Emboldened speculators: People walk past the Nasdaq MarketSite in New York. Some positions paid off spectacularly. Others misfired when momentum reversed, financing dried up or leverage cut the wrong way. — Bloomberg
NEW YORK: It was another year of high conviction bets – and fast reversals.
From bond desks in Tokyo and credit committees in New York to currency traders in Istanbul, markets delivered both windfalls and whiplash.
Gold hit records. Staid mortgage behemoths gyrated like meme stocks. A textbook carry trade blew up in a flash.
Investors bet big on shifting politics, bloated balance sheets and fragile narratives, fuelling outsized stock rallies, crowded yield trades, and crypto strategies built on leverage, hope, and not much else.
Donald Trump’s White House return quickly sank – and then revived – financial markets across the world, lit a fire under European defence stocks, and emboldened speculators fanning mania after mania.
Some positions paid off spectacularly. Others misfired when momentum reversed, financing dried up or leverage cut the wrong way.
As the year draws to a close, Bloomberg highlights some of the most eye-catching wagers of 2025 – the wins, the wipeouts and the positions that defined the era.
Many of those bets left investors fretting over all-too-familiar fault lines as they prepare for 2026: shaky companies, stretched valuations, and trend-chasing trades that work, until they don’t.
Crypto: Trumped
It looked like one of crypto’s more compelling momentum bets: load up on anything and everything tied to the Trump brand.
During his presidential campaign and after he took office, Trump went all-in on digital assets, pushing sweeping reforms and installing industry allies across powerful agencies.
His family leaned in, championing coins and crypto firms that traders treated as political rocket fuel.
Bitcoin, still the bellwether, is on track for an annual loss after slumping from its October peak. For Trump-linked assets, politics offered momentum, but no protection.
AI trade: The next big short?
The trade was revealed in a routine filing, yet its impact was anything but routine.
Scion Asset Management disclosed on Nov 3 that it held protective put options in Nvidia Corp and Palantir Technologies Inc – stocks at the centre of the artificial intelligence (AI) trade that’s powered the market’s rally for three years.
While not a whale-sized hedge fund, Scion commands attention due to the person who runs it: Michael Burry, who earned fame as a market prophet in The Big Short book and movie about the mortgage bubble that led to the 2008 crisis.
The strike prices were startling: Nvidia’s was 47% below where the stock had just closed. Whether the trade proves prescient or premature, it underscored how quickly even the most dominant market narratives can turn once belief begins to crack.
Defence stocks: New world order
A geopolitical shift led to huge gains in a sector once deemed toxic by asset managers: European defence.
Trump’s plans to take a step back from funding Ukraine’s military sent European governments into a spending spree, giving a huge lift to shares of regional defence firms, from the roughly 150% year-to-date rally in Germany’s Rheinmetall AG as of Dec 23, to Italy’s Leonardo SpA more than 90% ascent during the period.
Banks even started selling “European Defence Bonds,” modeled on green bonds except in this case ringfenced for borrowers like weapons manufacturers.
It marked a repricing of defence as a public good rather than a reputational liability, and a reminder that when geopolitics shifts, capital tends to follow faster than ideology.
Debasement trade: Fact or fiction?
Heavy debt loads in major economies such as the United States, France and Japan, and a lack of political appetite to confront them, pushed some investors in 2025 to tout gold and alternative assets like crypto, while cooling enthusiasm for government bonds and the US dollar.
The idea gained traction under a bearish label: the “debasement trade”, a nod to historic episodes when rulers such as Nero diluted the value of money to cope with fiscal strain.
Gold, meanwhile, has kept powering ahead, reaching new all-time highs.
In that corner of the market, the debasement trade endured, less as a sweeping judgment on fiat, more as a focused bet on rates, policy and protection.
South Korean stocks: K-Pop
Move over, K-drama. When it comes to plot twists and thrills, it’s hard to beat this year’s action in South Korea’s stock market.
Fuelled by President Lee Jae Myung’s efforts to boost the country’s capital markets, the benchmark equity index rocketed more than 70% in 2025 through Dec 22, headed towards his aspirational goal of 5000 and handily topping the charts among major stock gauges worldwide.
It’s rare to see a political leader publicly set an index level as a goal, and Lee’s “Kospi 5000” campaign drew little attention when it was first announced.
Now, more and more Wall Street banks including JPMorgan Chase & Co and Citigroup Inc think it’s achievable in 2026, helped in part by the global AI boom, which has increased demand for South Korean stocks as Asia’s go-to AI trade.
Bitcoin showdown: Chanos v Saylor
There are two sides to every story. In the case of short-seller Jim Chanos’s arbitrage play involving bitcoin hoarder Michael Saylor’s Strategy Inc, there were also two big personalities, and a trade that was fast becoming a referendum on crypto-era capitalism.
In early 2025, as bitcoin soared and Strategy’s shares went through the roof, Chanos saw an opportunity. The rally in Strategy had stretched the premium the company’s shares enjoyed relative to its bitcoin holdings, something the legendary investor saw as unsustainable.
So he decided to short Strategy and go long bitcoin, announcing the move in May when the premium was still wide.
Japanese bonds: Widowmaker
If there was one bet that repeatedly burned macro investors in the past few decades, it’s the infamous “widowmaker” wager against Japanese bonds.
The reasoning behind the trade always seemed simple. Japan carried a vast public debt, and so the thinking was that interest rates just had to rise sooner or later to lure in enough buyers. Investors, therefore, borrowed bonds and sold them, expecting prices to fall once reality asserted itself.
In 2025, the widowmaker turned rainmaker as yields on benchmark government bonds surged across the board, making the US$7.4 trillion Japan debt market a short-seller’s dream.
The triggers spanned everything from interest rate hikes to Prime Minister Sanae Takaichi unleashing the country’s biggest burst of spending since pandemic restrictions eased.
Yields on benchmark 10-year Japan government bonds (JGBs) soared past 2% to reach levels not seen in decades, while those on 30-year paper advanced more than a full percentage point to an all-time high.
A Bloomberg gauge of JGBs returns fell more than 6% this year through Dec 23, the worst-performing major market in the world.
Credit scraps: Playing hardball pays
Some of 2025’s richest credit payoffs didn’t come from turnaround bets, but from turning on fellow investors.
The dynamic, known as “creditor-on-creditor violence”, paid off big for funds like Pacific Investment Management Co and King Street Capital Management, who waged a calculated campaign around KKR-backed Envision Healthcare.
When Envision, a hospital staffing company, ran aground after the Covid-19 pandemic, it needed a loan from new investors.
But raising new debt meant pledging assets already spoken for. While many debt holders formed a group to oppose the new financing, Pimco, King Street and Partners Group broke ranks.
Their support enabled a vote to allow the collateral, a stake in Envision’s valuable ambulatory surgery business Amsurg, to be released by the old lenders and used to back the new debt.
Fannie-Freddie: Revenge of Twins
Fannie Mae and Freddie Mac, the mortgage-finance giants that have been under Washington’s control since the financial crisis, have long been the subject of speculation over when and how they would be released from the government’s grip.
Boosters such as hedge fund manager Bill Ackman loaded up on the two in the hopes of scoring a windfall on any privatisation plan, but the shares languished for years in over-the-counter trading as the status quo prevailed.
Then came Donald Trump’s re-election, which catapulted the stocks into a meme-like zeal on optimism the new administration would take steps to free up the companies. In 2025, the excitement ratcheted up even more:
The shares soared 367% from the start of the year to their high in September and remain big winners for 2025.
Driving the momentum to its peak this year was word in August that the administration was contemplating an initial public offering (IPO) that could value the enterprises at around US$500bil or more, involving selling 5% to 15% of their stock to raise about US$30bil.
Turkiye carry trade: Cooked
The Turkyish carry trade was a consensus favourite for emerging market investors after a stellar 2024.
With local bond yields above 40% and a central bank backing a stable dollar peg, traders piled in – borrowing cheaply abroad to buy high-yield Turkyish assets.
That drew billions from firms like Deutsche Bank, Millennium Partners and Gramercy, some of them on the ground in Turkey on March 19, the day the trade blew up in minutes.
As of Dec 23, the lira was some 17% weaker against the US dollar for the year, one of the world’s worst performers. The episode served as a reminder that high interest rates can reward risk-takers, but they offer no protection against sudden political shocks.
Debt markets: Cockroach alert
Credit markets in 2025 were unsettled not by a single spectacular collapse, but by a series of smaller ones that exposed uncomfortable habits.
Companies once considered routine borrowers ran into trouble, leaving lenders nursing steep losses.
Saks Global restructured US$2.2bil in bonds after making only a single interest payment, and the restructured debt is itself now trading at less than 60 US cents on the dollar.
New Fortress Energy’s newly-exchanged bonds lost more than half their value in the span of a year.
The bankruptcies of Tricolor and then First Brands wiped out billions in debt holdings in a matter of weeks.
In some cases, sophisticated fraud was at the root of the collapse.
In others, rosy projections failed to materialise. — Bloomberg
