Episode summary
S&P 500 Erases December Loss as Gold Hits Record
Bloomberg Surveillance
· · 7 min · Guests: Michael Purves, Chris Larkin, Stephen Miran, Mark Hackett, Clark Bellin, Parag Thatte
Summary
The guest argues that the setup for 2026 still favors risk assets, but with a clear split between large-cap winners and everything else. He expects more M&A because equity markets are firm, rate volatility is lower, and scale matters more in an economy reshaped by AI and supply-chain reorientation. That, in his view, should keep smaller and mid-sized companies merging to survive and compete.
On equities, he says the biggest risk is not the broad market but the huge AI-linked capital spending by the mag seven. Their valuations can look attractive on growth metrics, but free cash flow yields are at record lows because of capex, and if the spending does not produce returns, valuations could reset lower. He also thinks the S&P 500’s equal-weight side is less compelling because its earnings growth is only about 4% and many cyclical and value areas already look expensive.
Near term, he sees a year-end drift higher, led by large tech, but longer-term technicals look stretched after a strong 2025. He says momentum is constructive overall, though less so than for gold and silver, which he views as even stronger on the charts.
Key takeaways
- The guest expects more M&A in 2026 because strong equity markets, steadier rates, and lower Treasury volatility create a better backdrop.
- He argues that AI and global supply-chain shifts are increasing the importance of scale, pushing smaller and mid-sized companies to merge.
- The main equity risk is the mag seven’s heavy capex: free cash flow yields are at record lows, and weak returns on that spending could trigger valuation resets.
- He sees the S&P 500 equal-weight index as less attractive because about 4% earnings growth may not be enough to justify current valuations in cyclicals and value stocks.
- He expects a “Santa Claus” drift higher into year-end, probably led by large tech shares.
- He says momentum is more constructive for gold and silver than for the stock market overall.
Notable quotes
“I think for the near-term and near-term in this context, May being 2026, I think we should expect more M&A”
“I think you're going to keep seeing small or medium sized companies merging to get scale so that they can survive and thrive in this in this new era”
“what I'm looking for, Paul, in 2026 is that if there's indications that the return on invested capital from this CapEx spend is not there, then you're going to have a lot of narratives rewritten”
“I think we're going to have a nice sort of Santos sell to drift up higher into year end here, probably led by large tech shares”
“their momentum signals are a little mixed right now, depending on what you're looking at generally, I think they're pretty constructive, but not as constructive as they are for gold and silver”
How the episode opens
I think for the near-term and near-term in this context, May being 2026, I think we should expect more M&A. And one of the reasons why I say that is because on one hand, you're seeing reasonably strong equity markets and some stability in rates. And, you know, you look at Treasury volatility, that's much lower.
Rates may not be as low as some would like, but the rate volatility is lower. It sets a better platform. But I think the other sort of overarching theme here is that, you know, we have this k-shaped economy, but I also think there's sort of a k-shaped stock market dynamic as well.
And what I what we've talked a little bit about this the past, but what I mean by that is that with a I and with reorienting supply chains globally, scale matters, right? Larger companies are able to sort of manage through these transitions better than smaller ones and in many cases there. So I think you're going to keep seeing small or medium sized companies merging to get scale so that they can survive and thrive in this in this new era.
And we're seeing that just with the news that Tom and I were discussing just a moment ago with Paramount and Warner Brothers Discovery. Michael talked to us about kind of the the risk outlook for 2026 again, and the stocks and bonds and commodities were just ripping in 2025. How to how do we set up for 2026?
Well, look, I think broadly speaking, the macro that we have a good sort of macro set up a risk appetite. Right. In terms of, you know, we've got sort of warm, maybe hot monetary policy, we've got some warmth and fiscal policy.
And currently, you know, here on top of reasonably strong earnings growth, on top of not perfect but decent enough economy there.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai trade
- gold and silver rallies
- s&p 500 momentum
- fed rate cuts expectations
- equity positioning and valuations
Companies and tickers mentioned
- TSLA
- NVDA
- MS
- DB
- Tallbacken Capital Advisors
- Gold
- Silver
- Paramount Skydance
- Warner Bros.
- Tesla Inc.
- Nvidia Corp.
- E*Trade
- Morgan Stanley
- Federal Reserve
- Deutsche Bank AG
- Nationwide
- Bellwether Wealth
Watch the episode
Watch “S&P 500 Erases December Loss as Gold Hits Record” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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