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It's Christmas Eve and we're unwrapping the market moments that shape the year.
It's World Business Express from the BBC World Service.
I'm Leanna Byrne, broadcasting from Dublin.
We're going to talk tariffs, precious metals and, of course, AI.
AI.
Yes, it's Christmas Eve.
And listen, even if you don't celebrate Christmas.
I think it's a good moment to pause, look back and take stock of a year that kept markets anything but quiet.
It's a pleasure to introduce Ross Mould, Investment Director at AJ Bell.
With me, Ross, happy Christmas.
Happy Christmas, Deanna.
I hope you have a lovely one.
Yeah, you too.
Well, let's get this markets moment of the year officially open.
Ross, ring that bell for me.
Way!
You gave it welly there, Ross.
I've always wanted to give that a good whack, I have to say.
There you go.
So earlier we asked you to go through some of your markets moving moments of the year on World Business Express.
And here's your first one.
I don't think anyone could have missed this one.
April 2nd 2025 will forever be remembered as the day American industry was reborn, the day America's destiny was reclaimed and the day that we began to make America wealthy again.
I was taking you back April 2nd, the day that the United States raised lots of tariffs on countries around the world to try to bring manufacturing back to America.
But Russ, what did it do for markets?
They were absolutely terrified.
They got used to 40 50, 60 years of global free trade, easy movement of goods and people and services.
They really hated it.
But only for about a week, share prices fell quickly, bond markets fell out of bed.
But they quickly recovered as the president delayed.
The tariffs then struck country by country deals.
And company profits didn't show a big hit from the extra costs and tariffs, and inflation didn't shoot higher.
So I think financial markets have for the moment, rightly or wrongly decided that Liberation Day was just no big deal really.
Priced it in, I guess.
I think you're right to say that this has changed so much.
We lived in an era when trade was a lot freer.
It was a lot easier.
And of course, when the announcements for tariffs came in, a lot of people were not happy.
Here's European Union President Ursula von der Leyen.
President Trump's announcement of universal tariffs on the whole world, including the European Union, is a major blow to the world economy.
Then some countries pushed back, especially China, which brought rare earths into the equation.
We have repeatedly emphasised that rare earth-related items have dual uses, for both civilian and military purposes.
Implementing export controls is in line with international practices.
China and the US had a very tenuous relationship this year and went back and forth on this.
Russ, where are we now with the relationship and how have the markets reacted?
It's still tense.
I mean, there was a big summit between President Xi and Trump in Korea in October.
That seemed to take a little bit of the tension out of it.
But issues such as intellectual property, market access, silicon chips, are still really really big stress points between the two countries.
There is this talk of another summit between the two nations next spring.
But for the moment they still have tariffs on each other higher, an awful lot higher than they were a year ago, let alone five or 10 years ago.
Maybe they'll be friends in 2026.
All right, let's move on.
Here's a clue as to what we're talking about next, Ross.
So what's that sound, do you think?
Sounds like a pretty heavy metal to me.
It's a precious metal, we'll say.
And they've done very well this year, haven't they?
Gold, silver, both at record highs.
Let's first hear from Adrian Ash, Director of Research at Bullion Vault, an online marketplace for metals investors.
Gold tends to do well when other things do badly.
And this year obviously, the return of Donald Trump to the White House has really lit a fire beneath what was already a very strong uptrend in the precious metals.
To hear the chief investment officer of Morgan Stanley saying you should be 20 gold in your portfolio, Bank of America saying 25.
When you consider how gold and silver have performed in the last couple of years, it doesn't look that good.
20% to 25% gold in your portfolio.
What do you make of that, Ross? very unusual.
But if investors were brave enough to do it, it's worked out incredibly well.
Gold is up 70% this year, silver 140%.
But it's not just investors who've been buying, it's been central banks been looking to diversify away from the dollar, reduce exposure to America because they're not certain of what President Trump is going to do.
And some countries looked at what America did to Russian assets and thought well, if they can seize their assets and weaponize the dollar, what could they do to us if they felt like it?
So some central banks have decided to try and find a different way of storing their capital.
Maybe a gold standard 2026?
No, I doubt it.
Didn't work out so well last time.
The first time, exactly.
That's right.
Well listen, I'm going to stop being the ghost of Christmas past for a moment and we're going to look at the present day and what's happening.
Here's BC Adebayo.
Lots still going on today, Liana.
Latest job numbers are out in the US and it shows new applications for unemployment benefits falling.
However overall, the number of people already receiving benefits edged a bit higher, to more than 19 million.
Also with me looking through the news today is Amber Mahmood.
What have you spotted, Amber?
First thing i've seen is that pakistan's national airline is being privatized.
Pia has been sold by the government to the arif habib group for 482 million us dollars.
And, staying in the skies, india's launched its heaviest ever space rocket.
The bluebird block 2 is another sign of India's growing ambitions to compete in the fast-growing global satellite business.
And finally Liana, you've probably heard of Castrol, the famous engine oil and lubricant brand that you find in cars and machines all over the world.
And now BP is selling its 65 stake in the business to US investment firm Stonepeak, in a deal that values Castrol at roughly 10 billion.
Thank you, BC and Amber.
Now, it's been a topsy-turvy year for Japan.
A new prime minister bringing more financial stimulus.
Plus surprise interest rate rises coupled with increasing prices, particularly on the cost of rice.
And for the first time, Japan has a female prime minister.
There's been considerable concern at the doubling in the price of rice in the country over the past year.
The Bank of Japan has raised its interest rate to the highest level in 30 years.
Japan's cabinet has approved a stimulus package worth more than $130 billion.
Now, Ross, Japan's been an interesting one to follow this year.
Can you try and do a quick op sum for us of where Japan is at when we go into 2026?
It's got inflation for the first time in over 30 years.
It's showing a little bit of nominal economic growth of some size for the first time in over 30 years.
And its currency is at a 35-year low against the US dollar, even as the Bank of Japan raises interest rates.
And the stock market is at an all-time high.
So overall the picture looks good, but lots and lots of different currents there and financial markets.
Because the yen has been weak and the interest rate there is still low, they borrowing yen use cheap yen to buy other assets around the world.
So the question is, what happens if the yen ever goes up again?
They lose me on the yen.
Do they have to sell the foreign positions they bought and does that cause a market downturn elsewhere, a little bit like we saw in summer 2024?
Well, I don't have the answer, but I will be watching keenly.
All right, let's come to your next markets moment of the year, Ross.
This was about the complicated but worrying collapse of two companies.
Let's hear how it was reported at the time.
When car parts conglomerate First Brands Group went bankrupt in October owing 12 billion, JP Morgan CEO Jamie Dimon said that where you see one cockroach, there are usually more, leading to concerns.
Banks may have opened themselves up to too much risk coming from the private credit markets.
Tricolour and First Brands bankruptcies, each within the last few weeks, have shed a new light on the risks of over-leverage and subprime borrowers.
The cause of its filing, or the proximate cause, seems to be its heavy reliance on short-term working capital financing that was based on assets receivable and assets payable.
Now, that's how Reuters, Bloomberg and CNBC reported the bankruptcies of First Brand and Tricolour.
And you can hear there sometimes it can be quite complex a lot of jargon in those reports sometimes.
Can you explain it to us in more simple terms, Ross?
Generally speaking, after the great financial crisis, banks didn't want to take too much risk, weren't allowed to take too much risk by regulators.
So other providers of credit, of loans, private companies, stepped in to riskier borrowers getting a much higher interest rate.
That's all well and good.
But as the economy has now some higher interest rates, it's put some pressure on those companies.
They've been able to withstand the higher interest rates that they've been paying.
They've collapsed.
And that's made some markets think Maybe there's too much borrowing going on in the private area, where by definition it's private.
We can't see what's going on.
And 20 years after a debt crisis.
The question is does a period of low interest rates mean there's been too much borrowing in a way that we can't withstand?
If interest rates even go up a little bit, which they have done?
All right, Ross, we're going to go to our last markets moving moment of the year.
We always like to say that there's at least two sides to every story, and we don't need AI to tell us this.
On the one hand, you've got tech stocks booming, but are they becoming too much?
Earlier this year, the chipmaker NVIDIA became the first company to reach a $5 trillion valuation.
Here's Silicon Tech journo Alison Van Diglen speaking to us when NVIDIA announced quarterly revenue of 32 billion in October.
Well, in Silicon Valley, there's still a big belief in the transformational potential of AI.
And as long as NVIDIA remains the go-to source of AI chips, the price is justified.
But are the values justified?
Jamie Dimon, CME CEO of the world's largest bank, JPMorgan Chase, told us in October that perhaps they're not.
I am far more worried about that than others.
So if you said now I'm talking about probabilities, I would give it a higher probability than I think it's probably priced in the market and by others.
Yeah, and I'm not saying next year.
Because the timing of these things is almost impossible.
So it could be, what, six months?
Could be a year?
Could be six months.
Could be two years.
Now, Russ, we're making you work on Christmas Eve, but you're not here to give us investor advice.
So we're not going to ask you whether it's overvalued.
Instead, I want to know how worried are you about their valuations?
Does this take up space in your head?
It does.
And these companies Alphabet Amazon Microsoft Meta Oracle, the kind of hyperscalers are spending colossal amounts of money 436 billion between them this year, 604 billion forecast for 2026.
And if they don't start showing a return on that investment and proving to people that companies will pay for the AI service to get rid of it, their own business is running more smoothly.
That's when the trouble could begin.
And some share prices are already worried.
Oracle shares are down 40 from their high in September, worrying about how they're funding their spending and again, what return on it they'll get.
And maybe 2026, the AI chip wars year.
It could be.
I mean, NVIDIA will inevitably attract competition just because it's making so much money.
You've got AMD.
Google Alphabet, Amazon are all trying to break into it, and Chinese competition are looking at this market as well.
All right, we've come to the end, Russ, Investment Director at AJ Bell.
I hope you have a nice Christmas plan.
Very happy Christmas to you.
Yes, home with the family.
What about you?
Oh, yes, I'm actually broadcasting from Dublin at the moment for my national broadcaster, RTE.
So I'm going to be getting a taxi and heading straight home after this.
Russ, thank you so much for joining us.
And that's it from World Business Express.
Please subscribe to get the latest.
Just search for World Business Express wherever you get your podcasts.
Thanks so much for listening.
To you, the empty plastic picnic chair sitting there between Yasmin and Nikki.
I see you, waiting for me with cold, open arms.
I'm not afraid to sit on you anymore.
Now we're both strong enough.
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