for the last decade that oil has largely been offline. Due to various sanctions and mismanagement, the US administration has been very clear. They want to stabilise global energy prices for the long term by effectively removing the Maduro regime. The expectation is that US energy majors, companies like Chevron or Exxon, will eventually step in to modernize that infrastructure.
[00:03:19] Edward Kennedy: Okay, so paradoxically, an invasion might lead to lower oil prices eventually.
[00:03:25] Rory Dowie: Yes, eventually it should. Obviously that's not what we saw when Russia invaded Ukraine, but this time round it, it could well be different. However, there is some uncertainty but the acting president of Venezuela, Delta Rodriguez asked the US to work with her country early this morning following her initial outrage of the capture of Maduro. Though we are also concerned a little bit about the loyalist factions may sabotage oil wells before the US can actually secure them, so we'll be watching that one quite closely. Oil is actually down 1% in early trading this morning. However, equity markets actually seem to have shrugged off the move looking this morning, Asia and Europe are both up whilst futures in the US are indicating that the US will open green later today.
[00:04:03] Rory Dowie: So it seems like markets have looked through that news.
[00:04:06] Edward Kennedy: So it seems like markets have looked through the news. Rory, I want to bring it up a question I've seen coming up from a few investors. Does that mean this is president set for China as the US can topple a government in its backyard? Does that mean Beijing has a green light to move on Taiwan?
[00:04:26] Rory Dowie: It's probably the main risk that we see with the US Venezuelan news. China has already come out with a very strong condemnation calling the US action, a violation of international law. The fear is that President Xi looks at this and says, if you can use force to secure your interests, so can I.
[00:04:41] Edward Kennedy: Does that mean we should be worried about any imminent invasion of Taiwan?
[00:04:46] Rory Dowie: We need to be careful not to jump to conclusions. Eddie, most geopolitical analysts and the market reactions we're seeing in Asia suggest the answer is no, at least not immediately. The context are different. I would point out Venezuela was isolated with very few allies. Taiwan is a major democratic partner that explicit security guarantees and it's critical to the global technology supply chain, given how many semiconductor chips are produced there.
[00:05:08] Rory Dowie: So we may see some high volatility in emerging markets for a few weeks. As China flexes, its muscles diplomatically potentially. But as a long term investor, you have to separate the angry headlines from the actual economic reality. And we'd really kind of reiterate that point here.
[00:05:22] Edward Kennedy: That's really helpful distinction, rhetoric versus reality.
[00:05:26] Edward Kennedy: Okay, so 2025 was great. The start of 2026 is volatile, but the fundamentals haven't broken yet. We've got about a minute left. What is coming up in the calendar year this week that investors need to watch?
[00:05:41] Rory Dowie: Really, it's about economic data. This week, first on Wednesday, we get the ISM services, PMI. That's essentially a survey of purchasing managers in the service sector.
[00:05:50] Rory Dowie: Gives us an indication of what they're thinking for the year. Then on Friday we get an update on the jobs in the US with non-farm payrolls. That's probably the major event of the week. So we'll be watching that very carefully as a team.
[00:06:01] Edward Kennedy: Fantastic. So Rory, thank you for making sense. So a very chaotic Monday morning.
[00:06:05] Rory Dowie: Thanks for having me Eddie.
[00:06:06] Edward Kennedy: And to our listeners, thank you as always in wishing your very prosperous 2026.