Ukraine Strikes and Market Moves | Macro Mondays (June 2, 2025)
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Hello out there. Welcome to another edition of Macro Mondays here at Real Vision. My name is Mikkel Rosenwald and I'm joined as usual by my co-host Andreas. Welcome to the show Andreas. Good to see you Mikkel.

Yeah, you too. You too. Joining us from the home office. Looking really nice there, Andreas. So very, very interesting weekend, Andreas. We had a lot of action in the Ukraine-Russian war. We have lots of ground to cover to give you an outlook into our view of the macro landscape right now. Remember, this is a sneak peek into our research and analysis. If you want to deep dive more details, more trade ideas, head over to Real Vision to sign up for that pro subscription program.

Also, perhaps while I remember it, it's good to bring our usual little disclaimer here, Andreas, that we try to be very specific. We try to be very actionable.

But as always, this is not investment advice and our trade ideas might be. Sometimes maybe good, sometimes maybe shit. Let's hop on over to what's going on right now. Massive attacks from Ukraine on Russia over the weekend. We want to take a little bit of a deep dive into that. Look at the market effects. We're going to talk a little bit about both oil and the Bitcoin as well.

The Operation Spiderweb, it's been called. I don't want to try and pronounce the Ukrainian name here, Andreas. It was a massive drone-based attack based by drones who were driven to the near Russian air bases by Russian truck drivers. They didn't know they were carrying Ukrainian war drones. The war drones were released, remotely activated, of course, and bombed some very, very large Russian military aircraft. You see some in the picture here.

Most of them what we call strategic bombers, so bombers aimed at delivering mostly nuclear warheads in times of war. Massive attack, a lot of talk on social media about this being sort of a Pearl Harbor moment of the launch of World War III. We can get back to that. But certainly sets the tone for these negotiations that are taking place right now in Istanbul, Russian and Ukraine are meeting.

We have some initial photos of the Russian side, the left side of this photo. They didn't look too happy or too encouraged about these talks, given the backdrop of these drone attacks. Andreas, how do you gauge the market reaction for this today? Yeah, well, obviously we have a reaction in everything related to commodity markets, everything from oil to copper to silver spiking. And I guess it makes sense, given that this is the first time in a while that we have

basically see geopolitics back in the limelight from a risk perspective. Hi, Raoul here.

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Judging from the response in oil, this wasn't expected at all and arrives at very peculiar timing in a way since OPEC is basically flooding the market month in and month out with incremental increases in their supply. So I've personally been pondering whether this could be the optimal timing for the US administration to try and

Pull the rug from under the Russian energy exports in an attempt to try and force an outcome here. I'll hand you the word in a second to discuss that, Mikkel. But given that OPEC in May, in June, in July decided to add, say, 400 to 500K worth of barrels of oil a day in production...

could be like a golden window of opportunity to try and do something here on sanctions on Russian energy if they truly want to force an outcome here. And I'm obviously thinking about the US administration and the role that it takes in these negotiations. Yeah, I agree completely. I mean, we did hear some whispers about what could be in this upcoming sanction package. I still think something is coming or something is at least on the table if the Russians do not play ball this week.

we're talking sanctions related or directed at financial assets. So we've discussed this before. A lot of Russian financial assets were frozen, but not necessarily ceased, especially by European countries. I think that's something the US administration could look at as part of the sanction package. Another part could be energy. Energy isn't mentioned directly in this sanction package, but secondary tariffs is. And that's what the formula would come in. So sanctions on, say, India,

if they continue to buy Russian oil and gas. So I agree completely. That's very, very likely. The current negotiations are going to be very important because the Russians need to show that the peace process is still alive. That's been Putin's game all along. I used the phrase that he was French-zoning Donald Trump. Essentially, he needs to keep sort of the illusion of a peace process going on. But it looks like Trump is waking up to the fact that he has been French-zoned, if you buy that phrase.

And yeah, things are looking difficult for Vladimir Putin right now. I think the Ukrainians are also upping the ante to say so. They launched a drone swarm against Putin's presidential jet last week or the week before that.

And now these attacks, it shows an increased level of audacity and risk willingness, most likely also encouraged or at least assisted by the US who are providing the intel, et cetera, satellite footage needed for this. So absolutely. I just want to move on to one more chart here because that's obviously the end game. Are we going to get a ceasefire? I've been a very big proponent of, yes, we're going to get a ceasefire in 2025, but

Polly Market has done a U-turn on this. I have also slightly so. I still think it's possible during 2025. But obviously the game Putin is playing right now is to keep the war going and the peace process sort of alive to satisfy Trump in the hopes that his summer offensive can be really, really successful. He can afford to be patient. The Ukrainians and Trump cannot. So that's essentially the game here. Yeah.

So, Andreas, another angle. Yeah, go ahead. Michael, one thing I'd like to add here is that, you know, judging from the price action already this morning in the Asian session and during the European hours after this drone attack became widely known and the information started spreading on social media and various media outlets, I think it was very interesting to see that the dollar was actually weak and growing.

At least historically, you would have probably seen the opposite, right? The dollar gaining some momentum when geopolitical risks were on the rise. But I think the current dollar sell-off is very related to the exact point that you mentioned on the seizure of financial assets in Russia. So remember what happened when Russia invaded Ukraine, both the foreign exchange reserves, but also assets, obviously, of all the US and others.

or frozen by the international community. And obviously, when stuff like that happens, and you run a big portfolio in a country like India or China or Nigeria, et cetera, you call for a meeting and discuss what to do about that sanction risk.

Because obviously you're prone to such sanction risk if you're not an ally of the U.S. And that became crystal clear after that Russian invasion. And Scott Besant and Trump even publicly discussed whether to hand back these seized assets basically a few weeks ago. I mean, we're talking less than a month. And I think it was part of the plan if they could actually get

Putin to the table and get him to agree on some sort of ceasefire without being too hostile to him, that they would actually hand some of these assets back in order to send the signal to the global south that the US is not seizing assets right, left, and center just for the sake of it. So they are painfully aware in the White House that

That this sanctions package back in 22, seizing assets from Russia, has been a part of weakening the dollar. It's been a part of driving gold higher. It's been a part of this whole journey that we've seen two, three years in a row now of a move from soft dollars to hard dollars, gold and Bitcoin, instead of US dollar and treasuries.

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Thank you.

Very interesting. And I also think some of the reactions to the markets are a little bit overdone. Just a final point on these attacks, because...

A lot of people are talking about Pearl Harbor, Ukraine are faffing this. I mean, it's very symbolic to attack the Russian nuclear arsenal because this is one of the pillars of Russia's great power status. They're not an economical great power. They're not a cultural great power. They are a military and an energy great power.

And the military great power pillar is very, very much based on the nuclear weapon. So there is a lot of symbolism to this. It's very useful for Zelensky internally in Ukraine and for his Western backers.

But it's not doing anything to alleviate the situation on the front line. It's not doing anything to remove the half a million Russian troops inside Ukraine. So this doesn't alter the facts on the front. You can listen to my interview with Klaus Kontroban this last week, where we go much more in depth on this. But it's a symbolic attack that's very, very important for this Western backer, Zelensky, but doesn't really change the facts on the ground. Perhaps...

It doesn't have to change the course or the progress of the peace talks. We'll have to see about that. One angle address that keeps on rolling is European defense. And we've been banging our drum a lot. I know a lot of listeners here have joined in on the Rheinmetall trade. We can bring that up here. Doing incredibly well this year, especially. I have to say, I completely underestimated this address.

Well, it's been tempting to take profit quite a few times in this trade. Let me put it like that. And we've actually, we have taken profit. And, you know, I think other areas of this trade are, you know, less invested in. So this is now global darling, also retail investors, making it prone for them.

for a setback should the market conditions not really underpin the case anymore. I think the next thing that we'll discuss in size is how to protect yourself digitally. Because obviously we're going to spend billions after billions on tanks and

and what have you. But if we're going to spend 5% – now you're bringing up the headline from Reuters late last week. If we're going to spend 5% of GDP on defense, we'll have to be creative. And you have a background within the public diplomacy in Europe, Michael, so you know how creative you can be. Yeah, yeah. I mean, we –

We tried to do this a couple of years back when the threshold was 2%. That was the goal. Denmark was nowhere near that. So we basically got the memo like, can we find anything that tastes a bit like military spending? And we had the idea, oh yeah, how about some cybersecurity, some strategic infrastructure? And most of it got rejected. It's probably going to count towards the 5%. That's what we're hearing. So some sources, the Danish PM are saying this is going to be

3.5% of GDP spending directly to military. That's a huge number, but probably already priced into the Rheinmetall trade. What's not priced in necessarily is from 3.5% up to 5%, the remaining 1.5 percentage points there.

most going to other stuff than directly military investments, which, among other things, means defense spending, border security, all that kind of stuff. So 5% is an incredible number. I don't think any European country is there. Not very many countries on Earth is there. So this is an enormous investment. We're talking wartime investments almost here.

So it's definitely something to be invested in and being on both the straight. But you can just pull up Jonas here. Yeah, but Michael, that's the thing you're saying. We're talking wartime-like investments. Well, according to those exact same leaders, we are at war. So I guess that's why we should actually start comparing this to wartimes. And yeah, this German equity, Jonas, has been on a tier basically for decades.

Yeah, two, three months in a row, especially after the whole discussion on the digital defense started. So part of this is obviously to also take back the keys on everything related to your digital infrastructure, cloud services and what have you. This being one of the few companies in Europe worthwhile discussing in that relation.

So I think you're absolutely right, Mikkel, that a lot of focus has been given to the 3.5% related to tanks and grenades. We probably need to focus a lot more on the 1.5% related to digital defense spending, cybersecurity, and so on and so forth. Just over the past week, we've also learned how the Trump administration has provided support

Palantir with the keys to build an all-in system on the US population, basically, as far as I can tell from the stories in the US. I think you should expect something similar in Europe, some big, big, big orders to some of the European companies capable of actually dealing with stuff like this, Jonas being an example of it in the digital infrastructure space.

Okay, Andreas, enough about war and peace and guns and cloud services. Very relevant this week, of course, but let's talk some good old macro. I think we got it hammered down now. We've talked about that for a couple of weeks, that the Doge project is dead. The US administration is now in outgrowing mode rather than saving mode with regards to the deficit. Does that reinforce your view on macro? What are you seeing there?

Well, so I think first of all, I don't necessarily think it's fair to say that the Doge project is dead. They've just acknowledged that Doge is not large enough in scale to really alter the broader trend. So it can change stuff on the margin, but it's not going to alter the overall trajectory of the US deficit, which is still moving in the wrong direction. If you look at the tariffs taken in through the

April and May, we're starting to see some pretty decent revenue coming in, like 2.5x of what you typically saw ahead of the tariff increases. And on a good day, we're talking plus 300 billion now a year in tariffs revenue. Between friends, we're still plus minus around the percentage point of GDP.

So when you have a deficit that is 6x that, it sure helps, but it doesn't alter the trajectory. And then if you account for the impact of the big, beautiful bill, which is going to be discussed again this week, we're probably still talking about

a slight fiscal loosening. It kind of depends on the assumptions you make on the budget deficit after these tax cuts. Will we see improved growth and so on and so forth? But in any case, my best guess would be that we're on the margins heading towards a slightly looser budget than last year. So the whole notion that Trump, Besant, and Musk would be able to balance things

is by now utter bullshit, to be honest. Pardon my French. It was never really a case that was feasible. But tariffs and DOGE helped a little bit on the margin, but nothing stops this train, basically. So sure. And also in relation to the spending talk we just discussed on defense spending in Europe,

I'm not sure that the bond market is fully on top of what's going on from an issuance perspective here. We are seeing some signs of it again today of bond yields going higher also, especially in the long end. And the claims that we saw towards or the price action we saw towards the end of last week with flows into bonds out of equities, I think we'll see a reversal of that during June.

Especially since everyone will come to the conclusion that we don't really see any material change of trend in the bond space. So what are your positions for this summer, Andreas? We've talked a lot about tech equities. We talked a little bit about commodities. What's the plan here?

As you can hear, I still don't like the long end of the yield curve. I think we're going to see a further move in long bond yields. I think the dollar is still very vulnerable here. You need to take some clues from the price action after what happened in Russia over the course of the weekend. It was one of the main tools

that the administration could use to try and regain some credibility and some momentum for the whole dollar reserve trade, US treasuries owned by foreigners. If they could remove sanctions on Russia, it would have kind of given the green light to the global south to start buying dollars again and start accumulating US treasuries. It's really hard to see right now that they remove sanctions on Russia. And frankly, I don't think they should do it.

It kind of leaves us in a vacuum for the dollar, and I think the dollar will take this as a negative input, at least for the time being. Let's see in the second half of the year, but the weak dollar is still here on a trend basis.

You should take clues from what happened on Thursday and Friday last week in relation to the rebalancing flows. And let me just try and explain why, because I think this is very technical of nature and something that a lot of people misunderstand every time they see such price action. We obviously saw some bond buying. We saw some selling of Bitcoin, selling of risk assets into one thing.

But if you look at the relative performance between, say, NASDAQ and long bonds during the month of May, we had one of the most outrageous outperformances of risk assets versus bonds that we've seen over the course of a month for a long while. And we actually need to go all the way back to April 2020 to find something similar.

So once again, a testimony to our analogy that this is very similar to March, April 2020, that we had a full stop. Now we basically have more or less a full go in the economy, locked down to reopening. So we are currently in the reopening phase. And the price action we saw towards the end of last week was basically driven by rebalancing. When you see such an outperformance in equities versus bonds,

pension funds, sovereign wealth funds, and such institutions, they see equities deviating and bonds deviating from their benchmark allocations. And it basically means that they have to adjust. So the stuff that performed during the month, they have to sell that. And the stuff that did not perform, they have to buy that. Buying of bonds, selling of equities to kind of readjust to benchmark.

And it speaks in favor of the exact opposite happening over the next week or two, that you'll start to see institutional investors piling into risk assets again. They're still underinvested, in my opinion, also gauged by various surveys, positioning data, et cetera. It doesn't really look like they've flipped their book to be upbeat on the reopening, so to speak, of the economy.

What is the risk to all of this that I'm saying right now? Well, and I'll allow you to answer that question, Mikkel. The risk is that the journalist asking Trump whether he always chickened out managed to piss him off to an extent that will make him U-turn on his U-turn in the trade war. I don't think that's likely, but who knows by now.

no no i agree completely that that's that's uh that's a risk i mean right now you you when you read the media you basically see two explanations here either the one that we've been pushing but that that trump is is is very very flexible uh that's the nice ways of that's the nice way of saying it uh that he's he's prone to these u-turns the other explanation you hear in the media a lot is that oh trump doesn't like to lose but but clearly it's

it doesn't care. He likes these U-turns. Whenever things get complicated, whenever the opposition or the resistance is too much, he deviates. He focuses on something else. And my base case on these might be wrong, is though that he's trying to get out of this whole trade situation

malaise he's been in. Focus on something else. Focus on dudes in dresses, as Pete Hex had said. Simply to change the narrative ahead of the midterms, which are coming closer as we speak. Mikkel, that's maybe the final thing I want to mention. We obviously had this court ruling that was appealed last week on the reciprocal tariffs. Is Trump even allowed to just

you know, artificially set his own tariffs right against each country on earth. And well, the Court of International Trade initially said no, and then it was appealed, and then they reinstated the tariffs, and we'll have to see, right? I generally think that they'll end up with the same conclusion. Let's see whether the Supreme Court will have another opinion. But the point here is that

The Section 232 tariffs are still in place and they're not legally challenged. Section 232 relates to, for example, the steel and aluminum tariffs that Trump decided to up to 50% as of this week. I think it's much easier for Trump to just use that section. He could use that section to add

tariffs on copper, for example. We've written a couple of in-depth research papers on this exact topic, this tariffs arbitrage between types of tariffs and how to make money on it. So go have a look at Real Vision Pro Macro to find out more about that because I think there's a super niche case here and not a lot of people are involved in these trades, so you can really make some money here.

Yeah, absolutely. Also worth your time to check out our charts on institutional positioning, as you mentioned earlier, Andreas. There's always a good watch to be where the institutional money is headed. That's always what you try to be here.

That's all for this week, Andreas. Really good stuff. We have a lot of great articles and content coming up. I have an interview with Jonathan Galavis perhaps later this week, which was just postponed, where we're going to go much deeper into the status of the US trade talks with Euro, Asia, etc. Lots of good content coming up. So any final points, Andreas, before we round off?

No, I think you need to watch Trump's reaction function and whether it shifts to these two, three, two section tariffs. That would be a game changer, mostly positive, but also with a few niche cases where you can make a lot of money. So go check it out in our research. Absolutely. Thanks a lot for this, Andreas. And thanks to all you guys for tuning in. We'll be back next week with another edition of Macro Mondays. See you then.

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if you've been together. So hopefully see you next time in Singapore. Real Vision will be there. I look forward to seeing you all. If you liked this episode, I'd love for you to head over to realvision.com forward slash join for a free membership. Start your journey today to unfuck your future. Just one click away.

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