Weekly PROPHET NOTES 11/11/24

Global Outlook: Trump is back, Germany is in shambles and the whole Europe is anxious about Ukraine

The emotions are cooling off. Obviously, while many switched their focus to what will come next, some of the accounts on social media keep on coping and refuse to believe that Trump won. Happily, in this newsletter we focus on the future, not the past.

This week we are still enamored (or horrified) by the election results and the whole news cycle is full of useless predictions. I can tell you easily one thing - none of the pundits have any idea on who Trump will nominate to cabinet. Unless you know Barron, Don Jr. or Elon Musk, you can easily fade the gossip.

Before I begin the global outlook, some public announcements:

• this week I took a bit of a break from the news cycle, so this edition is expected to be short,

• after election frenzy, I am back to focusing on making the forward looking news platform ie. more focus on *truly* global events,

• going forward, main focus will be on global politics (major elections, dramas, etc.), geopolitics (wars, foreign policy, international trade, treaties, etc.) and economy (both on the macro scale ie. GDP, unemployment, etc. as well as on the micro scale - look at the Apple x OpenAI deep dive for reference).

As described in the last election special, we are looking at times of global volatility, so expect a lot of deep dives into uncharted territories. Fasten your seatbelts as with Trump we are in for a ride for the next four years. Join below so you do not miss a beat.

Enough of introduction, let’s move towards a short summary of the week and what lies ahead.

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Weekly Recap

Trump has won, we can move ahead right? Not really. As Trump’s victory has captured the news cycle, there are a lot of things happening in the background. Especially outside of the US. Buckle up, volatility has started.

US Politics

Here there is not much insight. We have witnessed the delayed red sweep with Republicans taking control of Presidency, Senate and the House. The MAGA wet dream is here. If you want to read my thoughts on the elections, go below:

As for other developments, the Republican sweep should give Trump enough room to implement most of his policy promises. Some of the more controversial (abolishing DOE) are probably a libertarian pipe dream, but one can dream. Personally I doubt that he will follow through on this, but I cannot wait to be called on this prediction.

While the US has been in party / wake mood depending on the affiliation, the world around us also reacted to the elections.

Wars

The Middle East is in an interesting situation right now. With Trump being elected we can clearly see the vibe shift between the Taliban congratulating him and Qatar expelling Hamas leadership from its country. While the vibes shift there, Trump’s support for Israel is clear and we can expect that the US will further support Israel in its efforts to curb Iran’s enthusiasm. The same cannot be said about Ukraine.

Trump was very vocal about ending the war in Ukraine swiftly and we can already see European nations scrambling to offer continuing support to Ukraine. Poland, France, Germany and the UK are supposedly working towards providing more support in light of Trump administration policies.

One thing it indicates is that Trump is serious about his commitment to end the war there. We are looking at last aid packages for Ukraine being approved before Trump’s inauguration and then it is Europe that will pick up the burden of Ukrainian support.

My take on this war is clear. You either go all in and show that Ukraine is part of the Western world, or you fold and let Russia take it. There is no land in between where you funnel money and weapons to Ukraine in dire hope that Russia will get tired before Ukraine and Western societies.

Out of the two, the Trump administration is going the latter way leaving Europe hurting, either scrambling to repair relations with Russia or continuing on the path of slow bleeding through half-hearted support of Ukrainian effort.

We are still to early to do an early assessment of Trump’s foreign policy, but somewhere in March I should have enough data points to travel there.

Europe

Last time I featured Europe as a separate section in my global outlook was back when I started and as a European I am glad that today is the day that I can feature this continent once again. Europe’s largest economy (and the third largest economy in the world) is undergoing a political turmoil.

Germany’s leading coalition has effectively crumbled after German Chancellor Scholz has ousted finance minister Christian Lindner from the conservative Free Democratic Party, ending the already unstable three party coalition.

While many have suspected that Scholz will continue to rule for the next few months, undergoing the confidence vote only next year, yet there are more and more rumors that it will happen faster. Many politicians in Germany expect that the snap elections will take place before Trump is officially sworn in and Scholz is supposedly leaning into this option, as described by Politico.

Interesting developments in the biggest European economy, more on this in the markets section.

Other events

Nothing much in other events, maybe despite Bronny James being relegated to the G-League. Laugh all you want, the kid has been through hell with his heart problems + pressure since birth. All the best to him, hope that one day he will be able to unlock his full potential, unburdened by what has been.

That is all major news from last week, let’s look ahead.

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Global Outlook

This week we are looking at more coping, more baseless rumors on Trump’s cabinet and maybe, just maybe some developments in Germany. And Germany will be today’s spotlight.

To keep the long story short, the government in Germany was a coalition of three parties - Social Democratic Party that Olaf Scholz belongs to, Free Democratic Party that the fired finance minister belongs to and the Green Party. This was a very unstable coalition since the very beginning as:

• the Social Democratic Party which you can essentially compare to the US Democratic party in terms of the platform,

• the Free Democratic Party, which is essentially a centrist party, leaning conservative in economic policy and liberal in social policy (can you see the economical conflict already?), like a mix between Republicans and Democrats,

• the Green Party, of which you can guess what its main goals are.

The conflict between the Social Democrats and Free Democrats was brewing since the start and now it was too hard to contain. Now to the prediction.

Considering that the German nation will want to have clarity and start building rapport with the new president of the US as soon as possible, I expect the snap election to take place before the inauguration. I think that most traders agree with me based on the current odds:

Even at 81/19 I still believe that this is still value. But, unless I am missing something, there is one more market that is worth my attention even more:

The 27 p.p. difference between these two markets is solely due to the fact that the President of Germany (not to be confused with the Chancellor) has 21 days to dissolve the Bundestag after the no confidence vote happens. That being said, it is in the best interest of Germany that after the no confidence vote the Bundestag is resolved swiftly as the whole rationale of the situation is to have a new, stable government before Trump is sworn into office. These odds seem like a steal.

Markets ending this week