The Fates were three daughters of Zeus and Themis, goddess of divine law and order. I was in Greece, wandering. Clotho brings each of us into existence, spinning the threads of our lives. Her sister, Lachesis, measures thread with her rod, determining the length of our lives, our destinies. I have clung to the belief that free will shapes an indeterminate and evolving future, though one can never be certain of anything. But the ancient Greeks were sure of the role fate plays in all things; we live in the world they overwhelmingly shaped. And Atropos, cut the thread of life with her shears, determining the manner and precise timing of our deaths.

Overall: “We want a Europe capable of defending itself,” said Ursula von der Leyen, President of the European Commission for the past five years, campaigning for another term. Much has changed during her time in office. No sooner had Europe come to terms with the 2016 Brexit vote, which itself had followed the 2015 mass immigration wave, then Covid shut the continent. The pandemic was followed by Russia’s invasion of Ukraine, a war expected to last days that shows no signs of ending soon. The latest European conflict brought to vivid life the profound implications of economic linkages, dependencies, national security. The most recent geopolitical issue to arise during Leyen’s term is the Middle East conflict, where signs of an emerging peace between the Israelis and Saudis led a weakened terrorist organization to tempt fate, summoning a devastating war onto its people. Climate change and energy policies touched each aspect of these complex issues. And through it all has come a rise of the far right across Leyen’s Europe, which may be a force unto itself or simply a natural reaction to the overreach of the far left. Each has an opinion as to cause and effect, but no one can be certain. And the European elections today are just one of many in 2024. Over 4 billion people will go to the polls this year, more than half of humanity. Drill down to any of the important regions on the planet and many of the issues facing Europe are manifesting in interconnected ways. India went to the polls this week with a surprising result. Mexico too. Change of all varieties is in the air, and in ways unlike what we have generally seen in recent decades, when investors relied on well-mannered central bankers to lead. Politicians have at last reasserted themselves, battling to restore their reigns, the Titans and lesser gods. It was only a matter of time. “Human nature is the one constant through human history - it is always there,” wrote Thucydides in the 5th century BC.

Week-in-Review: Mon: India exit polls show dominate victory for Modi’s BJP and the broader NDA coalition, Sheinbaum wins Mexican presidential election / exit polls show landslide result for her Morena party – potentially surpassing the supermajority level which increases the risk of constitutional reforms, OPEC+ extended all layers of production cuts as expected but detailed the plans to phase out these extra voluntary cuts, ISM services miss, Roaring Kitty posts statement with $116m GameStop position, Israel rejected ‘permanent’ component to cease-fire, Fed’s Kashkari says rates should remain on hold for an extended period, Japan Capital Spending 6.8% (11%e), China Caixin mfg PMI 51.7 (51.6e), Indonesia CPI 2.84% (2.97%e), Turkey CPI 75.45% (74.80%e), EU PMI mfg (final) 47.3 (47.4e), US S&P PMI mfg (final) 51.3 (50.9e), US ISM mfg 48.7 (49.5e) / Prices paid 57.0 (59.0e), S&P +0.1%; Tue: India’s Modi’s BJP party came up materially short of pre-election and yesterday’s exit polls – losing parliamentary majority, Biden signs executive order allowing him to halt asylum claims, Hamas rejects proposal saying ‘permanent’ is necessary component to cease-fire deal, BOJ to discuss bond tapering at next week’s meeting, BoJ’s Himino says policy shouldn’t target ccy level but warns of effects of weak currency, Riksbanks Breman says could cut twice in 2H, South Korea CPI 2.7% (2.8%e), Germany emp chg 25k (7k exp)/unemp 5.9% as exp, S. Africa 1Q GDP 0.5% (0.8%e), Brazil 1Q GDP 2.5% (2.3%e), Mexico gross fixed inv 3% (3.7%e), US JOLTS Job Openings 8059k (8350k e) / Quits 3.507m (3.409m prev), US Factory orders 0.7% (0.6%e) / Durable goods orders 0.6% (0.7%e), S&P +0.2%; Wed: BOC cuts 25bps (as exp) / dovish stance during press conference as Macklem didn’t rule out a per meeting cut and says doesn’t need to move in lockstep with Fed, Modi secures coalition support, Poland CB unch as exp, NVDA mkt caps exceeds $3T, Japan Cash earnings 2.1% (1.8%e) / real -0.7% (-0.9%e), Australia 1Q GDP 1.1% (1.2%e), China Caixin serv PMI 54 (52.5e) / Comp 54.1 (52.8p), EU PPI -5.7% (-5.3%e), Brazil IP 8.4% (8.7%e), US ADP 152k (175k e), Russia Ret sales real 8.3% (10.3%e) / Unemp rate 2.6% (2.7%e), S&P +1.2%; Thu: ECB cuts 25bp as exp / provides minimal fwd guidance but July cut appears unlikely, Mexico’s Morena Party leader says AMLO’s 18 constitutional reforms will be voted on before Sheinbaum takes over from AMLO, BOJ’s Ueda says appropriate to reduce the amt of bond purchases / Nakamura is still not confident about sustainability of wage growth, Germany factory orders -1.6% (0.3%e), EU ret sales 0% (0.2%e), US 1Q Unit labor costs (final) 4% (4.9%e), US Trade balance -$74.6b (-$76.5b e), US Initial claims 229k (220k e), S&P +0%; Fri: US NFP 272k (180k exp – whisper even lower) / unemp 4% (3.9%e) / AHE 4.1% (3.9%e), China halts Gold reserve gold buying after 18m stretch, RBI unch as exp / 2 of 6 voters wanted 25bp cut but MPC forecasts skewed hawkish, S. Africa’s EFF reportedly not to be a part of ANC’s gov’t, Mexico’s Sheinbaum said no decision has been made on package of constitutional reforms, ECB’s Scnabel reiterates they cannot pre-commit to particular rate path / Nagel says not on auto-pilot, Netanyahu to address congress 7/24, China Expts 7.6% (5.7%e) / Impts 1.8% (4.3%e), Japan leading index 111.6 as exp, Germany IP -3.9% (-3%e), EU 1Q GDP 0.4% as exp, Russia Key rate 16% as exp, Mexico CPI 4.69% (4.82%e) / Core 4.21% (4.29%e), Canada Unemp rate 6.2% as exp / Net change in emp 26.7k (22.5k e), S&P -0.1%; Sat: Israeli military freed 4 hostages after central Gaza attack.

Manufacturing PMI (high-to-low): India 57.5 (previous month 58.8), Greece 54.9 (previous month 55.2), Russia 54.4 (previous 54.3), Sweden 54 (previous 51.9), Spain 54/52.2, Netherlands 52.5/51.3, Norway 52.29/52.56, Indonesia 52.1/52.9, Brazil 52.1/55.9, Hungary 51.8/51.8, China 51.7/51.4, South Korea 51.6/49.4, UK 51.2/49.1, Mexico 51.2/51, Taiwan 50.9/50.2, Singapore 50.6/50.5, South Africa 50.4/50.3, Japan 50.4/49.6, Vietnam 50.3/50.3, Canada 49.3/49.4, Hong Kong 49.2/50.6, United States 48.7/49.2, Turkey 48.4/49.3, France 46.4/45.3, Switzerland 46.4/41.4, Austria 46.3/43.5, Czech Republic 46.1/44.7, Italy 45.6/47.3, Germany 45.4/42.5, Poland 45/45.9. Services PMI: India 60.2/60.8, Spain 56.9/56.2, Brazil 55.3/53.7, Ireland 55/53.3, US 54.8/51.3, Germany 54.2/53.2, Italy 54.2/54.3, China 54/52.5, Japan 53.8/54.3, UK 52.9/55, Australia 52.5/53.6, Russia 49.8/50.5, Sweden 49.5/48, France 49.3/51.3.

Weekly Close: S&P 500 +1.3% and VIX -0.70 at +12.22. Nikkei +0.5%, Shanghai -1.1%, Euro Stoxx +1.0%, Bovespa -1.1%, MSCI World +1.0%, and MSCI Emerging +2.3%. USD rose +8.1% vs Mexico, +1.9% vs Brazil, +1.1% vs Australia, +1.0% vs Canada, +0.6% vs South Africa, +0.4% vs Euro, +0.3% vs Turkey, +0.2% vs Chile, +0.2% vs Sweden, +0.2% vs Sterling, and +0.1% vs China. USD fell -5.2% vs Bitcoin, -1.6% vs Russia, -0.9% vs Ethereum, -0.4% vs Yen, -0.3% vs Indonesia, and -0.1% vs India. Gold -0.9%, Silver -3.3%, Oil -1.9%, Copper -2.6%, Iron Ore +2.0%, Corn +0.6%. 10yr Inflation Breakevens (EU -4bps at 2.06%, US -5bps at 2.30%, JP -8bps at 1.47%, and UK -5bps at 3.71%). 2yr Notes +1bp at 4.89% and 10yr Notes -7bps at 4.43%.

2024 Year-to-Date Close: Argentina +46.9% price in US dollars (+63.4% priced in pesos), Turkey +24% priced in US dollars (+35.7% priced in lira), Denmark +23.5% in dollars (+26.5% in krone), Venezuela +21.4% in dollars (+23.8% in bolivar), Taiwan +15.6% (+21.9%), Colombia +15.6% (+18.1%), Netherlands +14.6% (+17.4%), NASDAQ +14.1% in dollars, S&P 500 +12.1% in dollars, Italy +11.5% (+14.2%), Spain +10.3% (+12.9%), Greece +10.1% (+12.8%), Hungary +10% (+15.3%), MSCI World +9.8% in dollars, Ireland +9.6% (+12.3%), Euro Stoxx 50 +9.1% (+11.7%), Malaysia +8.8% (+11.2%), Germany +8.2% (+10.8%), HK +7.7% (+7.7%), Czech Republic +7.1% (+9.4%), India +6.9% (+7.2%), Poland +6.5% (+8.2%), UK +6.3% (+6.6%), Norway +5.6% (+11.8%), Russia +4.8% (+4.3%), Sweden +4.2% (+9.5%), Austria +4% (+6.5%), Japan +3.9% (+15.6%), France +3.6% (+6.1%), Switzerland +3% (+10%), Chile +2.8% (+7.1%), Belgium +2.7% (+5.2%), Canada +0.9% (+5%), China +0.5% (+2.6%), Singapore +0.3% (+2.8%), Russell flat in dollars, Australia -0.2% (+3.5%), Israel -0.8% (+3%), Finland -1.5% (+0.9%), South Africa -2.9% (+0.1%), New Zealand -2.9% (+0.7%), Saudi Arabia -3.4% (-3.4%), Portugal -3.8% (-1.5%), Korea -4.1% (+2.5%), Philippines -4.8% (+1.1%), UAE -6.5% (-6.5%), Indonesia -10.3% (-5.2%), Thailand -12.6% (-5.9%), Mexico -14.8% (-7.7%), Brazil -17.2% (-10%).

The Fates: “What made the war inevitable was the growth of Athenian power and the fear which this caused in Sparta,” wrote Thucydides in the History of the Peloponnesian War. As an Athenian general, he had failed to prevent the Spartan capture of a strategic city, Amphipolis, and was thus exiled for 20 years. This separation allowed Thucydides to collect detailed information on the 27-year war between Athens and Sparta. “I have written my work, not as an essay which is to win the applause of the moment, but as a possession for all time,” he explained.

The Fates II: Graham Allison published his book “Destined for War: Can America and China Escape Thucydides’ Trap?” in 2017. The political gears of global conflict had been grinding since antiquity; they will never cease to turn. The political shocks of 2016, first in the UK and then in the US, alerted politicians in nations across the globe to some strange new subterranean force underway, the gods at play. Ever since the last great war ended in 1945, the global system had been stable, first with a cold war between two Titans, and then with a unipolar world of utter US dominance.
The Fates III: Perhaps it was the US elite’s self-serving support for China’s ascent and their simultaneous neglect for America’s working class that is responsible for the 2016 backlash. No mortal can know such things. But ever since, so much has changed. The world’s great powers are adjusting to this new reality. “If you give way, you will instantly have to meet some greater demand, as having been frightened into obedience in the first instance; while a firm refusal will make them clearly understand that they must treat you more as equals,” wrote Thucydides.

The Fates IV: “In general, the men of lower intelligence won out,” wrote Thucydides, his work a gift to those intent on not repeating the great tragedies of ancient history. “Afraid of their own shortcomings and of the intelligence of their opponents, so that they would not lose out in reasoned argument or be taken by surprise by their quick-witted opponents, they boldly moved into action. Their enemies, on the contrary, contemptuous and confident in their ability to anticipate, thought there was no need to take by action what they could win by their brains.”
The Fates V: Much has been written now about the inevitability of conflict with China, the fall of the American empire, the unseating of the dollar as the global reserve currency. But in each case, there is a visible path to success, room for cooperation, a shared prosperity. Only by articulating our fears, have we a chance to avert our fate. And on May 22, the House approved the Financial Innovation and Technology for the 21st Century Act (FIT21), a final version of which may help extend dollar dominance (via US dollar stablecoin), for many decades to come.

The Fates VI: “Right, as the world goes, is only in question between equals in power, while the strong do what they can and the weak suffer what they must,” wrote Thucydides for all time. “The bravest are surely those who have the clearest vision of what is before them, glory and danger alike, and yet notwithstanding, go out to meet it.” he wrote. “Those who really deserve praise are the people who, while human enough to enjoy power, nevertheless pay more attention to justice than they are compelled to do by their situation,” wrote the banished general. “And of all manifestations of power, restraint impresses men most.”

Anecdote: Zeus and Hera detested their son. Murderous, bloodstained, incarnate curse of mortals, wrote Homer of that child, Ares, the god of war. I looked out across the Aegean from Cape Sounion, the southernmost tip of the Attica peninsula. The ruin of the temple of Poseidon, god of the sea, still stands atop the Sounion acropolis. Nearby, the temple of Athena, goddess of wisdom and defensive warfare, is little more than scattered stones, laid to waste by the Persians in 480 BC. Ares was also known to be a coward, who bellowed in pain, and fled when wounded. He traveled with a train of attendants; his sister Eris, translated to Discord, and her son Strife. The goddess of war, Enyo, walked with Ares, and by her side strode Terror, Trembling, and Panic. As they moved, a groaning arose behind them, and the earth streamed with blood. Thucydides mentioned the strategic and miliary importance of Cape Sounion in his History of the Peloponnesian War; an analysis of the devastating 27-year war between Athens and Sparta from 431 BC – 404 BC. Sparta prevailed in the conflict that left the Greeks states terribly weakened, paving the way for the meteoric rise of Phillip II of Macedon, and his son, Alexander the Great. Looking out from Cape Sounion, one can see the flow of trade, and the approach of hostile navies. He who controlled the point commanded the sea routes south of Athens. And looking down from the Temple of Poseidon, where Thucydides once observed the Athenian navy at anchor in the shallow port, one can’t help but wonder what, if anything, has changed in the true nature of war, even as our machines have advanced well beyond the wildest ancient imagination. Ares, mighty as he was, had no cities where he was worshipped, nor was he given a personality like Hermes, Athena, Dionysus, Aphrodite. He came from Thrace, home of a rude, fierce people. The dog was his animal. His bird was the vulture. And he, perhaps alone amongst the ancient Greek gods, remains immortal.

Good luck out there,

Eric Peters
Chief Investment Officer
One River Asset Management

 
Disclaimer: All characters and events contained herein are entirely fictional. Even those things that appear based on real people and actual events are products of the author’s imagination. Any similarity is merely coincidental. The numbers are unreliable. The statistics too. Consequently, this message does not contain any investment recommendation, advice, or solicitation of any sort for any product, fund or service. The views expressed are strictly those of the author, even if often times they are not actually views held by the author, or directly contradict those views genuinely held by the author. And the views may certainly differ from those of any firm or person that the author may advise, converse with, or otherwise be associated with. Lastly, any inappropriate language, innuendo or dark humor contained herein is not specifically intended to offend the reader. And besides, nothing could possibly be more offensive than the real-life actions of the inept policy makers, corrupt elected leaders and short, paranoid dictators who infest our little planet. Yet we suffer their indignities every day. Oh yeah, past performance is not indicative of future returns.