YWR: The Next Pain Trades
It’s happening.
The Insanity Trade.
Or, the Anything but the US trade.
The pain for PM’s must be awful.
Everything going the opposite of what they expected.
Europe ‘the outdoor museum’ +12% YTD. ‘Uninvestable’ China +21% YTD,
But it goes on… JPY/$ +7%, EUR/$ +5%, Boomer Coin +10%.
Meanwhile, NASDAQ -6%, BTC -5%. AI Capex bubble cracking…
We’re only 2 months into this and it’s going to get worse.
What we’ve seen so far is a whipsaw move off oversold levels in China and Europe driven by extreme valuations and improving sentiment.
As we go through 2025 longer term themes will start to kick in. Improving growth and competitiveness in Europe (A Secret to Making Money) and growth of the Chinese domestic economy. Not for the love of the Chinese consumer, but for geopolitical reasons.
Already we have Goldman doubling their German growth forecasts for 2026 from 0.7% to 1.5% and 2027 from 1-2%.
And it’s a whole change in mentality around growth and spending in Europe.
"Nobody doubts that this is the biggest turning point for German economic policy at least since reunification, and possibly much longer. The country’s frugal monetary and fiscal policies are born of folk memories of the Weimar Republic’s hyperinflation a century ago, and this is a decisive turn away from that. Plenty of people predicted that Germany would have to start spending more; nobody I spoke to pretended to have had any idea of the scale of what is underway. Only a week ago, the talk was of €200 billion, which seemed extraordinary. Now we’re talking about €900 billion, closing in on the psychological threshold of $1 trillion. Everybody in the Frankfurt financial center seems elated. You would think that Germany had just won the World Cup."
John Authers
Europe is ditching ESG and fiscal restraint, and the market loves it.
But what do you do if you missed it?
What do you do if you don’t want to invest in China, and you're struggling to get positive on Europe? US exceptionalism runs deep.
The next pain trade
Others are better at following momentum and charts, but I hate chasing things. You come in late, top tick everything with a bad price, then something goes wrong (bad news), the theme sells off, and you’re sitting on a loss, feeling like an idiot, hoping some trend you never really believed in will resume. That sucks.
That’s why I really focus on ideas and entry points where I think it’s still early and there is negativity.
So here are two potential pain trades which haven’t moved yet.
So what’s next?
Connect the dots.