War: Ukraine-Russia
Wars Can Be Lost Off the Battlefield, as Ukraine’s Zelensky found out in his meeting with Trump at the end of February where he found out that Trump does not care for insistent demands without the carrots of appreciation and compensation. Whether from being tone-deaf or following bad advice, Zelensky lost all US monetary, military and intelligence aid in the last five minutes of a forty-minute public exchange that started very well, with buddy-buddy banter and jokes. It may be only temporary but was a gross miscalculation. On the other hand, Trump’s reaction inspired Germany to volte-face and pledge as much as €900 billion in military and infrastructure expansion to better prosecute the war against Russia. The Europeans are also close to seizing €200 billion in Russian assets in Europe to fund their political support for Ukraine. Maybe they will actually hit their NATO spending targets!
The Mineral Deal (mining regions on map right) is not very important 
from Ukraine’s longer term perspective as any deal will generate revenue for Ukraine that can be used to service debt or its economy generally. A deal’s significance is to keep the US money, weapons and intelligence flowing to Ukraine in the short and medium run, even without a US or NATO guarantee, in order to keep the pressure on Russia going. A US commitment would be good for Ukraine of course but not necessary. It seems to me that Zelensky’s first priority is to last to the war’s end, with Europeans stepping up to the plate as well.
Wars Can Be Won On the Battlefield as Ukraine began to make strides in the eastern region south of the key city of Petrovske (close to that red Lithium area on right side of the map), as Russian infantry attacks crumbled and Ukrainian armored counter-assaults made inroads. While smaller, Ukraine still held Russian territory around Kursk as well. 
If Ukraine can continue their advances and keep up the 1000 Russian-soldiers-per-day casualty count, it will strengthen their hand in the negotiations. The chart left demonstrates that the US is key for their continued military success. Domestically-produced drones may be the basis for Ukraine’s defense but US and European missiles, planes, tanks and vehicles give Ukraine its offensive capabilities. Finally, keep in mind that Trump likes winners and he has repeatedly and publically recognized Ukrainian bravery. Ukrainian success on the ground could counter-balance Putin’s claims of inevitable Russian victory. On the other hand, Trump’s single-minded desire for a deal may force an injurious one down Ukraine’s throat. The entire situation is very much in flux.
Macro: Asia
China’s Key Economic Targets for 2025 were released in early March, including a target of +5% GDP growth supported by raising its fiscal deficit target to 5.66 trillion yuan, ($780 billion or 4% of GDP) the highest level in three decades. The government further announced total bond issuance of 11.86 trillion yuan ($1.6 trillion, up +20% from last year) with about one-third for its provinces suffering under bad real estate debt. Modest subsidies for car and home goods purchases will double to boost consumer spending. China has also announced plans to restructure its steel industry through output cuts and to expand coal production. Finally, stockpiles of strategic commodities, including fuels, food and metals, were to increase in 2025, underscoring a demand floor. Those purchases are less likely to come from the US as Trump increased the general tariff on Chinese goods from 10% to 20% at the beginning of March.
The Property Crisis Continued with Bloomberg reporting that after four years of standing by, Communist Party officials decided that real estate developer China Vanke was too 
big to fail. With the company warning of an annual loss of a record $6.2 billion, Shenzhen officials stepped in to take operational control and shore up funding. Is this the beginning of the end of China’s property crisis which created almost $160 billion of distressed debt — the world’s largest — or is it instead getting worse? Certainly the sales figures shown right show a massive step backwards.
From Ukraine to Taiwan was the reminder as China’s fourth-highest official, Wang Huning, unveiled stronger language toward Taiwan that signaled greater efforts ahead to intimidate the self-ruled democracy. He urged his nation to “shape the inevitable reunification of the motherland” at a meeting in Beijing, marking the first time that phrase had been used by the government. I estimate that China has about a twenty-year window to successfully invade Taiwan given its worsening demographic situation – a shrinking and aging population does not make for a strong military. Meanwhile, marriages in China plunged by one fifth in 2024 to their lowest level on record, falling to 6.1 million in 2024 after a post-pandemic increase to nearly 7.7 million in 2023. The tally for last year marks the fewest marriages since public records began in 1986 and is less than half the peak reached in 2013. The declining population trend will continue.
Japan Faces Higher Interest Rates and Inflation as fresh 
food price increases outpaced overall inflation (see right) and despite a stronger Yen, which broke lower than 150 Yen to the US Dollar at the end of February. Core consumer inflation hit +3.2% in January for its fastest pace in 19 months, with overall inflation at +4.0%, accelerating from +3.6% the month before. Japan’s economy expanded an annualized +2.8% in the final quarter of last year on robust business expenditure and consumption, completing the BOJ’s case for more rate hikes in the coming months.
Macro: US
US Inflation Ticked Higher in January with consumer prices rising by +0.5% for the month on higher food, gas and other household costs. The more closely-watched core CPI also increased more than forecasted, by +0.4%, fueled by car insurance, airfares and a record monthly increase in the cost of prescription drugs. The US budget deficit hit a record $840 billion in the first four months of the federal fiscal year, on track for over $2 trillion if expenses are not meaningfully cut or taxes materially increased. The current deficit of $2.1 trillion is a function of government spending ($7.1 trillion) far outpacing tax revenue ($4.9 trillion) over the last twelve months ending January. Over the past decade, tax revenue actually increased over +60%, but this paled in comparison to the +99% increase in spending. While the Ukraine war and migrant funding are behind a lot of this increase, the supercharged growth in federal employees over the last eighteen months undoubtedly contributed (and artificially(?) pushed unemployment lower) as the federal payrolls added about 3,000 people per month. The graph on the next page at the upper right from the Federal Reserve shows the federal government employment in millions with the temporary inclusion
during COVID. The average citizen sees that and wonders how it can continue. With unemployment at 4.1% and private payroll growth basically as expected at +140,000 in January, it is too soon to see any impact from DOGE. In any case the political and legal battles over budget and payrolls are too uncertain right now with budget legislation or a shutdown pending in mid-late March.
Outstanding US Consumer Debt Surged by the most on record in December, reflecting massive increases in credit-card balances and non-revolving credit, jumping $40.8 billion, according to Federal Reserve data. Outstanding credit-card and other revolving debt increased $22.9 billion in December, more than reversing the prior month’s decline. Non-revolving credit, such as loans for vehicle purchases
and school tuition, climbed $18 billion, the most in two years. The delinquency rate has risen, too, with some 3.5% of card balances past due by 30 or more days and 1.8% of accounts delinquent. Both figures are more than double the post-pandemic lows recorded in 2021. Also, the interest rate on that debt remains near record highs, at 21.5%. The graph left shows the rise in delinquent car payments, which are following the same trajectory.
Tariffs Get the Clicks but the final numbers and timing are still unknown, with 25% tariffs being levied on Canada and Mexico more-or-less coming into effect with some delays for the automobile industry and lower rates for energy. Furthermore, it is difficult to imagine that Trump would put 25% tariffs on Canada and Mexico and not do the same or higher to the EU. Together, the EU, Mexico, and Canada made up nearly two-thirds of all US goods imports, which came to about $3tn in 2024. Canada’s governor of Ontario promised to slap a 25% export tax on electricity in retaliation for President Trump’s tariffs and threatened to shut down the exports entirely if Trump moves ahead with even more tariffs on April 2. However, Canada is dependent on the US for most of its oil exports and even to supply eastern Canada from western Canada as there are no Canada-situated pipelines between those provinces. There is a lot of grandstanding right now but reality will sort this out quickly enough.
Macro: Europe
Eurozone Inflation Ticked Lower to +2.4% in February, as the ECB cut 0.25% as expected. Markets were pricing almost two more rate cuts this year, broadly in the range of expectations. The real news was Germany’s reaction to Trump halting aid to Ukraine with the two political parties expected to form the next German government agreeing to loosen the country’s constitution restrictions on borrowing,
enabling 1 trillion euros ($1.08 trillion) or more in spending on defense and infrastructure, in approximately equal measures. I wonder if part of that infrastructure spending is on natural gas pipelines or LNG ports. Bond yields immediately reacted, popping about +0.4% in a few days as seen in the chart right. GDP growth will shift higher on this deficit spending, though will it be enough to absorb the losses in the automotive sector is another question. War (on other people’s territory) is good for the economy, apparently. With France still in the throes over its budget deficit negotiations, Germany also letting loose will push record global debt issuance even higher.
All the best in your investing!
David Burkart, CFA
Coloma Capital Futures®, LLC
www.colomacapllc.com
Special contributor to aiSource