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
The midterms are less than three months out and traders increasingly focus on the main election markets, rather than primaries. Here, a persistent D advantage in the generic ballot polling average is keeping a Democratic sweep as the base case:
Ever since the beginning of August, Republican chances have been steadily decreasing on the main market. This is aligned with reports that Jared Kushner met with Hakeem Jeffries to discuss WH-Congress cooperation post-midterms.
However, Adjacent’s SENR Index, based on a basket of individual Senate races, is still showing a slight Republican advantage:
While the discrepancy is small (the main Senate market is exactly at 50/50), the index might be providing a real alpha.
In the primaries, the most popular market is still the SC Republican Senate Special Primary Winner:
Darline Graham is down from the peak of a 92% chance of getting the nomination to 69%. The move down was fueled by a rather weak debate performance and incoming polls that show her advantage dwindling.
The slight increase in the last two days happened on the back of a Trump rally in support of Darline.
2028 Presidential Election
The last two weeks saw a major repricing on the Democratic Presidential Nominee 2028 market. AOC solidified her lead and traders now give her a 23% chance of getting the nomination.
Additionally, Jon Ossoff is emerging as a strong contender. He is currently tied with Gavin Newsom at a 15% chance of getting the nomination—the latter was a strong favorite to win only a month ago!
On the Republican side we see no changes:
JD Vance is still the favorite to get the nomination.
The Fed
It is an important week for the finance world—the Fed officials will gather at Jackson Hole to discuss policy. The market on the September decision is flat ahead of Kevin Warsh’s speech.
Traders expect the Fed to hold rates on the upcoming meeting. However, there’s still a 56% chance of a hike this year, and only a 14% chance of a cut:
The consensus among analysts now is that a hike becomes most probable only after the midterms.
The Americas
Brazil Presidential Election
We are entering a crucial period in the Brazil Presidential Election. In the last five weeks, Flavio Bolsonaro has cut Lula’s lead by half and some polls show a statistical tie between the two in the run-off.
Polymarket still gives Lula a significant advantage (63% vs 33%). However, Bolsonaro’s chances rose by 10 points in the last month, in line with the recent polling.
We have two months until the run-off and if Bolsonaro is able to sustain the trend, we will have an extremely tense election night.
Canada Trade Deal
Last week saw trade talks between the US and Canada collapse. While it was a separate discussion from the USMCA, it shows two things:
How unrealistic the extension of the broad USMCA agreement is, if a smaller discussion faced so many hurdles.
How pathetic the state of US-Canada relations is.
Traders priced in both things and now give only a 13% chance the wider agreement is extended this year.
Why did the deal fall apart after Trump’s announcement that it was finalized? Reporting suggests that America introduced a series of changes that were unacceptable to Canada—it looks like Trump is firing up a trade war ahead of the midterms. Maybe he thinks it will help to lift his approval rating from the absolute gutter:
Asia
South Korea
South Korea is now expected to raise rates this Thursday. The market was initially split—then traders started pricing in an upward revision of annual GDP growth on the back of the semiconductor export boom. The inflation forecast is expected to move the same direction, and the market now heavily favors a hike.
Middle East & Africa
The Iran War
Today, Scott Bessent is expected to announce the most striking sanctions package on Iran in what is dubbed the single greatest economic offensive against a country.
Iran threatened severe retaliation, including an implicit suggestion of kinetic strikes:
That being said, traders see little chance the ceasefire between Iran and the US or Israel will be broken:
Same can be said about putting boots on the ground—Trump’s mention of the military defending bond yields had little impact on the chance of a US invasion of Iran:
Traders seem to heavily discount the severity of the operation and the subsequent Iranian response.
Instead, rumors of a potential revival of the MoU framework pushed the market on the end of the US blockade of Iran up:
Long-term Strait of Hormuz traffic normalization markets also saw an uptick on the hopes of a diplomatic push:
And so did the market on the US-Iran peace talks:
The economic warfare narrative is treated mostly as noise—after all, there’s little more the US can sanction (and effectively enforce). At the same time, peace signals were rather soft—most markets have been flat for the last few days, as if waiting for a worthy signal.
The Houthis
The Houthi attacks on Saudi Arabia have quieted down this week. However, tensions are still high and traders keep the market forecast on the Bab-el-Mandeb Strait closure flat.
Israel
Lastly, Netanyahu’s chances of staying prime minister of Israel are sliding. Each new poll shows Likud losing support in favor of Gadi Eisenkot.
Netanyahu’s problems are structural—Israelis disapprove of his handling of the war and I don’t believe he can change their perception anytime soon. I do have a small No position on him, but I also do know that Israeli politics can be volatile.
Europe
The Ukraine War
The Ukraine war is escalating. Last week we saw several drone incursions, as well as a curious 3-day NATO exercise around Kaliningrad:
One of the drone incidents caused the NATO-Russia military clash market to spike. However, it was ruled that the incident was outside of the market rules.
At the same time, Ukraine continues to strike further into Russian territory and it expanded its civilian targets to other e-commerce warehouses:
I still expect Russia to escalate after the Duma elections:
Putin cannot allow Ukraine to continue the strike campaign unpunished. Mounting losses are forcing his hand and I expect to see some kind of a breakthrough by the end of the winter.
Other
AI
We are nearing the end of August and Anthropic still absolutely dominates the leaderboard. Even the recent wave of Claude hate on X didn’t change the simple fact that Fable is an exceptional model.
Anthropic is looking to ride the Mythos-Fable wave to the IPO, where it aims to beat SpaceX:
Traders now give a 47% chance Anthropic will breach a $2.5 trillion valuation by the end of the year.
Wrap up
That’s all for today! I’m working on my Fed deep dive and I’m planning to publish it by Friday.
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.