Merryn Talks Money: Helen Jewell on Sectors to Watch (Podcasts)

BlackRock International CIO Helen Jewell says global equities had an unexpectedly strong year with most regions outside the US outperforming; she cites renewed strength in European banks and accelerating, AI-driven demand for energy infrastructure as key drivers shaping her 2026 outlook. Jewell highlights diversification and selective opportunities in European quality growth and UK small caps despite recent volatility, but flags investor complacency as a principal risk; interview was recorded Dec. 4, 2025 at the London Stock Exchange.

Analysis

Market structure: The rotation away from long-duration US growth into cyclicals benefits European banks (higher NIM if rates stay elevated) and energy/infrastructure owners (power, cables, transformers). Expect bank index SX7P and utilities/grid operators to capture flows; long-duration tech and bond-proxies should underperform. Cross-asset: a sustained cyclical rerate would push 2s10s wider (higher term premium), pressuring sovereign bonds and strengthening EUR vs USD as capital flows into Europe.

Risk assessment: Tail risks include an EU regulatory shock to bank dividends/bonus rules, a sudden Fed easing that narrows NIMs, or an energy-price crash that stalls infra returns. Near term (days–weeks) earnings and AI capex announcements are catalysts; medium-term (3–12 months) depends on ECB/Fed path and permitting cycles; long term (12–36 months) hinges on multi-year grid capex and semiconductor/data-center buildouts. Hidden dependency: bank upside is conditional on stable/higher front-end yields and unbroken deposit franchises.

Trade implications: Direct plays are concentrated, time-boxed exposures to Euro banks and energy infra with tight risk controls; prefer liquid index/futures or top-tier names (INGA.AS, BNP.PA, SHEL.L, NG.L). Use relative-value pair trades (long SX7P / short QQQ) and asymmetric option structures (call spreads on banks) to express thesis while limiting downside. Size positions as modest conviction bets (1–3% of portfolio) and scale on confirmed catalysts.

Contrarian angles: Consensus may underweight regulatory and cyclicality risks—European banks have historically retraced sharply post rallies when growth disappoints (2016–18 parallel). Energy infra enthusiasm could be overdone if permitting/supply-chain delays push ROI beyond 24 months. Watch positioning metrics (ETF flows, put/call skew); crowded longs can reverse quickly if central banks pivot.

Key Decisions for Investors

• Establish a 2–3% portfolio long in Euro banks via SX7P exposure (ETF or futures) over the next 2–6 weeks; set a stop-loss at 12% and a profit target of 20–30% within 3–12 months, scale out on positive Q4 bank earnings and stable ECB guidance.
• Allocate 1.5–2% each to energy/infrastructure names: Royal Dutch Shell (SHEL.L) and National Grid (NG.L); horizon 12–24 months, target blended upside ~25%; trim if commodity prices fall >20% or permitting delays push capex >6 months.
• Implement a pair trade: long SX7P (2%) funded by a 1.5% short in QQQ to express cyclical rotation while hedging market beta; rebalance if 2s10s moves >40bps or if QQQ outperforms by 8% in 30 days.
• Buy a 3-month call spread on SX7P (buy ~5% OTM / sell ~15% OTM) sized to risk 0.5–1.0% of portfolio premium; exit on 30%+ premium gain or total time loss; use as a low-cost asymmetric bet ahead of AI capex/earnings catalysts.