Welcome to another week! For the new readers: every week I comment on the top prediction markets—selected by volume, volatility and surprising resolutions—across (geo)politics, elections, macro, tech and science. Markets first, news through their lens, not the other way around.
Let’s see what changed in the world!
Weekly Outlook
US Inc.
Midterms
After last week, Democrats might have put some big champagne orders. Polls, both local and generic ballot, were extremely favorable to the blue side—sweep chance went from 53% to 61%.
Other forecasts are aligned. Adjacent’s SEND Index is up almost 3% on the week:
Nate Silver is also bullish on Democrats with his model showing a 65.1% chance the Senate turns blue:
It is clear that the GOP struggles against Trump’s policies (mostly the Iran war and tariffs), which put pressure on domestic agriculture and manufacturing. Bar a sudden reversal in the Iran war, this is just the beginning of a trend.
The Fed
Against my thesis, the Fed hiked, prompting many to believe that a new cycle has started.
The decision was unanimous, a large surprise vs pre-meeting consensus which expected a split vote. Siding with the market in such a way sends a strong signal to the Trump admin, to the market itself and to the voters.
However, next month’s decision depends on whether this was a Bernanke- or a Kohn-type hike.
Greenland
We also had a surprise—Trump announced a deal with Greenland that would give America slightly more rights (probably, full text still pending) over the island than the 1951 treaty does.
The market was caught completely by surprise as there were no rumors ahead of the announcement. At least we can be sure there were no insiders.
The Americas
Brazil Presidential Election
Amazing things are happening in Brazil. Only a month ago, Flávio Bolsonaro had a 33% chance to win and now traders give him a 59% chance to be the next president of Brazil.
All thanks to a series of recent polls that consistently put Lula behind the right-wing candidate:
The market gives Bolsonaro a slight premium vs polls, suggesting that traders bet on his momentum.
Asia
Last week also marked the first major scare in Europe over a possible clash with Russia. Incidentally, some European leaders mentioned fearing a double war—Russia vs Europe and China vs Taiwan at the same time.
That likely explains the surge in volume on the Taiwan invasion market. However, there were plenty of traders willing to take the No side as the price didn’t move at all—the market still sees the invasion as highly unlikely.
Middle East & Africa
The Iran War
We are seeing the first signs of bullishness on the US-Iran peace markets. This is the inflection point I’ve been pointing out in my paid articles—this week sees the most important meetings between world leaders at the UN General Assembly in New York.
This is the single best opportunity to launch a peace effort before the midterms. And it’s the best lever the GOP has on the Senate:
It goes against expectations (ie. it’s a positive surprise) and would be highly popular (Americans already wrote off the war as lost based on a Marquette poll). If the effort succeeds, it could also lower diesel prices just ahead of the election.
The market on the US blockade ending by end of October sits at 37%, already pricing in a fair chance of small progress:
However, the downstream markets are flat, suggesting that traders have low expectations of serious progress:
This week is decisive. If nothing comes out of New York, expect a longer conflict.
The Houthis
The market on the Bab-el-Mandeb Strait closure eased off a bit after Trump said that he reached an understanding with the Houthis. The group will refrain from attacking US vessels in exchange for no American strikes on its positions.
This, however, won’t change the fact that the East-West pipeline is damaged and traders see a 71% chance it will stay that way till the end of the month:
Israel
Israel’s reduced role in the war may be connected to the upcoming Knesset election.
The Iran war was not exactly popular in Israel either, but that cannot be said about the Lebanon war, which continues uninterrupted.
Maybe this week’s polls will move the market if we get more results which favor Likud.
Europe
The Ukraine War
Russia is coming out of the Duma election with Putin’s party stronger than ever, thanks to rigging a great program and the stellar performance of the Russian economy, of course.
Ukraine celebrated the election by sending over 1,000 drones at Moscow. At the same time, European leaders are expressing unprecedented levels of fear and are openly warning of a possible clash with Russia. The market on the NATO-Russia military clash rose on the news:
Tensions are especially high after we learned that Russia introduced a curfew near the border with Estonia:
In this environment it is difficult to speak of any durable peace between the two countries:
It’s pretty clear by now that both sides need to fight it out a bit more.
France
Europe is entering its most difficult period in decades as the old elites lose their ground. France will hold a presidential election in April next year and Marine Le Pen is slowly pulling ahead of Édouard Philippe.
I will cover the French election next year, along with other crucial votes on the calendar.
Germany
Germany held elections in Berlin and Mecklenburg-Vorpommern, and both produced a surprising result. In the former, Linke outperformed its polls, while CDU fell below 20% of the vote; in the latter, CDU failed to clear the 5% threshold and didn’t make it into the Landtag!
As a result, the chance that Merz resigns this year is now at 24%:
It is increasingly clear that the next election will belong to the AfD.
Other
AI
Lastly, some AI news. Anthropic initially planned an October IPO; after last week’s comments about frontier progress slowing, traders now put the offering around Nov–Dec.
Additionally, OpenAI is actively suggesting they are way ahead of Anthropic, which could weigh on the IPO. Rumors are that we might see one more new model from the Claude creator soon though.
Wrap up
That’s all for today! I’m planning to release the Fed post mortem this week, with a few important implications and changes to my strategy.
Stay strong and see you soon!
This is not official investment or life advice. Do your own research. These are only my opinions and I encourage anyone to do their own research before putting any money anywhere.
French situation seems quite clear imo
Philippe is doing a catastrophic impression so far, looking very tired, autistic and diseased. So barring a last minute coalition like before or Philippe getting way better, LePen is on tracks to win.
I'm not sure there is time enough for anyone else to matter, I see only Hollande who could potentially declare. Apart from this can't see how it would change.
Imo Philippe+LePen at 61% looks really undervalued but maybe there will be suprises !