Markets Are NOT Priced for Perfection | Macro Mondays: August 18, 2025

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1:30Hello all there. Welcome to another edition of Macro Mondays. We're sending to you live on various platforms, and we're really excited for this show. My name is Mikl Wolfsloh, your usual host, and as usual, joined by you, Andreas. Welcome to the show. Hi, Mikl. Got a good weekend? Yeah, the sun is shining here in Copenhagen. The temperatures are slowly but surely descending towards more acceptable levels here. So if we can get the cocktail of sunshine and lukewarm temperatures, I'm good. And we're getting there. Almost a Goldilocks scenario. We're getting close to that. Usually this time of year brings that here.

2:12So Andreas, a lot to talk about today. We're going to cover the Alaska summit, the upcoming Washington summit, the entire situation on Ukraine and the peace talks there. Obviously a main driver for markets right now. Going to look into some of the numbers coming out last week and also looking a bit ahead at the Jackson Hole conference by the end of this week and the outlook for the ISM and how that might affect your positioning. Lots to talk about, Andreas. But before we get to all that, remember, listeners, this is a sneak peek into all the research that we do and publish at Real Vision. You need to be signed up for the approach here to get it all.

2:47But in this show, you're going to get a sneak peek and a general understanding of our view in the world of macro. Remember, though, even though we try to be as accurate and actionable as possible, that this is our usual disclaimer, our content and our ideas might be. Sometimes it may be good, sometimes it may be shit. Have you ever wanted to trade Bitcoin but haven't dared try? With Plus500 Futures, you can trade crypto without the hassle of opening a wallet. With just a few clicks, you can register and start practicing with their free and unlimited demo. See a trading opportunity? You'll be able to trade it in just two clicks.

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4:08There we go. And Andreas, speaking of, sometimes maybe good, sometimes maybe shit. Let's kick off with some of the laughs of this week. We need to have a bit of that. I don't know what's a good introduction I just need to show this picture this is the former Estonian Minister of Agriculture Rani Elmer I think his name is and I know Andreas you've always had great hair you've been a bit more experimental with yours than mine what's your analysis what's your take on this haircut here Andreas is this something to take inspiration from is this guy involved in the Ukraine negotiations or I just think it's lovely.

4:49We've been talking about the Trump administration having a lot of good ramps. I don't even know what to call this, Andreas. You know, my short take on it is that it takes balls to leave your ears exposed like that. I mean, apparently he likes his ears. It's just that, Andreas. On to another picture. This is me at my wedding. This is obviously the FogCoin version. I was having a feeling last week, Andreas, that I was being a part of a pump and dump without actually owning the asset. I think that's pretty much the worst position you can put yourself in. FogCoin had a great end to last week, stagnated a little bit over the weekend.

5:35So it seems like I'm out of the woods, still nowhere near all-time high. Am I in the wrong for not getting in on the FogCoin? what do you think andres i i guess for coin is another sentiment gauge right but um as i said i think it was a couple of weeks ago where our compensation was full of these pictures of us with our so-called fuck fingers and i i think it's pretty smart marketing i i have to admit to that and for all meme projects you obviously need a good marketing budget and a good marketing strategy. This is a pretty decent one. Whether there's any merit to this project, I don't know. I'm not the right one to ask.

6:19For now, the disclaimer is that I do not own any FogCoin, which could be an argument to get my analysis. But anyway, let's get on to some of the hot takes of the week here. So a quick break in your regular programming. If you're serious about your future, grab my free report called Prepare for 2030. I think you've got five years to make as much money as possible, and this guide will help you navigate what's coming. The link is in the description. Download it now. I love this meme. I know this has nothing to do with the PPI numbers last week when you're talking about the price of a beef loin New York steak.

6:56But do you get the feeling, Andreas? I know you're looking at this, that there is a discrepancy between the official inflation numbers and what people are feeling in the economy right now? Well, sure. But I think that's been the case for maybe a handful of years or so. Every now and then we see these pieces of anecdotal evidence with, in this case, beef loin doubling in a couple of years. And obviously we need to consider the fact that you have hundreds of thousands of items in the consumer basket, right? But there are bits and pieces currently very, very impacted by inflation, not least within the food sector.

7:38That was kind of what we saw in the PPI as well, material input cost pressures and producer leg of food prices. The question is whether we'll ultimately see those prices being passed on to Walmart and the likes, right? So I'm still in between on this topic in a sense because we obviously also had the consumer price index last week, and it showed basically more or less no signs of tariffs inflation. And then the PPI started showing signs of tariffs inflation, right? And as far as I can gather, this is a classic standoff between the producer and the consumer. is the consumer willing to pay the full tariff?

8:28And in such case, when will the producer pass on the full tariff to the end consumer? And for now, I think the Trump administration has been more right than wrong on this, meaning that the consumer does not bear anywhere near the full cost of tariffs, maybe even as little as 20 % or something like that for now. That could obviously change. I've seen Goldman and the likes. By the way, Goldman needs a new chief economist, according to Donald Trump, right? But kidding aside, you know, they claim that we should expect a full pass-through of these tariffs, say, come year-end or early next year. And I don't consider that unlikely.

9:11But since they haven't passed it on day one, they'll probably pass on the tariffs as part of what you would normally see as price increases, right? So maybe they don't assess that they can pass on everything right now. And instead, they will slowly but surely massage these tariffs in. And in such case, I think Trump will end up winning this discussion. Even if they pass on the full tariff over time, it basically means that they pass on the tariff instead of passing on price increases instead, if you know what I mean. Of course, they plan on increasing prices on a running basis. Every single enterprise does that.

9:52But if they keep the powder dry now, it's probably for a reason. Yeah, absolutely. And that sort of dilutes the immediate effect, at least for political considerations. I mean, a lot of people were expecting like a big hike for the price of an iPhone, etc. That's probably going to get, as you say, massaged in, going to get layered in over the next month. So very interesting that. Okay, Andreas, should we jump straight to the Alaska meeting and the Ukraine situation? Yeah. I think this was probably the hot take of the Alaska meeting. The Russian foreign minister, Sejia Lavrov, showing up to the meeting in a USSR t-shirt.

10:35I don't even know how to compare that to, but that's a very, very strong statement. Very, very fashionable guy, this. Just to round up this Alaska meeting. And I think it was kind of a strange vibe because everyone was looking forward to this, very anxious. Are we going to get a deal? And the press conference was like, we had a great meeting. And that was that. And no news about what was discussed, what was the outcome. And we're only learning that by now, a few days down the line. Tonight, obviously, Trump is meeting with President Zelensky of Ukraine, a lot of the European leaders. in a hope to sort of to pass on the Russian messages and to hopefully get the Ukrainians to accept that to some degree and the Europeans.

11:23So my first, my gut instinct was that Putin had succeeded in delaying the efforts again. And you have to say that he did so. I mean, Trump, what happened to the new sanctions on Russia that we've been talking about for months? They were supposed to kick in if Russia didn't agree to peace terms. The war is still going on where the sanctions are. But at least there's some sort of path ahead. There are some discussions to be had. And I think the Russians have been forced to become a little bit more specific and almost lining up a term sheet for Ukraine. And that's what's really interesting for me right now and what is keeping my hopes up.

12:01So even if this meeting was perhaps a little bit lackluster, or perhaps it was the point to simply keep the momentum going and keep the channels open. That's the way I see it. I know, Andreas, you had a look at a poly market. I don't think I got the chart in here. That's my bad. But I think the level was around a 38 % probability of a ceasefire within 2025. I think it could be a little bit higher, and I think it could be a little bit quicker than that. but it is still very much an unknown. So how did you see the market reactions from the Alaska Summit, Andreas? Well, I mean, first of all, it kind of showcases that it's not a base case that we'll get a peace deal.

12:50And I think in many ways for good reasons. On top of that, I think the most surprising element to this is that we see pretty decent relief at price action in China. So I think some people kind of feared that, okay, if this meeting does not end well, we'll suddenly see a re-escalation of secondary tariffs versus all countries trading with Russia. We've obviously seen secondary tariffs added on India as a consequence of their trade relationship with Russia, but nothing yet on China. and it made me ponder we're by the way long Chinese tech on a cocktail of this and AI catch up in China but it made me ponder whether China is really the true safe haven here from a geopolitical standpoint because we've obviously had this almost Texan style standoff between Xi and Trump during the spring and you know ultimately Trump ended up with slightly higher tariffs on China, which was probably one of his main goals.

14:04But it also showcased that China is probably able to withstand some sort of tit-for-tat embargo longer than the US for a couple of reasons. First of all, because they immediately curbed rare earth exports, which is a big mess for the West. and on top of that the population in China they're simply used to hardship in another way

14:35they're used to hardship in a way that you cannot compare to the West you'll simply end up struggling as a Western leader earlier so I think for those reasons China looks strategically solid here as a macro play also since for example Hang Seng Tech including the usual suspects, Alibaba, Tencent, etc., which are decent AI bets, by the way. It looks very cheap versus earnings. Earnings have surpassed what we saw in 21 where the Hang Seng tech traded twice compared to current levels. I think there's a value play here and everything that's happening geopolitically underscores that. Interesting interest.

15:20So just to sum up our view here, I think it is still a significant probability that we do get some kind of deal, because I think the Russians have moved on a number of issues, specifically the political concessions, but still very, very much up in the air, obviously. But I think it is a little bit undervalued, that probability. We did an entire article last week on our modeling on how markets might react to a peace deal within one week, one month, three month scope. You can check that out on Real Vision for a deep dive into how various assets might react to a peace deal here. You also brought in this, Andreas, the odds for the Nobel Peace Prize of 2025.

16:05And I mean, I think it's going to be tough to find someone who was part of more peace deals than Donald Trump, especially if they get something done in Ukraine. I have zero confidence that he's going to get this peace prize, even though it means a lot to him. But we know he's been nominated, but I'm sure they'll find some writer or some human rights activist in Cambodia or whatever to give it to the backlash of giving this to Trump. Elon Musk is an even worse bet, in my opinion. But yeah, I don't know where your money is at. I think the reason why Trump is so positive every time he talks about Norway is exactly this.

16:50Have you noticed that? Every time he meets with Jonas Sturr, whatever his name is in Norway, he's so upbeat. And Norway is a great country. And we can learn a lot from Norway. And you haven't really heard those tunes with any other country in Europe, really. So and obviously the committee is appointed by the Norwegian parliament, if I'm not right, wrong. So, I mean, but I'll have to disappoint Donald Trump here. Having spent a lot of time in Norway in my life, having met a lot of Norwegians and knowing Norwegian culture, not least when it comes to political decisions, he's not going to get the Nobel Peace Prize.

17:31It's just not going to happen. So he should forget about it. Yeah, I agree completely, Andreas. Okay, so on to other news, Andreas. You posted your StenoSignals weekly editorial this week, looking ahead of the Jackson Hole conference and obviously the speech by Jay Powell. What do you expect there? We've been talking about the possibility of the expectations of the September cut. Do you expect any signals in that direction? What should you look out for? Well, he kind of needs to say something. I mean, it's almost a fully priced base case from the market that we'll get 25 basis points in September.

18:15I'm a little in doubt myself because I think it's getting increasingly clear that Jay Powell himself is not in team rate cuts. We obviously have a lot of members of the committee now openly supporting it, but it very much depends on the political pressure and whether Powell feels the need to sort of accommodate a growing but very vocal minority in the committee asking for substantial rate cuts. And in light of that discussion, Miguel, I want to show this picture of a very, very beautiful man donning an orange suit. I think we have it up there. There we go. David Servos of Jeffries. He's in a relationship with Kellyanne Conway and he's got strong market credentials.

19:03He's ex-fit, by the way, and he's made a massive transformation in terms of his visuals. So this guy is now being brought up. We brought him up, I think, two or three weeks ago when we did a little preview into the potential candidates. And I hold a very firm view on this. The market is way too honed in on mainstream candidates for this job. Look at the guy that he offered the job as BLS commissioner. It was a very unconventional pick, one that clearly led to some fierce reactions within the Bureau of Labor Statistics. I think Trump is the kind of guy who wants to throw a hand grenade into the committee when he gives the nod to the next chair.

19:56And David Servos would be such a pick. I mean, a lot of the members of the committee would be like, okay, this is, you know, because one way of ensuring that this guy is actually capable of forming a majority around big rate cuts, this guy is in favor of big rate cuts, is to, you know, almost force resignations, if you know what I mean, from the committee. We've obviously already seen Arianna Krugler deciding to throw in her towel, basically, and leaving the job. And I think if he appoints David Servos, a few more members will probably leave, which is good. You know, if you want to form your own majority, remember that the president's, you know, he can sort of line up or tee up the nominees every time there's a new job available in the committee, right?

20:50So if a couple of members decide to leave because of this nomination, good news for Trump. So I think he's aiming for a hand grenade solution. This guy would be a brilliant pick. And therefore, I'm still waiting for that kind of fireworks before I really make a decision on what to expect from the Federal Reserve into next year. so the whole point and the reason why I bring it up again now is that maybe very short term here you know the committee is not exactly where the Trump administration wants it to be but it will be in 9 to 12 months from now and I think we'll see major change at the Fed one that will underpin complete debasement of the dollar Very interesting Andreas, this obviously plays into our overall narrative also that we're talking about here at Real Vision And so, Andreas, just a few more thematics before we round off here.

21:45Back to the FogCoin. Not that I want to talk about FogCoin, but I asked one of those guys. He tried to explain it to me. DMs. And I was like, okay, okay, okay. But my question is, when FogCoin banana zone, what will it take? And he said, oh, the ISM just needs to stay above 50 or 60. I don't remember. That's the one variable he was looking at. That's all it takes. Okay, I thought that was quite simple. And then you showed me this because in your standard signals this week, you did a roundup of which assets to look at

22:22when taking in the development of the ISM manufacturing into account. And this one address, you have to explain to me, why does Bitcoin have such a spread to, I mean, this chart essentially shows that Bitcoin is way too cheap if ISM manufacturing rises to 60. How can that be so massive? Yeah, okay. I mean, it's actually a pretty simple study, but yet a little bit complex that I've done in my weekly. And you can obviously get all of the results across all assets and all markets in the weekly article on Real Vision Pro. But take a look at Bitcoin here. currently we're up 95 percent since exactly a year ago while the model implies that if ism rises to 60 which is debatable we're not there by by any means uh it should pick up uh speed to 300 roughly on the year right uh so triple basically in value uh since the year prior um and this is basically you know it's based on a regression so uh when you look at the ism manufacturing over time or the ism composite over time and take the annual returns in bitcoin you see a very strong correlation to the cyclical developments in the economy right so what i think what what mechanically happens here is that when the business cycle improves uh you typically see a positive development in the money trends uh you see positive development in employment trends and wage trends and stuff like that.

23:56And you see an increase in the overall risk appetite. So that's why the correlation is as it is. I think for now, the important takeaway is that we're not even one third of the way rising in a full cyclical up swing. ISM to 60 would typically be where a cycle peaks. We obviously had such a cycle peak in 21. and all models with the forward-looking component to them point in the direction of, say, 55 to 57 now on ISM in three, four months from now. So where are we in this cycle and what's priced in? Well, we're probably one-third of the way into a cyclical upswing. Obviously, there is always a risk that it could go in the other direction, But the point here is that it's very asymmetrical if you believe that business cycle is accelerating, not the opposite.

24:59The market is pricing a mild acceleration of the economy, nothing more than that. And it's the same conclusion, no matter whether you look at equities, commodities, foreign exchange, etc. I really get to that conclusion. The market is pricing a very mild reacceleration in the ISM index to maybe 52, 53, that range. so i see it constantly online right now i see constantly from the investment banks saying okay equities are priced in an almost picture-perfect macro landscape um the answer is that's not really empirically true the macro picture that is priced in is a very lukewarm one which could ultimately of course end up being the case but it's just not priced for perfection by any means uh i simply have to stress that because it's so important that you don't buy into that narrative that this is price to perfection.

25:53This is the peak because it's certainly not if the economy accelerates. It's certainly not. Incredible numbers, incredible chart, Andreas. It's going to be very, very interesting to follow. We're obviously talking a lot about the ISM score in here, one of the few remaining numbers that we're actually following, perhaps. Andreas? yeah i so much want to talk about the chart that i uh sent you just 15 minutes ago whatever it was just before we went on air because yeah go ahead yeah yeah but i i um i had a chat with jordy um great guy uh uh former market maker and uh in uh the option space and in equities etc you know a tremendous curriculum.

26:40And he's ventured a lot into investments in the AI space and crypto space. And we had a discussion on whether AI could end up being, or Bitcoin could end up being the ultimate AI trade. And I think this chart is very telling in that regard because this is the monthly survey for Bank of America. And they ask a lot of institutions, I think two thirds of them are global and one-third of them are domestic in the US. So, you know, everything from sovereign wealth funds to pension schemes to insurance companies to very large family offices and stuff like that. And three out of four in this survey respond that they have zero exposure to crypto.

27:32That includes Bitcoin in this. They probably have some indirect exposure via the S &P 500 now with MicroStrategy a part of it. et cetera, but direct exposure, nothing. If, and I stress, if some of these institutions start basing their investment decisions on agents, every single agent will tell you not to have this allocation. So that could be a pretty, pretty material change. And that's why I actually like the way he framed it, Jordi Visser. You can go have a look at the entire interview I did with Jordi last week at the Real Vision platform. Very interesting. There was a lot of discussions on X last week about people posting we're still so early in Bitcoin.

28:20People invested in Bitcoin and that's people say, oh, we're not. You should have gone in at 10 ,000. If you believe that simply half of these or most of these institutions are going to dive into crypto, it's yeah, things are looking very, very interesting address. Absolutely. Any final points before we round off here? I'll maybe conclude with a few remarks on the wall of worry that we're currently faced with in terms of inflation pressures. So if you can move to the chart on page 20, Michael, on the PPI, because it was a nasty PPI last week. I'll have to admit to that. we saw input cost pressures in both consumer goods services, you know, basically across the board.

29:08But if you look beneath the hood here, a couple of observations. One, it was very, very heavily impacted by portfolio fees, meaning that all of the aforementioned asset managers, they've had great returns since April, thereabout. And you can see that in performance fees and whatever, and that feeds into the PPI. That's point number one. Point number two, this is an example of companies being reluctant to pass on the tariff straight away. Why is that? Well, ultimately, and again, this is maybe my point of the week, you cannot have broad-based inflation across all goods and services unless there is an expansion of the money base to pay for the fucking goods and services.