11 big trades of 2025: Bubbles, cockroaches, and a 367% jump

Group 1: Trump-Linked Crypto Assets - Trump-linked assets experienced initial momentum due to political support but ultimately faced significant declines, with Trump's memecoin down over 80% from its January high and Melania's token down nearly 99% [2][3] - The Trump family actively engaged in the crypto space, launching various tokens and promoting them, which initially created a compelling investment narrative [4][6] - Despite the political backing, the underlying volatility and speculative nature of crypto assets led to substantial losses, highlighting the risks associated with such investments [1][6] Group 2: European Defense Stocks - A geopolitical shift has resulted in significant gains for European defense stocks, with companies like Rheinmetall AG and Leonardo SpA seeing year-to-date rallies of approximately 150% and over 90%, respectively [12][14] - The change in sentiment towards defense stocks has prompted asset managers to redefine their investment mandates, moving away from previous ESG concerns [13][14] - A Bloomberg basket of European defense stocks increased by more than 70% for the year, indicating a strong market response to increased government spending on defense [14] Group 3: AI Trade and Market Dynamics - Scion Asset Management's disclosure of protective put options in Nvidia and Palantir highlighted skepticism regarding the high valuations in the AI sector, with Nvidia's strike price at 47% below its recent close [8][9] - The market reaction to Burry's trade led to a temporary decline in Nvidia and Palantir stocks, illustrating the fragility of investor confidence in high-growth tech stocks [10][11] - The AI trade narrative has been characterized by rapid price movements and speculative behavior, raising concerns about sustainability as market dynamics shift [11] Group 4: Japanese Bonds - The Japanese bond market, previously seen as a "widowmaker" for short-sellers, has turned favorable for bearish investors as yields surged, with benchmark 10-year JGBs exceeding 2% for the first time in decades [27][28] - The shift in yields has prompted discussions among fund managers about selling JGBs, indicating a potential long-term bearish outlook on Japanese government bonds [28] Group 5: Credit Market Dynamics - The credit markets in 2025 faced challenges from a series of smaller collapses, exposing weaknesses in borrower practices and leading to significant losses for lenders [39][41] - Notable cases included Saks Global restructuring $2.2 billion in bonds and New Fortress Energy's bonds losing over half their value, highlighting the risks associated with lax lending standards [40][41] - The trend of "creditor-on-creditor violence" emerged, where funds that broke ranks with their peers on financing decisions reaped substantial rewards, demonstrating the competitive nature of credit markets [29][30]