Global Outlook: The Tide Is Turning
Weekly PROPHET NOTES 4/21/25
I see the change of sentiment slowly taking effect across influencers, pundits and commentators. The most devoted hardliners will be loyal to the bitter end, but those positioned even remotely moderately are changing their tune. Chaos is winning.
In the face of disastrous execution by Trump administration, the whole world is seemingly anticipating a rapture. Commentary is now highlighting chaos. Prediction markets are taking Trump’s comments with a huge grain of salt (my biggest telltale is the Ukraine ceasefire market which has minimal reaction to any new developments now).
The ultimate short-term test of the sentiment will come on the 30th of April when 1Q2025 GDP numbers will drop, but in my opinion even a surprise to the upside won’t change much - everyone is anticipating the Q2 numbers where we should see the first major effects of the policy chaos.
In the meantime, let’s see what awaits us this week. Subscribe below and see the world as it is.
Weekly Outlook
Prepping material for this article and watching the news throughout the week I got a feeling that we got a lot of scattered developments across numerous domains. None of them were extremely consequential by themselves, but in their totality they just strengthen the argument in the introduction.
US Inc.
Starting on a strong note, Nvidia was restricted by US Inc. and now cannot sell H20 chips to China. The chips specifically designed to comply with previous regulations are now in danger of dusting in the inventory. Nvidia said that this will result in $5.5 billion hit to its revenue. The trade war is raging.
Speaking of trade war, last week Trump was talking with Georgia Meloni and the Japanese delegation. Well, neither of the talks resulted in anything substantial, with Japanese delegation repeating EU’s comments on not knowing what the US wants… At this point I’m not sure on whose side the incompetence is, but surely something is off. The markets are less and less confident of any trade deal being announced this month now:
While the trade war is slowly killing the American businesses, Trump is on a crusade to force Jerome Powell to resign, as he is not willing to go with his masterplan on tariffs. Despite all the posts on Truth Social, Trump has really no power here. Markets definitely show some signs of hopium, but rest assured, Trump is powerless here:
Powell is also very candid when speaking to the public. He has now highlighted that the Fed faces problems with maintaining its dual mandate of inflation and employment due to Trump tariffs. Stagflation anyone? In the eventual trade-off between unemployment and inflation, we all know that strong employment will prevail. If it really comes to that it will be increasingly painful to hold currencies… I hope that at least Polymarket implements yield on cash.
Lastly from the failing empire, the Signal drama continues. Reports emerged that Pete Hegseth has also shared details of attacks on Houthis on another chat with his wife, brother and personal lawyer. Well, the administration is for now fiercely defending Hegseth, but it surely seems that someone wants him out. The odds of his ousting rose sharply, but are still fairly low:
The Americas
Stable here besides some drama around migrants and El Salvador - nothing substantial for the overall global situation.
Asia
China continues to bull-post by sharing its 1Q2025 GDP numbers - a staggering 5.4% growth y/y. Skeptics were plenty and rightfully so. Subsequently shared tax revenue data shows ca. 3% decline y/y.
This comes alongside Chinese threats of countermeasures for countries aligning with US Inc. in the trade war as well as continuing effort to secure deals in South East Asia. My opinion here is simple - China sees that US Inc. is struggling with its new tariffs regime and they made a bet on outliving them. It remains to be seen who has the stronger economy, but Xi wouldn’t make this bet if he didn’t believe that he can win.
Also, China is now doing another invasion drill on Taiwan. The game is serious and China is not backing down for the time being.
Staying with the tariff focus, South Korea unveiled a support package worth ca. $23.2 billion for its semiconductor industry. While the semiconductors are for now excluded from majority of the tariffs, Trump has promised that a specific rate is due to be published in a month or so. The subsidy is 25% higher than last year, indicating how seriously countries threat the tariff threat. And how low confidence they have on tariffs being removed, even if they are long-time US allies.
Middle East & Africa
Could I be any more bearish on Gaza ceasefire? Probably not. And each new development only makes me more certain that I’m right. I have currently a quarter of my bankroll bet on no immediate ceasefire in Gaza. And I sleep like a baby.
The current conflict gives Israel casus beli to go all in and actually eliminate Hamas. Sorry to hurt your feelings, but they don’t care about the hostages. They are now convenient. All ceasefire talks now fail because Israel wants Hamas to fully surrender and Hamas wants Israel to back out of Gaza. And faced with sure elimination, I bet Hamas will fight to the bitter end.
So it doesn’t come as any news to me that both IDF decided it wants to stay in parts of Gaza indefinitely as well as the fact that Hamas rejected the most recent ceasefire proposal. It is still somewhat shocking to the trading community, but I claim to have alpha for a reason ;)
Meanwhile, a bit east of Israel, Iran is now talking with US Inc. to reach a deal on nuclear “stuff” and avoid a wider war. The western media is reporting that Iran is “dangerously close” to having a nuclear bomb. My older readers probably have flashbacks of the 2000s when we hear similar reports.
Truth be told they might be closer than ever - would be surprising if the progress was negative throughout all these years. But another truth is that probably no one in the world wants them to have a nuclear weapon. From US, through Israel, Russia, China and even Pakistan - the balance of power in the region would be massively distorted if it happens.
For now the talks seems fairly productive - Iran wants to sustain its enrichment capabilities, but is open to not pursuing nuclear weapons. Pressured from all sides it is no wonder. A telltale here is that Russia is somewhat involved in the discussions and I bet they are also convincing Iran that nuclear weapons are bad for them.
After two rounds of talks, the prospects are somewhat promising - US Inc. seems open to allow the enrichment program to stay in place as long as nuclear weapons are not pursued. In this scenario, Iran’s allies would prevent them from developing them, but Iran would maintain the capability to do so. Not ideal for the US, but there is a chance that Russia’s and China’s unwillingness to allow it will be enough to swallow the pill.
From my POV, I exited my no deal position a while ago. I am now considering a Yes position as I think that Trump would rather avoid a direct conflict with Iran considering the Chinese pressure and overall alignment on Iranian situation among both allies and foes:
Europe
There’s a lot to unpack here. Let’s start with the tangible. Russia announced an Eater truce that was nothing but a major failure. Ukraine wanted to grab the opportunity and proposed a 30-days ceasefire instead. Russia denied it and then Ukraine said it will mirror Russian actions. And the actions were clear - there was no truce at all.
A very delicate situation that caused a lot of turmoil on prediction markets, where some of the traders felt cheated on. I’m all for fair resolutions, but a one day truce that was not explicitly agreed to and failed to materialize for a single minute is not a sound basis for a resolution.
Everyone and their mother was aware that Russia will propose this. The ambiguity was there, but considering the “vibes” of the markets, it was pretty clear that a short-term holiday truce would not be enough to resolve the markets. Two years ago I would hav been mad. But experience on prediction markets thought me that it’s also the people that decide what the markets are about ultimately. And ceasefire markets are about a lasting pause in the war that *may* lead to peace. Not stunt actions.
Anyway, the US effort to end the war is entering its ultimate phase. The proposal is to be presented this week to Russia and if there are wide differences, Trump and Rubio said they will drop the effort.
My thesis here remains the same - during the last few months there was no bridge built. The respective positions of Ukraine and Russia are the same and the distance between them is huge. We’ll see the US signing the deal, maintain intel sharing and resigning from providing any more aid, pushing the burden on Europe. This time markets tend to agree with me:
Staying on the topic for a bit more, Zelensky has also accused China of supplying Russia with weapons. Not only that, he also accused that China supports Russia in producing them on their territory. It’s an interesting development considering that China was weary of supporting Russian war effort. Well, a sign of things to come happening.
From other news J.K. Rowling has won her crusade on trans. Britain’s Supreme Court ruled that the definition of woman is based on biology. I’m listening to Led Zeppelin now so - there’s a sign on the wall, but she wants to be sure, and now she is that the woke is dead. And it makes me wonder… if the Stairway To Heaven is ours to take on.
Lastly, there were some strange protests in France. There were several attacks on prisons throughout the country. Assailants fired automatic weapons at a prison in Toulon, a southern city, and torched vehicles outside jails in others. Supposedly these are a response to a crackdown on drug smuggling. Signs of things to come.
Business, Finance & Economics
Moving to finance, the ECB cut the rates from 2.5% to 2.25%. Based on lowering inflation, the bank also indicated that future lowering is contingent on the trade war being suppressed.
From other business news, the demand for luxury items is falling. LVMH posted 5% y/y decrease in revenue. The revenues were declining even before the trade war, but the sign is obvious - there are structural issues besides the tariffs. Trust me or not, I got my position steadily growing here on Yes:
Lastly today, American banks posted some pretty good result on Q1 earnings calls. No surprises here, for these we need to wait for Q2. When volatility is up, trading revenue for the banks is up as well. But mid-term M&A revenue will suffer. Watch for it. Q2 is going to be wild…
Wrap up
That’s all for today. I missed my last week’s deep dive - only because I didn’t think it was worthy of a publish - I’ll get back with it as soon as it is!
For now stay strong and we will see each other on the market rundown tomorrow!
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.