Market Update December 2025 Year Review and 2026 Outlook

In this episode, Chad breaks down the year that re-centered markets around fundamentals, discipline, and real-world constraints. From gold’s breakout to the resurgence of international equities, from energy’s structural super-cycle to the fragile underpinnings of private credit, this episode delivers a comprehensive and practical guide for investors heading into 2026.

 Key Topics Discussed:
• What truly drove returns in 2025
• Gold’s renewed bull market and the role of central banks
• Why energy remains one of the most asymmetric opportunities of the decade
• The re-emergence of Germany and Japan as global equity leaders
• Strategic opportunities in defense, utilities, and infrastructure
• What went wrong in private markets and how to avoid structural pitfalls
• MLD’s people, process, and philosophy for long-term compounding
• Our disciplined, diversified 2026 positioning playbook

Whether you’re an investor, advisor, or market enthusiast, this episode will sharpen your understanding of the global landscape and help you position with conviction for the year ahead.

Transcript

SPEAKER_00 0:34

Welcome back to the MLD Wealth Podcast Money Matters. I'm Chad Larson, your host and senior portfolio manager at MLD Wealth. And today I'm going to do my annual year-end review and outlook, our most comprehensive episode of the year. 2025 was a remarkable year for markets, but also a clarifying one for many investors. In many ways, it was a year when fundamentals mattered again. Supply, demand, cash flows, capital discipline, structural constraints, and real assets took center stage. This episode will break down what actually drove returns in 2025, why leadership broadened far beyond technology, the resurgence of gold and precious metals, and why Boolean hit new highs, a deep dive on energy, integrating our investment memo comments from earlier last month, how international equities, especially German and Japan, re-emerged, the growing strategic importance of defense, aerospace, and infrastructure, what went wrong in private markets, and why good advisors must do differently. And of course, our 2026 playbook, Disciplined, Diversified, and Intentionally Positioned. This is going to be a detailed discussion, whether you're a client of MLD, another advisor, or someone who simply wants to be a better steward of capital, you're going to get a lot of this episode. So let's jump right in. So, section one, you know what really happened in 2025? 2025 will be remembered as the year that leadership broadened. For the first time in a long time, markets rewarded real assets, commodities, precious metals and gold miners, financials, industrials and exporters, aerospace and defense, utilities and power producers. Yes, technology played a role, and I'll speak to that in a measured way later. But the dominant story was the return of fundamentals and scarcity economics. Several forces converged this year. Inflation remained sticky, but not runaway. This supported pricing power for hard asset sectors. Interest rates stabilized, providing visibility for capital-intensive industries. Geopolitical tensions pushed investors towards resilience assets, defense, nuclear, energy infrastructure, Boolean, supply chain independent producers. You know, underinvestment from 2014 to 2022 created supply shortages, and this was especially true in energy and metals. Fiscal spending accelerated, particularly in Europe and Japan, and defense budgets broadened worldwide. The US dollar began to soften, a major tailwind for gold and international equities. These are structural forces, not short-term narratives. You know, section two, I've spoken about this a lot through this year: gold and precious metals, a renewed bull market. I want to talk about gold because 2025 was a breakout year for Boolean and equities, and one that we anticipated well ahead of consensus. So why did gold break out to all-time highs? Well, one, a weakening US dollar. Several global macro shifts pressured the USD, narrowing growth differential between the US and the rest of the world, rising deficits, political volatility, international diversification away from USD reserves. A weaker dollar is almost always constructive for gold. Central banks were major buyers again. According to the latest data, central banks, especially in emerging markets, continued to accumulate gold at a historic pace. And even things like tether and stable coins in the crypto world accumulating gold. Why? Well, a distrust in global reserve assets, geopolitical hedging, and diversification away from the USD and USD treasuries. The need for universally accepted collateral. This is critical. Gold's price today is being set not by retail speculation, but by sovereign demand. Real interest rates stabilized. As yields stopped marching upwards and inflation moderated, real rates stopped suffocating Boolean. That shift unleashed gold's upside. Geopolitical escalation created a flight to quality. Investors worldwide increased allocations to precious metals as geopolitical conflicts intensified. Gold regained its traditional role as a store of value, a geopolitical hedge, a volatility dampener, and a long-term inflation anchor. So what about gold miners? Well, 2025 was a turning point for miners because margins expanded with higher Boolean, cost inflation stabilized, free cash flow improved, balance sheet strengthened, and MA activity reaccelerated. Miners went from being ignored into cash flow machines. We believe this trend continues into 2026. You know, our allocation, MLD portfolios have active gold exposure, and we remain bullish into 2026. Gold, again, it's a hedge, it's a store of value, it's a geopolitical insurance policy, a portfolio diversifier, and one of the few assets not reliant on another party's promise. This is not a tactical trade for us, it is a part of our strategic allocation. I want to talk about in section three, energy, revisiting the fundamentals. Energy was one of the most compelling sectors of 2025 and remains one of the most asymmetric opportunities heading into 2026. Why? Structural underinvestment. From 2014 to 2022, the global energy companies endured things like ESG pressure, regulatory hostility, capital flight, low commodity prices, and shareholder demands for return of capital over growth. And as a result, exploration budgets collapsed, development capital stalled, inventories declined, spare capacity shrank, refining capacity fell offline, pipeline construction slowed. We effectively starved the sector of capital. 2025 exposed that mistake. Supply cannot easily respond. Even with higher oil and natural gas prices, new fields take years to develop. LNG export terminals take five to seven years. Pipelines require regulatory approval and multi-year construction. Refining capacity expansion is structurally constrained. Global shale productivity is falling, and geopolitics restricts supply. The Middle East, Russia, and West Africa. In short, you cannot flitch flip a switch to increase supply. Demand remains strong and persistent. So despite headlines about renewables and electrification, global oil demand set new highs in 2025. Aviation fuel consumption rose sharply. Petrochemicals demand increased. Diesel consumption surged with global trade recovery, and natural gas remained the backbone of global electricity generation. And importantly, as I mentioned in my last segment, AI data centers are enormous energy consumers, not just for electricity, but natural gas and LNG indirectly. Energy demand is not going away, it is growing. Energy companies have become more disciplined than ever. And this is a key point from our energy investment memo. Energy companies are no longer chasing growth at all costs. They are returning capital to shareholders, limiting capex, focusing on high return projects, strengthening balance sheets, and generating record cash flow. This capital discipline supports sustainable dividends and buybacks as well. So geopolitical risk is now a permanent risk premium. Whether it's Middle Eastern instability, Russian supply disruption, U.S. China tension, shipping lane insecurity, OPEC plus policy unpredictability, energy markets now price in a persistent geopolitical premium. Investors need to exposure to assets that benefit from this environment. So our positioning in energy, uh, MLD portfolios maintain exposures across integrated producers, midstream pipelines, LNG exporters and operators, natural gas infrastructure, diversified energy royalties companies select refiners, uranium producers for nuclear base load, copper, and materials tied to electrification. This is a balanced barbell, traditional energy for cash flow, nuclear uranium for baseload, natural gas for bridge demand, and materials and copper for modernization. We expect energy to remain structurally attractive into 2026 and well beyond. I'm actually excited. Next month's um podcast, I'm gonna have a special guest. Uh we're gonna do a very deep dive solely on the energy market. And I can't uh tell you how excited I am for next uh month's segment. And it's really gonna set the table for how we feel. We're about five years into a 15-year bull market uh in energy. So section four um international equities, you've heard me pound the table and uh and speak on this in previous episodes. So a return to global multipoly polarity. You know, for over a decade, U.S. equities have dominated global returns. 2025 marked a shift, not a reversal, but a broadening. So in Germany, we saw massive fiscal activation, industrial investment revival, infrastructure spending, defense rearmament, improved energy security, revitalized export competitiveness. Germany is quietly entering a multi-year modernization cycle. Japan. Japan became one of 2025's most consistent winners. Why? Massive corporate governance reforms, record share buybacks, unwinding of cross shareholdings, renewed inflation, higher wage growth, improved return on equity. Japan has become investable in a way it hasn't been for decades. And a weakening US dollar supports global assets. As forecasted in our 2026 long-term capital markets assumption piece that I published, the dollar strength is likely past its peak, supporting international equities and commodities. At MLD, our energy, our international exposure reflects selective Europe, Japan, global industrials, exporters, and international dividend growers. International diversification is not optional. It is essential. You've heard me speak about defense, aerospace, and national security. Defense was one of the most important yet underdiscussed asset classes of 2025. Global tensions escalated, NATO countries increased spending, Asia Pacific names rearmed, cybersecurity uh threats expanded, space defense became a priority. Defense companies now have multi-year order books, strong cash flows, long duration visibility, rising global demand. This is secular, not a cyclical theme, and we maintain strategic exposure to aerospace manufacturers, missile and defense systems, cybersecurity, intelligence, and surveillance technology and space-based infrastructure. Defense has been moved from nice to have to core portfolio exposure. You know, section six, uh, infrastructure and power. You know, this is while AI still gets all the headlines. Um, it was two segments ago. I really gave a deep dive on our thematic, you know, portfolio and around uh AI and infrastructure. But the real story is global power shortage. Countries are now confronting a major truth. We do not have enough electricity generation or transmission capacity. This is driving massive utility capital expenditures, grid modernization, nuclear restarts, natural gas pipeline expansion, copper demand accelerating, public infrastructure spending. Infrastructure is not a theme for 2026, it is the next decade, and main MLD portfolios maintained uh exposure accordingly. You know, section seven, private markets and lessons from 2025. I didn't take a lot of heat, but I definitely got in front of some of the tail, uh, the headwinds that were starting to bubble up in and around the thematics of private credit. But you know, the private credit industry hit turbulence this year, not because the assets were poor, but because the structures were flawed. We predicted this in our educational memo: liquidity mismatches, gated funds, redemption cues, nav financing dependencies, duration mismatches, and advisor misunderstanding. Many advisors simply did not understand what they were selling, and this created pain for clients, not ours. MLD's advantage is structural literacy. We only invest in institutional quality managers, closed-end vehicles when appropriate, transparent structures with realistic liquidity frameworks and strategies with proven underwriting discipline. 2026 will separate strong lenders from weak ones, well-built funds from poorly designed products, and advisors who understand structure from those who don't. And this is a healthy evolution. You know, I want to spend a bit of time on MLD wealth and on people, process, and philosophy. Um, you know, I'm so honored to be able to share and build this, you know, along with my partners, but I want to talk about what differentiates MLD. You know, it's our people. You know, we operate as what we call an OCIO or MFO. That's a lot of jargon. But as an outsourced chief investment officer and as a multifamily office, we manage well in excess of $1.5 billion now for families globally. Clients get portfolio management, research, risk oversight, direct accountability, and global due diligence. This is not product distribution. This is real portfolio and risk management. You know, within process, our edge has been consistency. Every portfolio decision flows from risk budgeting, allocation discipline, liquidity management, scenario analysis, stop loss frameworks, and behavior discipline. Process removes emotion, process removes noise, and process compounds reserve returns. Within philosophy, our philosophy has been simple. Discipline outperforms, not speculation, not yield chasing, not trend following, discipline. Discipline has been that word in my life that has made such an impact. Um, discipline, you know, more than uh hard work. Discipline is not intention. Discipline is showing up uh routinely and doing the hard things when it matters and when no one's looking. And in 2025, that philosophy delivered. You have section nine, our 2026 outlook. And I've I alluded to this, you know, I think uh part of me wanted to just summarize, you know, a year's worth of podcasts or client notes and letters that uh, you know, I'm I'm being active in publishing and creating not content, but information to wade through the noise. And uh, but you know, where does that leave us in 2026 outlook? We enter 2026 responsively bullish. Themes we're constructive on energy, precious metals, copper materials, international equities, uh, defense and aerospace, infrastructure utilities, high quality fixed income, finally attractive again, and select private markets, disciplined and structured first. Themes we approach with caution, speculative gross growth, leveraged uh private credit, anything offering monthly liquidity backed by illiquids, and strategies sold on yield rather than structure. Portfolio posture, diversified, globally aware, inflation hedged, commodity sensitive, quality biased, liquidity conscious, and risk managed. We are not swinging for home runs. We are playing the long game with discipline. You know, guys, 2025 was a year where fundamentals mattered again, where real assets shined, where discipline paid off, where poor structures were exposed, and where clients who stayed the course were rewarded. As we enter 2026, our message is clear. We don't chase markets, we build portfolios, we don't react emotionally, we execute with discipline, and we don't follow trends, we follow process. MLD's advantage is people, process, and philosophy. Uh, and thank you for joining us, and thank you for your trust, and thank you for being a part of MLD Wealth Family. I'm Chad Larson. This has been our 2025 year in review and 2026 Outlook. I look forward to speaking with many of you through the holidays. I wish you and your family nothing but health, happiness, and blessings, and have a wonderful year. Take care.