2025 Global Financial Market Key Trading Panorama: An Annual Review of Political Narratives, Market Frenzy, and Structural Risks

The global financial markets of 2025 are once again defined by the dramatic rhythm of “high certainty bets” and “rapid reversals.” From Tokyo’s bond trading desk, New York’s credit committee, to Istanbul’s foreign exchange market, investors navigate political upheavals, inflated balance sheets, and fragile market narratives, reaping unexpected gains and experiencing intense volatility. Gold hit a record high, while stocks of mortgage giants oscillated like “Meme stocks,” and classic arbitrage trades collapsed in an instant. As the year draws to a close, we review the eleven most representative key trades of 2025, which together outline a risk map deeply intertwined with politics and markets, and serve as a mirror for forecasting 2026.

Cryptocurrency: The Momentum Trap of Trump-Related Assets For the crypto sector, “buying all assets related to the Trump brand” was once an attractive momentum strategy. During the campaign and after inauguration, Trump took a series of aggressive actions in the digital asset space, with his family endorsing various tokens and crypto companies, actions seen by traders as “political boosters.” A “Trump-related crypto asset matrix” quickly formed: Trump-themed Meme coins launched on the eve of his inauguration, Melania’s personal token, and WLFI tokens issued by family-affiliated company World Liberty Financial. Bitcoin miner American Bitcoin, co-founded by Eric Trump, also went public through an acquisition. Each asset’s launch triggered brief price surges, but none sustained. As of December 23, Trump Meme coins had fallen over 80% from January highs, Melania tokens nearly 99%, and American Bitcoin’s stock price retreated about 80% from its peak. This case reveals that political heat can provide short-term momentum but cannot alter the core cycle of crypto markets: rising prices attract leverage, ultimately leading to a correction due to liquidity drying up. Bitcoin, the industry benchmark, declined from its October high, likely ending the year in loss, reaffirming that speculative laws will ultimately overpower narrative hype.

AI Trading: The Valuation Concerns Ignited by the Prophet A trade exposed in routine disclosure documents caused market upheaval due to its operator. On November 3, Cathie Wood’s Ark Investment Management disclosed holdings of Nvidia and Palantir Technologies protective put options. The strike prices were significantly below market prices. Although details were limited and positions may have changed, the disclosure acted like a match igniting widespread doubts about the “overvaluation and high expenditure” of AI giants. Following the announcement, Nvidia and Palantir’s stock prices fell, dragging the Nasdaq index down slightly. Later, Wood revealed on social media that her Palantir puts bought at $1.84 had gained 101% in less than three weeks. Whether this bet proved prescient or premature, it clearly shows that in a market dominated by a few AI stocks, passive inflows, and low volatility, once confidence wavers, even the strongest narratives can quickly reverse.

Defense Stocks: Revaluation Under Geopolitical Shifts The shift in geopolitical landscape led to a surge in Europe’s defense sector, once considered “toxic assets” by many ESG funds. Trump’s plans to cut military support to Ukraine prompted European governments to significantly increase defense spending, causing related companies’ stocks to soar. As of December 23, German Rheinmetall gained about 150% year-to-date, Italian Leonardo rose over 90%. Fund managers quickly adjusted strategies, with some redefining investment scopes to include defense assets. This wave spread from core military-industrial companies to peripheral firms like goggle manufacturers and chemical producers, with the Bloomberg European Defense Stocks Index up over 70% this year. The credit market also saw innovation, with “European Defense Bonds” modeled after green bonds but dedicated to defense industries. This marks a redefinition of “defense” from “reputational liability” to “public good,” with capital flows once again outpacing ideological shifts.

Devaluation Trades: Divergence Between Narrative and Reality Faced with heavy debt burdens in major economies, some investors flocked to so-called “anti-devaluation assets” like gold and cryptocurrencies in 2025, while remaining cautious on government bonds and the US dollar. This “devaluation trade” peaked in October, amid concerns over US fiscal outlook and the longest government shutdown in history, pushing gold and Bitcoin to rare simultaneous all-time highs. However, as a trading strategy, its effectiveness was complex. Subsequently, cryptocurrencies retreated overall, the dollar stabilized, and US Treasuries might have their best performance since 2020. Prices of other assets like copper and aluminum fluctuated under macro forces such as devaluation fears and Trump tariffs. Only gold continued to strengthen, setting new records. This indicates that the “devaluation trade” did not evolve into a wholesale rejection of fiat currencies but shifted into more precise bets on interest rates, policies, and safe-haven demand.

Korean Stock Market: Policy-Driven “K-Pop” Rebound Korea’s stock market staged a dramatic reversal in 2025. Under President Lee Jae-myung’s policy to “boost the capital market,” the Kospi index rose over 70% year-to-date as of December 22, heading toward Lee’s “5000 points” target and ranking first among major global indices in gains. More Wall Street banks believe this target could be achieved by 2026, partly due to Korea’s role as a “core AI target” in Asia. However, a notable absence in this global-leading rebound was local retail investors. Despite heavy foreign inflows, domestic retail investors continued to net sell Korean stocks and poured record funds into US equities, cryptocurrencies, and overseas leveraged ETFs. Capital outflows pressured the won, reminding the market that even a sensational rebound could mask deep-rooted domestic investor doubts.

Bitcoin Duel: Arbitrage Battle Between Chanos and Saylor The public battle between short-seller Jim Chanos and MicroStrategy founder Michael Saylor has become a referendum on “crypto-era capitalism.” Early 2025, as Bitcoin prices rose, MicroStrategy’s stock traded at a high premium relative to its Bitcoin holdings, prompting Chanos to establish an arbitrage position: short MicroStrategy and long Bitcoin. The two then engaged in a public debate. After July, with the surge of “digital asset treasury” companies and falling crypto prices, MicroStrategy’s stock declined, and its premium over Bitcoin shrank, making Chanos’s bet pay off. From his public strategy in May to announcing liquidation on November 7, MicroStrategy’s stock fell 42%. This case reveals the typical boom-bust cycle in crypto: balance sheets inflate due to market confidence and financial engineering, but this pattern relies on continuous price increases. Once confidence wavers, the premium dissipates rapidly.

Japanese Bonds: The Widowmaker’s Comeback The “Widowmaker” trade shorting Japanese government bonds, which caused macro investors decades of losses, finally reversed in 2025. Factors like the Bank of Japan’s rate hikes and Prime Minister Suga Yoshihide’s large spending plans drove yields sharply higher. The 10-year yield broke above 2%, and 30-year yields rose over 1 percentage point, hitting multi-decade highs. As of December 23, the Bloomberg Japan Bond Return Index fell over 6% this year, making it the worst-performing major bond market globally. Fund managers from Schroders and Jupiter Asset Management publicly discussed shorting Japanese bonds. With the BOJ reducing asset purchases and high government debt, bearish sentiment may persist, leaving room for this strategy to continue.

Credit “Intra-Party Fight”: The Lucrative “Hardball” Strategy One of the most lucrative credit returns in 2025 came from internal battles among creditors. In the case of KKR-backed healthcare firm Envision Healthcare, institutions like Pacific Investment Management and Kinge Capital supported a plan to release collateral (equity of Envision’s quality business Amsurg) to back new debt, seen as a “betrayal” by other creditors. These institutions then became bondholders secured by Amsurg and ultimately converted bonds into equity. In 2025, Amsurg was sold for $4 billion, delivering about 90% returns to these institutions. This case reveals the reality of today’s credit market: in an environment of loose covenants and dispersed creditors, “cooperation” is not necessary, and “avoiding being outflanked” often matters more than “judging correctly.”

Fannie Mae and Freddie Mac: Revaluation of the “Toxic Twins” After years of government control, mortgage giants Fannie Mae and Freddie Mac experienced a fundamental shift in market expectations following Trump’s re-election. Optimism grew that the new administration would push them out of government oversight, and their stocks were surrounded by “Meme stock-like” enthusiasm in the pink sheet market. From the start of the year to the September peak, prices soared 367%. In August, news that the government was considering a large IPO pushed sentiment to a peak. Although subsequent prices fluctuated due to uncertainty over specific plans, investor confidence remained. In November, Bill Ackman submitted a detailed proposal to the White House to push for re-listing on NYSE. Michael Burry also announced a bullish stance in early December, suggesting they might be “no longer toxic twins.”

Turkish Carry Trade: Sudden Collapse Under Political Shock After a stellar 2024, the carry trade exploiting Turkey’s high interest rates and stable exchange rate became a consensus among emerging market investors. However, this trade collapsed within minutes on March 19, 2025. Early that morning, Turkish police raided and detained a popular opposition mayor in Istanbul, triggering political turmoil and a sharp sell-off of the lira. The central bank was unable to stop the currency plunge. It is estimated that about $10 billion exited Turkish lira-denominated assets that day, and the market never truly recovered. As of December 23, the lira depreciated about 17% against the dollar this year, making it one of the worst-performing currencies globally. This event served as a wake-up call: the returns from high interest rates are fragile in the face of sudden political shocks.

Bond Market: The “Cockroach Risk” Warning The credit market in 2025 did not experience a single major crash but was troubled by a series of “small crises,” exposing hidden vulnerabilities. Former “regular borrowers” like Sax Global and Fortress Energy faced successive difficulties, with bond values plummeting. Companies like Tri-Color and First Brand went bankrupt within weeks, wiping out billions in debt. Some cases involved complex fraud, others simply dashed hopes. Years of low default rates and easy monetary policy eroded credit standards, with laxity seen in loan covenants and underwriting processes. JPMorgan CEO Jamie Dimon warned in October with a “cockroach” metaphor: “When you see one, there may be more hiding in the dark.” This “cockroach risk” could become one of the core themes shaping the market in 2026.