Global Outlook: Finally, a Deal
Weekly PROPHET NOTES 5/5/25
I touched some grass today. Yes that’s the message. Nature in the morning is truly a gamechanger, especially since I’m more of a night owl. Anyway, I have a busy week ahead with a trip coming up tomorrow. A mix of a city-break with nature exploration is exactly what I needed after four years with nearly no time off.
This doesn’t mean I won’t be here and on X posting updates - after being terminally online for the last year it’s tough to disconnect completely. Especially since I have positions on prediction markets that depend on it.
Some say we are in for a wild week as well no, so let’s go ahead and see.
Weekly Outlook
This week we had a few elections, including Canada as well as some major developments around the Ukraine war, which I detailed in the article yesterday:
US Inc.
The US and Ukraine signed the reconstruction deal, more details above. While the deal is signed, the peace is slowly drifting away with both countries not exactly cooperating. Now Trump administration has reportedly finalized new sanctions on Russia, mostly on energy and banking sectors.
In the meantime, Mike Waltz was ousted as national security adviser and is replaced with Marco Rubio for the time being. He was then nominated to be the next UN ambassador. Not exactly a punishment, but some are linking the ousting to the Signal fiasco.
Lastly for US Inc., a judge in Texas ruled that Trump administration cannot use Alien Enemies Act to deport Venezuelan immigrants. It will be a tough legal battle that won’t resolve for months. And for the time being, Trump will continue to do what he wants.
The Americas
Moving a bit north, we had an election in Canada. In a stunning reversal, Mark Carney has managed to not only win the election with enough margin to from a government (a coalition one to be precise), but also have a more personal victory as in a highly unexpected scenario, Pierre Poilievre lost his seat.
While I was on the sidelines in this election, the Conservatives fumbled massively, from holding a firm lead just a few months ago, to profoundly losing the election. Some blame Trump for the right’s underperformance, while I believe that it is more the effect of Canada being a highly liberal society that was not turning right, but getting tired of Trudeau.
Asia & Australia
Tensions on the India-Pakistan border continue as last week Pakistan supposedly had credible intel on imminent Indian attack. In the end nothing happened, but countries are still on the edge as only a couple of days ago India banned the import of all goods from Pakistan. Anyway, I still hold my thesis that India won’t invade Pakistan and the two nuclear powers will end their dispute through diplomatic channels.
In a rare appearance, we had Australian election as well this week. In a similar fashion to the Canadian one, the Labor Party has secured a strong victory with a right-wing leader failing to secure his seat. Well, what can you expect of a country that had one of the most stringent COVID regulations on earth.
Middle East & Africa
Iran-US nuclear deal negotiations appeared to hit some sort of a roadblock. Suddenly Americans imposed additional sanctions on Iranian oli and Pete Hegseth said that Iran would pay the consequence for backing the Houthis. Iran accused US Inc. of a lack of goodwill and seriousness (I can agree with the second one considering all the propaganda photos posted by the official White House account on X) and in effect, the talks scheduled for Saturday got postponed.
Oman, the mediator, cited some logistical reasons for the delay, but for now the new date is not set. It is supposed to depend on the US approach, per some Iranian official. Well, in my opinion these are just some pressure theatrics as despite these strong comments neither side exited the talks. Odds moved only slightly and are back to 50/50 now:
In the midst of the deal, Israel has reportedly approved plans for long term military occupation of Gaza, further decreasing ceasefire odds. The plan is supposed to go into effect after Trump’s visit in the region in the mid-May, but honestly it’s just a theatric way to show they “care” about a ceasefire. Well, it only further reinforces my thesis, even fulfills it and the price action on markets responded accordingly:
Additionally, after some Houthi strikes near the Ben Gurion airport, Binyamin Netanyahu vowed to retaliate and strike Yemen. Supposedly the US gave its green light.
On the northern border, Israel has once again carried strikes on Syria, targeting a site near the presidential palace in Damascus. The official casus beli is protection of Druze religious minority, but I believe that Israel wants to pressure Syria and create a sort of a buffer zone as plan minimum to have some distance to the new regime.
After a small pause, Africa is back on the menu with bombing of hospital in South Sudan as well as a drone attack on a military base near port Sudan. Fears of the civil war reigniting are on the rise.
In the a bit forgotten conflict between Rwanda backed M23 rebel group and DRC, there is a détente as two sides are working towards a ceasefire. Minor clashes are bound to continue in the foreseeable future, but the territorial expansion of M23 is stopped for now.
Europe
Amid the botched peace talks, Russia has announced a 3 day truce for the Victory Parade on the 9th of May that was rejected by Ukraine. Then Zelensky threatened to strike the parade in Moscow, but amid all the flexing, the Ukrainians are now softening their stance. Anyway, it was just enough for two European leaders - of Serbia and Slovakia - to “fell ill” and cancel their trips to the parade.
Quite in line with my initial assessment of the Romanian election, in the re-run of the first round, George Simon, the right-wing candidate has secured 41% of the vote and is going to face Nicusor Dan, the independent mayor of Bucharest, in the second round on the 18th of May. Seems like the Trump negative effect can only go so far.
Speaking of the right-wing, the now most popular party in Germany, AfD, is now labeled as a proven right-wing extremist organization by German domestic spy agency. It allows for increased scrutiny over the party and its members, including surveillance. Kind of absurd, as the party has risen in popularity due to an awful migration policy combined with equally absurd energy policy. Both intrudocued by the incumbent parties.
Now both CDU and SDP will govern over Germany as they voted to agree to a coalition deal that is supposed to go into effect this week. Long time coming, especially for my Yes shares on the market.
Lastly in another, this time UK local election, the right-wing is gaining. Reform UK, the party of Brexit and Nigel Farage, beat Labour Party by six votes in Runcorn and Helsby by-election.
Business, Finance & Economics
In the big news last week, the Q1 GDP numbers for US Ince were a negative 0.3%, on the back of increased imports to front-run tariffs. Well, if the Q1 GDP was down due to front-running tariffs, the Q2 negative GDP will be due to actual tariffs and turmoil associated with them - you are not bearish enough:
While Apollo is now predicting a 90% chance of a tariff driven recession, the jobs number for April was surprisingly good at 177k vs 138k consensus. The unemployment stayed stable though at 4.3% and accounts form different sectors of the economy point to the fact that hiring is slowing down and it’s increasingly difficult to find a job. At some point these two now contradicting facts will converge and something tells me they will converge on the not so good outcome.
Moving to markets, OPEC+ has once again agreed to increase oil production, despite the plummeting oil prices. While some report that this is done to put pressure on Kazakhstan and Iraq that failed to limit production beforehand, I believe that the measures are aimed at the US, to prevent Americans from quickly developing their shales.
Amid all the turmoil, the legend himself, Warren Buffet, said he plans to retire from Berkshire Hathaway at the end of the year. Amazing run by the legendary investor, I guess it’s high time for him to rest being 94 years old.
From the business angle there is a mix of actions pointing to recession fears and trials to appease Trump. The latter is now done by IBM, that announced plans to invest $150 billion in America over the next five years. The move comes after losing 15 government contracts due to DOGE.
The former is visible by lack of concrete guidances that are usually issued during earnings calls and by UPS that plans to cut 20,000 jobs globally due to anticipated decrease in deliveries from Amazon, its largest customer. Recession indicators all around the economy are flashing brighter and brighter.
Lastly, Temu, the popular Chinese ecommerce, said it would stop selling goods to America after the de minimis exemption was eliminated. Big blow to Temu as well as ecommerce bros in general.
Tariffs
I figured tariffs now deserve their own subsection so here it is. First some good news, Trump signed EO to reimburse some tariffs put on auto parts as industry insiders warned that there was not enough time to reroute supply chains.
But the main culprit, China, still faces 145% tariffs as the official talks between the two governments are yet to start. Deals take time to negotiate and looking at both Chinese and American approach, we are still far away from any kind of deal here. For now China is expecting some goodwill from the American side to start the talks.
And lastly in the very recent proposal, Trump wants to tariff… foreign movies at 100%, saying that Hollywood is dying. Well, that’s a new one, but honestly I think he should and will back off as taxing services would set a dangerous precedent for the US that is a massive net exporter of services thanks to all the tech giants.
Wrap up
That’s all for today. Tomorrow I’m traveling so ill be mostly active on X, but the plan forward is to publish State of the PROPHET NOTES on Wednesday with my performance last months and then a deep dive on Polish presidential election later in the week.
Stay strong!
This is not official investment or life advice. Do your own research. This are only my opinions and I encourage anyone to do their own research before putting any money anywhere.