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
I have some good news for Democrats. Over the last week, the chance of a blue sweep rose by 3 points to 66% on the wave of continuously favorable polls and increasingly bullish forecasts.
The most watched race of this cycle barely moved, however:
Traders and election nerds are trying to deduce something from early voting data. My testing on OMEN proved without a doubt that early voting data is purely noise (yes, including Nevada), so I don’t use it in my analysis.
I also have a small morning midterms forecast update for the start of the week for paid subscribers:
The Fed
This week we have the Fed decision on rates. Traders have a pretty good idea what that will be after Warsh’s comments in Bangkok on the back of the hot CPI print.
While no change now is the prevailing opinion, forecasts for the December meeting are expecting a continuation of the hiking cycle:
The Americas
Brazil Presidential Election
Down south, Brazil held the runoff to the presidential election. Models, experts, polls and prediction markets had Flávio as the clear favorite. However, his chances started to drop after the Supreme Court decided to extend voting by two hours due to weather and transport problems in some municipalities.
In hindsight, this was the first signal that something might go different with the election. And once the additional two hours passed and first votes came in, it quickly became clear who is the winner:
Lula held a slight lead almost from the beginning (outside of a small Flávio surge in the first 10% of the vote) with early signs that the lead is robust—he outperformed his first round result by a few points across all counted votes.
Did my forecast end up being wrong? Not necessarily—events with an 18% chance of happening do happen roughly 18% of the time… It was a good thing I had a live vote projection module, which helped me see Lula’s lead early on. If it weren’t for my initial disbelief, I could have ended up even more in the green.
Asia
No interesting markets in Asia last week.
Middle East & Africa
The Iran War
The Iran war is still in a stalemate. We have some renewed rumors about a potential escalation, but for now the markets are not pricing in any increased volatility:
Both final deal and Strait-of-Hormuz-related markets are flat or down.
US-Iran ceasefire markets are more volatile, but still in an upward trend:
Traders are not expecting strikes before the midterms, especially with all the bad publicity around the war; they give an 82% chance of the ceasefire holding through the end of the month.
The Houthis
On the other side of the Arabian Peninsula, the Houthis and Saudis continue to exchange blows. While the Bab-el-Mandeb Strait looks safe, we had news that the US ordered non-essential staff to leave Saudi Arabia last week.
This war also impacts the wider final Iran deal market. The issue of Iranian proxies is once again one of the talking points, and with the Yemeni war raging on, there is little chance of an imminent deal.
Israel
In the meantime, Israel is heading to the polls tomorrow in what shapes up to be an extremely difficult election and coalition-building period.
No bloc is expected to win an outright majority, raising a serious argument for a repeat election soon after this one ends.
Ultimately, traders see Netanyahu losing power:
Years of war and a series of personal scandals following Bibi might be too much for yet another reelection.
Europe
The Ukraine War
With the Iran war in a stalemate, it’s the Ukraine war that is picking up the pace, both in terms of peace efforts and escalations. On the one hand we have the recent peace plan along with Melania’s localized ceasefire.
On the other hand, Russian incursions into NATO territories increase:
This market should have resolved last week on the shot-down drones in Romanian territorial waters (see the spike?). However, the Polymarket team decided to once again tighten the rules on the market, leaving me and other sharp traders holding the bags…
Taking both into account, traders see little chance for durable peace in Ukraine. Neither the peace proposal nor the recent escalations moved the market by meaningful amount.
Serbia
Brazil was not the only country with a surprising election result this weekend. In Serbia, Aleksandar Vučić unexpectedly lost power to the Student List. The party built on the back of months-long student-led protests got majority in parliament.
Vučić conceded the election quickly and without a fuss.
France
France is still in the streets. What started in mid-September as high school blockades over crumbling schools has turned into a nationwide revolt over the cost of living. On Saturday, 410,000 people marched and nearly 1,000 were arrested. Macron met student representatives for the first time on Friday, but it didn’t calm anyone down.
On October 18, Retailleau demanded a state of emergency. Lecornu went for local night curfews instead, and the market got the message:
The year-end market fell from a 37% peak to 9%.
Interestingly, Le Pen’s chances dropped 5 points to 43% over the week, even though Ifop still has her at 36% in the first round and winning every runoff test.
On the debt side, Moody’s kept France at Aa3 with a negative outlook, even as the 10Y breached 5.1% for the first time since 2002. Just days earlier, traders priced a downgrade above 90%:
Other
AI
Lastly, Anthropic released Claude Duet—an early, waitlist-only app that aims to put Anthropic on par with Grok Bot, OpenAI’s Dots and Meta’s Muse. I’m yet to use the product, but honestly, I’m in no rush.
My current setup already utilizes agents and Claude Duet seems more like a nice UX over Claude Code than a proper standalone product. Rumors are that Duet is in fact a wrapper on Claude Code.
Wrap up
That’s all for today! This week I plan rolling updates on the midterms and a short post-mortem of Brazil presidential election. I’ll come back to geopolitics a bit after the midterms…
In the meantime, 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.