Weekly PROPHET NOTES 2/3/25

Global Outlook: The last late edition

Strong spray tan game from Trump recently. Source: NPR

Recently I’ve been playing various geopolitical analysts in the background and oh boy… They were caught by surprise is a severe understatement. Chief flip-floppers, they failed to predict Trump win, then they were helpless when analyzing his first moves. Tariffs were the prime example - they were projecting doom, while it was always a negotiation tool.

Anyway, their reckoning day is long overdue. These next four years will help with that. And now, I invite you to the delayed weekly global outlook!

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Weekly Outlook

You waited long enough, let’s just go.

United States

The US is mostly busy dealing with the consequences of the flurry of executive orders from Trump. Main issues are around global aid pause and domestic federal loans and grants pause. Both are now backtracked, but make no mistake - these were just a tool to recalibrate US foreign policy and bloated budget. Changes are coming anyway.

In the meantime, Trump’s two out of three uncertain Cabinet nominations are still awaiting confirmation. I am talking about Tulsi Gabbard and RFK Jr. We are bound to hear more about them in the coming days, but I have now little doubt that both will be confirmed.

CNN is living in an alternative universe. Source: CNN

I also couldn’t miss Trump’s recent comments on taking over Gaza. While CNN and the likes are literally losing their minds, this is just another negotiation tactic from Trump. If you remember the phased ceasefire deal, you see that Phase 3 includes rebuilding of Gaza. It’s not even worthy of a prediction market that the US will finance it in a large part if it ever comes to that. Trump is just showing how far he is willing to go to ensure American business interest is protected.

There is still a long way before we can seriously talk about Phase 3. However, such comments indicate that Trump will also be willing to support Israel to a large extent if the ceasefire goes south. Peace through strength or so they say.

Lastly, a bit of the sad news that I guess you all have seen already - an American Airlines flight from Wichita carrying 64 people crashed into the Potomac river by Washington, DC. The plane collided with an army Black Hawk helicopter that had three people on board. I just want to say here that the recent uptick in air crashes (remember end of last year?) is curious. Not in the conspiracy theory sense, but rather from the human psyche perspective - I must wonder if it can be partly attributed to people being more distressed and prone to making mistakes. It is still too early to say that the uptick is statistically significant, but I’m just sharing here my intuition.

The Americas

Surprisingly stable week for the Americas, bar the news on tariff suspension for Canada and Mexico. But if you read me you already knew that will happen.

Asia

Source: Britannica

That being said, for now the update is that Yoon was charged with insurrection along with former defense minister and several security chiefs. Impeachment trial is still in the works by the Constitutional Court.

Middle East & Africa

The rebuilding will take years. Source: CNN

Now moving to the most volatile part of the world, we start with the star of the Middle East - Israel (pun intended).

Binyamin Netanyahu was invited by Trump to visit the White House. The first in the pecking order, shows Trump’s priorities when it comes to foreign policy. Also Trump has allowed shipments of 2,000 lb (907 kg) bunker-buster bombs to Israel. Deliveries were suspended under Joe Biden last year. Obviously the Middle East is more important than Ukraine and he is willing to go to greater lengths to ensure Us dominance there. Not surprising - after all even without Ukraine, Europe is still dominated by the EU. More on that topic in the Europe section.

Moving just across the border, we had political development sin Syria, where the HTS leadership officially assumed interim office. As expected (by me as trad analysts were scared to touch this topic) Turkey was quick to officially recognize their grip on power. Erdogan pops non-alcoholic champagne while Israel went out of the frying pan into the fire. Turkey along with the HTS will make a lot more noise in the Middle East in the next years.

Meanwhile in Africa, another war is brewing. Rwanda is attacking DRC through a proxy and they are making gains. The topic is intellectually interesting as it is related to rare earth resources - let me know if you want it covered in a separate piece.

Lastly, the three military regimes of Burkina Faso, Mali and Niger have left the Economic Community of West African States and created their own Alliance of Sahel States. I may be massively wrong here as I am not *that* deep into African affairs, but West Africa is commonly known as Francophone Africa as countries there were under French influence for centuries. France had deals on resources, etc.; some currencies were pegged to Franc previously and now Euro (Cote d'ivoire for example). Russia has made gains in the three military regimes and I can’t stop thinking that ECOWAS must be heavily influenced by the French. So for now in my mind this move aims to limit the French influence in the region in favor of the Russian. Interesting times.

Europe

AfD is now legitimized. Source: Politico

Europe… Let’s start with Ukraine. Between the expected tariffs on Europe and the ceasefire that I hardly see happening for now, Europe seems to be between a rock and a hard place. I am still short of thinking that Europe siding with Team East is a possibility, but certainly this avenue is more open than it was a few months ago, especially considering German willingness to take Russian gas.

Will tariffs disappear the moment Europe commits to more aid to Ukraine? Probably. Or even simpler, if we really see the increase in NATO military spending target to 5% of GDP as some expect, it may just solve the situation for Trump. In Trump’s mind Europe must be more self-reliant so he can focus on more important regions. However, he also needs to be careful to avoid a European recession. Fine line there. I will focus on this aspect more in the upcoming focus piece on German election.

Staying with Germany, the parliament there passed non-binding measures to restrict migration, including the automatic refusal of entry to illegal migrants. It passed thanks to CDU siding with AfD. It’s the first time it happened and it just may be indicative of a new approach after the election with CDU and AfD looking to get first and second place.

Lastly, the Belarusian election. I think that no one doubted that Lukashenko will win and this is exactly what happened. I will spare you more comments on this.

Business, Finance & Economics

Good afternoon. Source: Britannica

The year in business has started with decisions on interest rates from top global central banks. While the Fed has decided to keep the rates flat (due to a mix of deflationary risks like tariffs and inflation moving back to target range) the ECB and Canadian central bank have cut by 25 bps to 2.75% and 3% respectively. Both regions are looking at a difficult economic environment moving forward so they are already looking to dampen the impact.

From other interesting news, aviation is on the headlines. Two ends of the spectrum - on the one end, there is a new company doing supersonic planes. Concorde fans can rejoice. At the same time Boeing had almost $12 billion in annual loss after a tragic year. I hope that the comeback of American manufacturing will have better results.

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Markets ending this week

As limited as my time was recently, I still got a bunch of interesting markets this week that I’m in process of getting in.