Outrageous Predictions
Executive Summary: Outrageous Predictions 2026
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London Quick Take – 8 Jan - Defence stocks soar with BAE leading the pack, Tesco and ABF stumble, Alphabet overtakes Apple
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
In the US, the S&P 500 and Dow Jones fell after notching fresh record highs, while the Nasdaq rallied as we are seeing increasing dispersion within the stock market and even with key limbs like Mag7. Alphabet rallied 2.5% and Apple fell almost 1%. Alphabet now has a larger market cap than Apple – the first time this has happened since 2019. Microsoft rallied 1% to close above its 200-day moving average.
The US economy keeps motoring, even if it is K-shaped. The economy is the market and vice versa. US ISM Services PMI rose to 54.4 in December 2025, up from 52.6 in November, surpassing expectations and marking the strongest growth since October 2024. The question is whether a market shock hits the economy - as long as the market keeps going up you can't see the economy failing. The K-shape idea supports the notion that the "stock market is the economy". So where AI goes I guess goes the US economy.
Finally, talked briefly about the memory storage trade yesterday as prices are rising on soaring AI demand and Samsung Electronics says it expects profits to triple, estimating fourth-quarter operating profit in 2025 of 20 trillion won ($13.8 billion).
I had a look at some key investing themes for 2026 here and
Defence tailwinds: British and European defence stocks extended gains on Thursday as tensions over Greenland sharpened the senses over what investment themes and sectors we should be looking at this year. Clearly defence stocks are the play - along with rare earths. Ironically, it's the Trump playbook for Greenland. BAE Systems shares jumped over 6% to take its gains to 20% in the last 5 days, with Babcock up 17% in the last week with a more modest 1.6% rally this morning. Rheinmetall, Renk, Leonardo were among the major gainers on the continent. This plays into one of the big themes for 2026 that I looked at last month. Then I wrote -
“I still like European defence as a theme. The rearmament story is yet to really even begin and whilst we have seen a material rerating in several large defence names on the continent and in the UK, a selloff in the autumn on some fuzzy ‘Ukraine peace deal hope’ trade is overdone and fails to capture the long-term value in the sector.
“We are seeing a paradigmatic realignment in EU/Nato/UK defence policy. The 20-40% decline in defence stocks since September appears overcooked. Any peace deal is likely to just begin the next phase in confrontation where we see Russia regenerate its armed forces and Europe materially increases defence spending to deter the threat.”
Obviously it was hard to foresee the capture of Maduro and all that has kicked off in 2026, but as I said before all that we are seeing is just the continuation Trump's reaction to long-term geopolitical trends and his reordering of the global balance of power via a mix of trade, economic, diplomatic and military means.
Over in the US, President Trump vowed to increase the defence budget by 50% to $1.5tn, but also said he would not permit dividends and stock buybacks for defence companies. Raytheon fell over 2% and Lockheed was down almost 5% but both rallied sharply in after-hours trading. A massively larger defence budget should be good news for Palantir. Trump wants to use tariff income to pay for the extra spending but we have the Supreme Court ruling to watch and Congress needs to approve it. But it does show increasingly Trump's desire to lean on US hard power assets to shape the world. Geopolitics is the inescapable story of 2026 thus far. US Secretary of State Marco Rubio said he will meet Danish officials next week to discuss the future of Greenland.
Back here, a nasty little January profits warning from Primark-owner ABF dragged on sentiment. Shares in ABF fell about 12%, dropping to the bottom of the FTSE 100, which was off by about 0.2% in early trading on Thursday. Primark sales in Europe fell flat and the US was pretty soggy too, but UK sales were positive. Plans to spin off Primark probably just took a bit of knock. Tesco fell 5% as it failed to provide an upgrade to forecasts despite some good trading numbers over Christmas. Marks & Spencer was up after a solid Christmas report. Shell tumbled 3% as it warned on weak Q4 trading and chemicals losses.
The FTSE 100 closed down 0.75% at 10,048, snapping a three-day win streak. Precious metals miner Fresnillo and copper miner Antofagasta were among the worst hit, down more than 4% each, as gold, silver and copper prices took a hit on Wednesday.
Metal prices are softer again on Thursday, which might add a little more pressure to some of the miners. Spot gold slipped to $4.415, down sharply from yesterday’s peak at $4,500/oz. Silver also extended its retreat to test the $75 support from a high above $82 yesterday. Both look to be in a bit of a consolidation following the tough Christmas pullback, which was followed by a new year push higher largely on geopolitical optics – and they will likely remain under pressure as the annual commodity-index rebalancing gets underway. Both metals could see about $6-7bn in selling on Comex futures in the next five days – so price action will be a useful signal for the underlying demand strength, and highlight whether the January rally so far is purely headline driven.
Crude oil prices were tracking a touch lower and looking softer with Brent hovering at $60 as the US says it will control Venezuela’s oil “indefinitely”. Looking for a major low in crude this quarter as the market remains oversupplied before tightness in supply starts to show at the back end of the year.
“I still like European defence as a theme. The rearmament story is yet to really even begin and whilst we have seen a material rerating in several large defence names on the continent and in the UK, a selloff in the autumn on some fuzzy ‘Ukraine peace deal hope’ trade is overdone and fails to capture the long-term value in the sector.
“We are seeing a paradigmatic realignment in EU/Nato/UK defence policy. The 20-40% decline in defence stocks since September appears overcooked. Any peace deal is likely to just begin the next phase in confrontation where we see Russia regenerate its armed forces and Europe materially increases defence spending to deter the threat.”
Obviously it was hard to foresee the capture of Maduro and all that has kicked off in 2026, but as I said before all that we are seeing is just the continuation Trump's reaction to long-term geopolitical trends and his reordering of the global balance of power via a mix of trade, economic, diplomatic and military means.
Over in the US, President Trump vowed to increase the defence budget by 50% to $1.5tn, but also said he would not permit dividends and stock buybacks for defence companies. Raytheon fell over 2% and Lockheed was down almost 5% but both rallied sharply in after-hours trading. A massively larger defence budget should be good news for Palantir. Trump wants to use tariff income to pay for the extra spending but we have the Supreme Court ruling to watch and Congress needs to approve it. But it does show increasingly Trump's desire to lean on US hard power assets to shape the world. Geopolitics is the inescapable story of 2026 thus far. US Secretary of State Marco Rubio said he will meet Danish officials next week to discuss the future of Greenland.
Back here, a nasty little January profits warning from Primark-owner ABF dragged on sentiment. Shares in ABF fell about 12%, dropping to the bottom of the FTSE 100, which was off by about 0.2% in early trading on Thursday. Primark sales in Europe fell flat and the US was pretty soggy too, but UK sales were positive. Plans to spin off Primark probably just took a bit of knock. Tesco fell 5% as it failed to provide an upgrade to forecasts despite some good trading numbers over Christmas. Marks & Spencer was up after a solid Christmas report. Shell tumbled 3% as it warned on weak Q4 trading and chemicals losses.
The FTSE 100 closed down 0.75% at 10,048, snapping a three-day win streak. Precious metals miner Fresnillo and copper miner Antofagasta were among the worst hit, down more than 4% each, as gold, silver and copper prices took a hit on Wednesday.
Metal prices are softer again on Thursday, which might add a little more pressure to some of the miners. Spot gold slipped to $4.415, down sharply from yesterday’s peak at $4,500/oz. Silver also extended its retreat to test the $75 support from a high above $82 yesterday. Both look to be in a bit of a consolidation following the tough Christmas pullback, which was followed by a new year push higher largely on geopolitical optics – and they will likely remain under pressure as the annual commodity-index rebalancing gets underway. Both metals could see about $6-7bn in selling on Comex futures in the next five days – so price action will be a useful signal for the underlying demand strength, and highlight whether the January rally so far is purely headline driven.
Crude oil prices were tracking a touch lower and looking softer with Brent hovering at $60 as the US says it will control Venezuela’s oil “indefinitely”. Looking for a major low in crude this quarter as the market remains oversupplied before tightness in supply starts to show at the back end of the year.
In the US, the S&P 500 and Dow Jones fell after notching fresh record highs, while the Nasdaq rallied as we are seeing increasing dispersion within the stock market and even with key limbs like Mag7. Alphabet rallied 2.5% and Apple fell almost 1%. Alphabet now has a larger market cap than Apple – the first time this has happened since 2019. Microsoft rallied 1% to close above its 200-day moving average.
The US economy keeps motoring, even if it is K-shaped. The economy is the market and vice versa. US ISM Services PMI rose to 54.4 in December 2025, up from 52.6 in November, surpassing expectations and marking the strongest growth since October 2024. The question is whether a market shock hits the economy - as long as the market keeps going up you can't see the economy failing. The K-shape idea supports the notion that the "stock market is the economy". So where AI goes I guess goes the US economy.
Finally, talked briefly about the memory storage trade yesterday as prices are rising on soaring AI demand and Samsung Electronics says it expects profits to triple, estimating fourth-quarter operating profit in 2025 of 20 trillion won ($13.8 billion).
I had a look at some key investing themes for 2026 here
Read my look at some ideas for 2026 here.
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