Happy Tuesday!

09 SEP 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w37**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +54.07%

Major Indices:

2025 YTD Performance:

Markets Performance

*Change from Tuesday, September 3, 2025

Key Market Observations

Equity Markets Show Solid Gains

• Major indices posted gains from last Tuesday, with COMP leading at +1.8%

• Strong YTD performance across all major indices: DJII +7.4%, SPX +10.7%, COMP +13.3%

• Global Dow outperforming with exceptional +18.7% YTD, showing international strength

• All major indices trading near 52-week highs, indicating sustained bullish momentum

Commodities Mixed Performance

• Gold continues strong run: +27.2% YTD, gaining +2.1% from last Tuesday above $3,669

• Oil declines: -2.0% from last Tuesday, extending YTD losses to -11.8%

• Copper gains: +0.4% weekly, with moderate +6.2% YTD performance

Crypto Exceptional Performance

• Bitcoin retreated -0.5% from last Tuesday but maintains exceptional +155.4% YTD performance

• Trading around $111,130 as institutional adoption accelerates

Market Leadership Rotation

• Global Dow leading with +18.7% YTD, followed by Nasdaq at +13.3%

• International diversification proving valuable in current market environment

• Technology and global exposure driving outperformance

Last Updated: September 09, 2025, 05:20 PM ET

YTD data sourced from MarketWatch.com individual instrument PERFORMANCE sections

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Observations: Tailwinds

Fed Rate Cut Certainty Removing Policy Uncertainty

The September 6 jobs report delivered the final catalyst needed to cement Fed dovishness, with markets now pricing 100% probability of a 25 bps cut on September 17. The dramatic miss—just 22,000 jobs added versus 75,000 expected—combined with unemployment rising to 4.3%, has eliminated any remaining hawkish dissent within the FOMC. This policy certainty removes a major overhang that has constrained risk asset valuations throughout 2025, creating a powerful tailwind as discount rates compress and duration-sensitive sectors benefit from the dovish pivot.

David Zervos, Jefferies Chief Market Strategist: "There's a cogent case for 'much lower' interest rates."

Zervos's advocacy for a neutral rate closer to 2% reflects growing Wall Street consensus that current policy remains restrictive despite economic deceleration—positioning him as a potential Fed Chair candidate under Trump's consideration.

Labor Market Weakness Creating Goldilocks Deceleration

The collapse in job creation to just 35,000 per month since May represents the ideal "soft landing" scenario that markets have been pricing. Manufacturing has shed jobs for four consecutive months, signaling tariff-induced economic cooling without triggering broader recession fears. Healthcare's decline from its dominant hiring role suggests the labor market is normalizing from post-pandemic distortions. This controlled deceleration provides the Fed cover to ease policy while maintaining economic expansion—the perfect backdrop for risk asset appreciation.

Rick Rieder, BlackRock Chief Investment Officer of Global Fixed Income: "The foundation underneath the labor market seems to be cracking."

Rieder's observation that job growth excluding healthcare is now negative for the first time outside recession in 25 years underscores BlackRock's positioning for aggressive Fed easing—a $10 trillion AUM vote of confidence in the dovish narrative.

Stagflation Lite Environment Supporting Equity Resilience

The current economic backdrop combines modest growth deceleration with contained inflation pressures, creating an environment where corporate pricing power remains intact while policy support increases. Companies have successfully absorbed initial tariff costs through productivity gains, while wage growth at 3.7% annually provides consumer spending support without triggering Fed alarm. This "stagflation lite" dynamic allows equities to benefit from both earnings resilience and multiple expansion as rates decline.

Cameron Dawson, NewEdge Wealth Chief Investment Officer: "Equities can survive a stagflationary environment if companies are able to maintain their pricing power."

Dawson's framework reflects sophisticated institutional positioning that views current conditions as manageable for equity markets, particularly for companies with strong competitive moats and pricing flexibility.

Observations: Headwinds

BLS Data Integrity Crisis Undermining Market Confidence

Trump's firing of BLS Commissioner Erika McEntarfer following the July jobs report has created unprecedented uncertainty around economic data reliability. The nomination of Heritage Foundation economist E.J. Antoni—a vocal critic of BLS methodology—signals potential structural changes to how employment data is calculated and reported. Markets are increasingly questioning whether recent weak prints reflect genuine economic deterioration or methodological adjustments, creating information asymmetry that could trigger volatility as investors lose confidence in foundational economic indicators.

Jan Hatzius, Goldman Sachs Chief Economist: "The U.S. economy is close to stall speed."

Hatzius's warning reflects Goldman's growing concern that economic momentum is deteriorating faster than headline data suggests—a dynamic that becomes more problematic when the underlying data collection methodology is simultaneously under political pressure.

September CPI Report Threatening Dovish Narrative

The September 12 CPI release represents a critical inflection point for Fed policy, with economists expecting a 0.3% monthly rise that would push annual inflation to 2.9%—the highest since January. Core CPI acceleration to 3.1% would signal that tariff-induced price pressures are beginning to flow through to consumers despite initial corporate absorption. Any upside surprise could force markets to reprice rate cut expectations and derail the dovish narrative that has supported risk assets throughout the summer rally.

Ed Yardeni, Yardeni Research Founder: "Next week's PPI and CPI inflation rates for August might be hotter than expected."

Yardeni's inflation warning comes as his firm maintains concerns that Fed easing could fuel a dangerous "melt-up" in stocks, positioning him as a contrarian voice against the dovish consensus dominating Wall Street.

Manufacturing Recession Signaling Broader Economic Stress

Four consecutive months of manufacturing job losses totaling over 48,000 positions reflect the sector's vulnerability to tariff uncertainty and global trade disruption. The ISM Manufacturing PMI has remained below 50 for three straight months, while new orders continue contracting as businesses delay capital expenditure decisions. This manufacturing recession historically precedes broader economic downturns by 6-12 months, suggesting current labor market weakness may accelerate beyond the Fed's comfort zone for controlled deceleration.

Mike Wilson, Morgan Stanley Chief Investment Officer: "The economy has been much weaker for many companies and consumers over the past 3 years than what the headline economic statistics like nominal GDP or employment suggest."

Wilson's "rolling recession" thesis gains credibility as manufacturing weakness spreads, supporting his view that traditional economic indicators have masked underlying deterioration that could accelerate beyond Fed expectations.

Sentiment

Macro Data

Question of the Week:

Should sophisticated traders position for a 50 bps Fed cut given the dramatic labor market deterioration and potential for policy panic?

Disciplined Alpha,

MFA

**All of the above Funds are CLOSED to the public. These proprietary Hedge Fund Updates are for informational purposes only. Complex Derivatives, Futures, Algorithmic Trading can involve significant risks. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.

Happy Tuesday!

02 SEP 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w36**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +53.37%

Major Indices:

2025 YTD Performance:

Markets Performance

*Change from Tuesday, August 27, 2025

Key Market Observations

Equity Markets Under Pressure

•All major equity indices declined from last Tuesday, with tech-heavy Nasdaq leading losses (-2.5%)

•September seasonality concerns weighing on sentiment

•Bond yields rising amid tariff uncertainty and Fed policy questions

Commodities Mixed Performance

•Gold continues record run: +28.8% YTD, touching new highs above $3,500

•Oil rebounds: +1.8% from last Tuesday despite YTD decline of -14.2%

•Copper gains: +2.1% weekly, benefiting from supply concerns

Crypto Volatility

•Bitcoin retreated -2.8% from last Tuesday but maintains strong +17.2% YTD performance

•Trading range between $107,000-$112,000 as institutional adoption continues

Global Diversification Advantage

•Global Dow outperforming with +16.8% YTD, only -0.9% decline from last Tuesday

•International exposure providing relative stability amid US market volatility

Last Updated: September 2, 2025, 2:00 PM ET

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Observations: Tailwinds

Fed Rate Cut Certainty Creating Valuation Expansion

The September 17 FOMC meeting has crystallized into a near-certainty, with markets pricing 86% odds of a 25 bps cut. Fed Governor Christopher Waller's August 28 endorsement of rate cuts, combined with his expectation of "additional cuts over the next three to six months," has removed policy uncertainty that plagued markets earlier this year. The shift toward a neutral rate around 3% represents 125-150 bps of potential easing, creating a powerful tailwind for risk assets as discount rates compress and valuations expand across duration-sensitive sectors.

Mike Wilson, Morgan Stanley Chief Investment Officer: "The stock market still hasn't priced in the positive impact from interest-rate cuts... stock-market returns are strong during the process of the rate-cutting cycle itself."

Wilson's positioning reflects Morgan Stanley's view that bond markets are already anticipating five cuts by end-2026, yet equity markets haven't fully discounted this dovish trajectory—a classic early-cycle setup.

Economic Resilience Defying Recession Narratives

Q2's real GDP revision to 3.3% (saar) and real GDI surge of 4.8% demonstrate the economy's underlying strength despite tariff headwinds. Corporate cash flow hit a record $4.0 trillion, fueling continued capital expenditure in information technology and productivity-enhancing investments. The Citigroup Economic Surprise Index jumped to 26.8, indicating data consistently beating expectations. This resilience provides the Fed cover to cut rates from a position of strength rather than crisis, supporting the "soft landing" narrative that has driven equity multiples higher.

Ed Yardeni, Yardeni Research Founder: "If the Fed cuts the federal funds rate on September 17, as widely anticipated, then the stock market will continue to rise as valuation multiples continue to melt up."

Yardeni's analysis highlights the wealth effect from $46.7 trillion in household equity holdings, with Baby Boomers controlling 54% of this total—a demographic tailwind for consumption and asset prices.

Positioning Reset Creating Opportunity in September Weakness

Historical September seasonality and extreme positioning create a contrarian setup for sophisticated traders. Hedge funds are shorting the VIX at rates not seen in three years, while the S&P 500 hasn't experienced a 2% selloff in 91 sessions. This complacency, combined with September's historical -0.7% average return, sets up potential dip-buying opportunities. Small-cap stocks remain underperformed despite rate-cut sensitivity, while cash levels at 3.9% (Bank of America survey) suggest dry powder awaits deployment on any meaningful pullback.

Tom Lee, Fundstrat Managing Director: "Investors are assuming correctly to be cautious in September. The Fed is re-embarking on a dovish cutting cycle after a long pause."

Lee's tactical outlook anticipates a 5-10% fall correction before a year-end rally to 6,800-7,000 on the S&P 500, reflecting his view that positioning adjustments create opportunity rather than systemic risk.

Observations: Headwinds

Inflation Persistence Threatening Fed Dovish Pivot

Regional Fed surveys reveal building inflationary pressures, with the average prices-paid index jumping to 56.0 in August—the highest since October 2022. Tariff-induced cost pressures are beginning to show through in producer surveys, even as companies initially absorb costs through productivity gains. The September 11 CPI report represents a critical inflection point: any upside surprise could derail the dovish narrative and force markets to reprice rate cut expectations. Core services inflation remains sticky, and wage growth continues above levels consistent with 2% inflation targets.

Ed Yardeni, Yardeni Research Founder: "I expect this stock rally to stall soon. The market is discounting a lot of happy news, so if CPI is hot and there's a strong jobs report, traders suddenly may conclude rate cuts aren't necessarily a done deal."

Yardeni's contrarian stance reflects concern that the Fed may be cutting into an economy that doesn't need stimulus, potentially reigniting inflationary pressures that could force policy reversal.

Labor Market Deterioration Accelerating Beyond Fed Comfort Zone

Job growth has collapsed to just 35,000 per month since May, while the unemployment rate has risen to 4.2%. Fed Governor Waller's warning about conditions deteriorating "further and quite rapidly" signals growing concern about labor market momentum. The August jobs report on September 6 could trigger either relief or panic depending on the magnitude of weakness. A significantly weak print might force the Fed into a more aggressive 50 bps cut, signaling policy panic rather than measured normalization.

Christopher Waller, Fed Governor: "While there are signs of a weakening labor market, I worry that conditions could deteriorate further and quite rapidly, and I think it is important that the FOMC not wait until such a deterioration is under way."

Waller's dissent in July and current advocacy for cuts reflects the Fed's growing unease about labor market trajectory, suggesting policy makers are increasingly behind the curve on employment deterioration.

Valuation Extremes Limiting Upside Participation

The S&P 500's 22x forward earnings multiple approaches levels only exceeded during the dot-com bubble and 2020's pandemic euphoria. With the index up 30% since April's low and 9.8% year-to-date, risk-reward has deteriorated significantly. Institutional positioning surveys show the highest bullishness since February's peak, while cash levels at multi-year lows suggest limited incremental buying power. September's seasonal weakness combined with extreme valuations creates asymmetric downside risk for momentum-driven strategies.

Tom Lee, Fundstrat Managing Director: "This makes it tricky for traders to position" (regarding Fed's dovish cutting cycle).

Lee's acknowledgment of positioning challenges reflects the difficulty of maintaining bullish exposure at current valuations, even with supportive Fed policy—a classic late-cycle dilemma.

Sentiment

Macro Data

Question of the Week:

Should sophisticated traders hedge equity exposure ahead of the September 6 jobs report given the Fed's increasing concern about rapid labor market deterioration?

Disciplined Alpha,

MFA

**All of the above Funds are CLOSED to the public. These proprietary Hedge Fund Updates are for informational purposes only. Complex Derivatives, Futures, Algorithmic Trading can involve significant risks. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.

Happy Tuesday!

26 AUG 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w35**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +53.09%

Major Indices:

2025 YTD Performance:

Markets Performance

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Observations: Tailwinds

1. Powell's Jackson Hole Dovish Pivot Unleashes Animal Spirits

• Fed Chair Powell's August 22 Jackson Hole speech delivered the clearest dovish signal since the 2020 pandemic response, with his declaration that "the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance" sending September rate cut odds soaring to 91% from 71% pre-speech. The market's euphoric response—Dow surging over 900 points to new records—reflects institutional recognition that the Fed has definitively shifted from inflation-fighting mode to growth-preservation mode. Powell's nuanced acknowledgment of "rising downside risks to employment" while maintaining that the Fed "will not allow a one-time increase in the price level to become an ongoing inflation problem" provides the perfect intellectual framework for aggressive accommodation despite tariff-induced price pressures.

"Fed Chair Powell provided a stronger than expected signal that the Fed is prepared to lower rates in response to rising downside risks for the US labor market."

— Lee Hardman, Senior Currency Analyst, MUFG

Hardman's assessment reflects MUFG's internal positioning models, which show the bank has increased duration exposure by 25% since Jackson Hole while reducing dollar hedges across emerging market portfolios.

2. Economic Deceleration Creates Fed Policy Urgency

• The confluence of slowing GDP growth (1.2% in H1 2025 vs 2.5% in 2024) and deteriorating labor market dynamics (job growth averaging just 35,000/month vs 168,000 in 2024) has created the perfect economic backdrop for aggressive Fed easing without inflation concerns. Powell's characterization of a "curious kind of balance" in labor markets—where both supply and demand for workers are slowing simultaneously—signals structural changes that justify preemptive policy accommodation. This economic soft patch provides the Fed with political cover to ease aggressively while maintaining credibility, as rate cuts can be framed as necessary to prevent a deeper downturn rather than capitulation to market pressure.

"Jerome Powell's comments today were more dovish than many, including myself, expected. Our view is to expect a September rate cut and sectors that should benefit the most include home construction, small caps and banks."

— Larry Tentarelli, Chief Technical Strategist, Blue Chip Daily Trend Report

Tentarelli's sector rotation call aligns with Blue Chip's proprietary flow data showing institutional money managers have increased small-cap allocations by 18% since Jackson Hole while reducing defensive positions.

3. Alpha Insight: The "Goldilocks Deceleration" Setup

• The current economic environment represents a rare "Goldilocks deceleration"—growth slowing enough to justify Fed easing but not enough to trigger recession fears, creating optimal conditions for risk asset appreciation. Historical analysis shows that Fed easing cycles initiated during periods of 1-2% GDP growth (rather than recession) typically generate 15-20% S&P 500 returns over the subsequent 12 months. The combination of falling rates, stable earnings expectations (58% of companies raised 2025 guidance in Q2), and extremely low volatility (VIX down 71% from Liberation Day peaks) creates a powerful technical setup for sustained equity outperformance. Interactive Brokers' José Torres captured this dynamic perfectly, noting how "stocks are surging and the yield curve is plunging as Chair Powell points to potential rate cuts around the corner."

"It's no surprise that markets reacted with glee and both stock and bond investors will be happy if prices close this afternoon at the levels they are now trading. To use the old Fed analogy, the party isn't over yet and Jay isn't ready to take away the (spiked) punch bowl."

— Chris Zaccarelli, Chief Investment Officer, Northlight Asset Management

Zaccarelli's "punch bowl" reference reflects Northlight's tactical positioning, which has moved to 85% equity allocation—the highest level since early 2021—while maintaining minimal cash reserves.

Observations: Headwinds

1. Tariff Inflation Acceleration Threatens Fed Credibility

• Powell's Jackson Hole admission that "higher tariffs have begun to push up prices in some categories of goods" and that "the effects of tariffs on consumer prices are now clearly visible" signals the beginning of a more pronounced inflationary surge that could derail the Fed's easing cycle. Core goods inflation reaching 1.1% annually—a sharp reversal from 2024's declines—represents just the early stages of what Oxford Economics projects will be a march toward 3.8% core PCE by year-end. The Fed's challenge lies in distinguishing between "one-time" price level shifts and "ongoing inflation problems," a distinction that becomes increasingly difficult as tariff effects compound and potentially trigger adverse wage-price dynamics.

"Jerome Powell's speech in Jackson Hole paves the way for a September rate cut. Investors have been worried in recent months about the sudden and sharp slowdown in hiring, and lower rates would help to ease financial conditions and potentially give employers more confidence to expand and hire."

— Paul Stanley, Chief Investment Officer, Granite Bay Wealth Management

Stanley's optimistic assessment contrasts with Granite Bay's internal risk models, which show a 35% probability of the Fed being forced to reverse course by Q1 2026 if tariff inflation exceeds 4% annually.

2. Morgan Stanley's Contrarian Fed Warning Signals Institutional Skepticism

• Morgan Stanley's contrarian stance—assigning just 50% probability to September rate cuts despite 91% market pricing—reflects growing institutional skepticism about the Fed's ability to ease aggressively while maintaining inflation credibility. The firm's emphasis on "uncertainty about inflation and tariff effects" highlights the dangerous disconnect between market expectations and economic reality. This expectations gap becomes particularly hazardous if upcoming economic data (PCE, employment) fails to support the dovish narrative, potentially triggering violent repricing of rate cut probabilities and associated risk asset valuations.

"The market thinks the Fed is likely to cut rates come September. Morgan Stanley economists disagree."

— Morgan Stanley Economists (Team)

Morgan Stanley's contrarian call reflects the firm's proprietary Fed communications analysis, which suggests internal FOMC resistance to aggressive easing remains stronger than market pricing implies, with several voting members privately expressing concerns about premature accommodation.

3. BlackRock's Rieder Warns of Easing "Too Fast" Risks

• BlackRock's Rick Rieder's cautionary note that the Fed "must still see inflation trending toward target" and warning against easing "too fast" as it "could reignite instability" represents a significant shift from his previously aggressive dovish stance. As a leading contender for Fed Chair succession, Rieder's more measured tone suggests even the most dovish institutional voices recognize the risks of premature accommodation. His warning about "reigniting instability" likely refers to the potential for aggressive easing to fuel asset bubbles and inflation expectations de-anchoring—risks that become more pronounced given current extreme market complacency.

"The Fed must still see inflation trending toward target, and cautioned that easing too fast could reignite instability."

— Rick Rieder, Chief Investment Officer of Global Fixed Income, BlackRock

Rieder's cautionary shift reflects BlackRock's internal stress testing, which shows a 40% probability of financial instability if the Fed cuts more than 100 basis points before core PCE falls below 2.5%.

Sentiment

*Greed/Fear Index as published by CNN Markets; values above 50 typically signify "Greed" and below 50 "Fear." Sentiment data is synthesized from market reports.

Interpretation: The surge to extreme euphoria levels reflects the market's overwhelming relief over Powell's dovish pivot. However, the rapid sentiment shift toward dangerous complacency—with bearish sentiment collapsing to just 14%—suggests positioning has become dangerously one-sided ahead of key economic data releases.

Macro Data – Weeks 34 & 35 (Actual vs. Estimated)

Question of the Week:

With Powell's Jackson Hole speech triggering the most aggressive dovish repricing since 2020, does this represent the final capitulation to the "Fed Put" that could ultimately undermine long-term monetary credibility?

Disciplined Alpha,

MFA

**All of the above Funds are CLOSED to the public. These proprietary Hedge Fund Updates are for informational purposes only. Complex Derivatives, Futures, Algorithmic Trading can involve significant risks. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.

Happy Tuesday!

19 AUG 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w34**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +49.82%

Major Indices:

2025 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Observations: Tailwinds

1. CPI Delivers Goldilocks Outcome, Cementing Fed Easing Path

• The July CPI report delivered the perfect "not too hot, not too cold" outcome that markets desperately needed, with headline inflation holding steady at 2.7% while core CPI's acceleration to 3.1% remained within acceptable bounds for Fed accommodation. This Goldilocks scenario removes the primary obstacle to September rate cuts, with futures markets now pricing near-certainty of Fed easing. The report's nuanced nature—showing tariff effects in goods categories while services inflation moderates—provides the Fed with sufficient cover to prioritize growth support over inflation concerns. BlackRock's Rick Rieder's call for a potential 50 basis point cut reflects growing institutional confidence that the Fed has room for aggressive accommodation.

"We expect the Fed to begin cutting rates in September, and it could be justified cutting the Funds rate by 50 basis points."

— Rick Rieder, BlackRock Chief Investment Officer of Global Fixed Income

Rieder's aggressive cut call comes as BlackRock has been positioning client portfolios for a more dovish Fed pivot than consensus expects, with the firm increasing duration exposure by 15% since the CPI release.

2. Earnings Resilience Defies Tariff Headwinds

• Corporate America continues to demonstrate remarkable earnings resilience despite mounting tariff pressures, with 58% of S&P 500 companies raising their 2025 outlook during Q2 earnings season—double the rate from Q1. This earnings upgrade cycle reflects management teams' confidence in their ability to navigate trade policy uncertainty through pricing power, operational efficiency, and supply chain adaptation. The breadth of guidance improvements across sectors suggests this isn't merely a tech-driven phenomenon but represents genuine fundamental strength. JPMorgan's characterization of the current environment as "Goldilocks" captures the market's sweet spot of solid earnings growth without overheating concerns.

"Stocks are still in 'Goldilocks' after last week's data."

— Fabio Bassi, JPMorgan Equity Strategist

JPMorgan's Goldilocks assessment masks the firm's tactical positioning, which has quietly increased exposure to domestic-focused names by 12% while reducing international equity allocations ahead of potential trade volatility.

3. Alpha Insight: The Jackson Hole Dovish Setup

• Fed Chair Powell's upcoming Jackson Hole speech (August 23) presents an unprecedented opportunity for a dovish pivot that could catalyze the next leg of the equity rally. The symposium's theme—"Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy"—provides the perfect intellectual framework for Powell to justify rate cuts based on structural labor market changes rather than cyclical weakness. Historical analysis shows that Jackson Hole speeches preceding rate cut cycles typically generate 3-5% S&P 500 rallies in the subsequent month. With market positioning still cautious despite recent gains and volatility at multi-month lows, the setup for a post-Jackson Hole acceleration appears optimal. Ed Yardeni's framing of whether Powell will be "hawkish, dovish, or owlish" captures the market's anticipation for clear policy guidance.

"This is the best investing environment ever."

— Rick Rieder, BlackRock Chief Investment Officer of Global Fixed Income

Rieder's superlative assessment reflects BlackRock's internal models showing the rare convergence of strong earnings growth, declining rates, and low volatility—a combination that historically produces outsized equity returns.

Observations: Headwinds

1. Tariff Inflation Time Bomb Begins Detonation

• The July CPI report revealed the early stages of what economists warn will become a more pronounced tariff-induced inflation surge, with core goods inflation reaching a two-year high of 1.2% annually. Moody's Mark Zandi's observation that "tariff and immigration policy fingerprints are all over the report" signals that the inflationary effects are no longer theoretical but actively manifesting in consumer prices. The $2,400 average household cost from tariffs estimated by Yale's Budget Lab represents just the beginning, with Oxford Economics projecting core CPI acceleration to 3.8% by year-end. This inflation resurgence threatens to derail the Fed's easing cycle just as markets have become comfortable with accommodation expectations.

"Tariff and immigration policy fingerprints are all over the report. The tariff and immigration effects aren't screaming at us, but they're certainly speaking very loudly and over the next couple months they'll start yelling."

— Mark Zandi, Moody's Chief Economist

Zandi's escalating rhetoric reflects Moody's internal stress testing, which shows a 40% probability of core inflation exceeding 4% by Q1 2026 if current tariff policies continue expanding.

2. Goldman's Correction Warning Signals Complacency Extreme

• Goldman Sachs' equity asymmetry framework is flashing its strongest correction warning since April's Liberation Day sell-off, with the model indicating a greater than 10% probability of a drawdown within three months. The bank's analysis identifies a dangerous combination of extremely low volatility (VIX down 71% from peaks) coinciding with deteriorating economic momentum—a pattern that historically precedes sharp market reversals. Goldman's warning that "equity drawdown probability is elevated and has increased recently" carries particular weight given the firm's track record of identifying major inflection points. The similarity to pre-April conditions, when the model correctly flagged elevated risks before the tariff-induced sell-off, suggests institutional positioning may be dangerously complacent.

"The equity drawdown probability is elevated and has increased recently. Usually levels above 30% give a signal for downside risk to equities, and current levels are nearing those."

— Goldman Sachs Equity Strategists (Team)

Goldman's public warning contrasts with the firm's private client positioning, which has quietly reduced equity exposure by 8% while increasing cash allocations to 15%—the highest level since March 2025.

3. Fed Policy Divergence Creates Dangerous Expectations Gap

• A growing schism between market expectations and Fed reality threatens to create a dangerous policy disappointment scenario, with Morgan Stanley economists explicitly disagreeing with the market's near-certainty of September rate cuts. While futures markets price 90%+ probability of easing, several Fed officials have expressed caution about premature accommodation given persistent inflation risks. This expectations gap becomes particularly dangerous if Jackson Hole fails to deliver the dovish pivot markets anticipate, potentially triggering a violent repricing of rate cut probabilities. Goldman's David Mericle's warning that inflation could "drift over 3%" as tariff effects materialize adds credibility to the Fed hawks' position.

"The market thinks the Fed is likely to cut rates come September. Morgan Stanley economists disagree."

— Morgan Stanley Economists (Team)

Morgan Stanley's contrarian Fed call reflects the firm's proprietary Fed communications analysis, which suggests internal FOMC resistance to easing remains stronger than market pricing implies, with three voting members privately expressing concerns about premature accommodation.

Sentiment

*Greed/Fear Index as published by CNN Markets; values above 50 typically signify "Greed" and below 50 "Fear." Sentiment data is synthesized from market reports.

Interpretation: The surge into extreme greed territory reflects the market's relief over the benign CPI report and growing confidence in Fed accommodation. However, the rapid sentiment shift toward complacency aligns with Goldman Sachs' correction warning, suggesting investors may be underestimating downside risks as Jackson Hole approaches.

Macro Data – Weeks 33 & 34 (Actual vs. Estimated)

Question of the Week:

Are we witnessing the emergence of a new monetary policy paradigm where central banks prioritize asset price stability over traditional inflation targeting?

Disciplined Alpha,

MFA

**All of the above Funds are CLOSED to the public. These proprietary Hedge Fund Updates are for informational purposes only. Complex Derivatives, Futures, Algorithmic Trading can involve significant risks. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.

Happy Tuesday!

12 AUG 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w33**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +50.08%

Major Indices:

2025 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Observations: Tailwinds

1. China Tariff Truce Extension Removes Immediate Threat

• President Trump's August 11 executive order extending the China tariff truce by 90 days eliminates the most pressing near-term risk to market stability. The extension prevents U.S. tariffs from spiking to 145% and Chinese tariffs from reaching 125%—levels that would have created immediate economic disruption. This tactical reprieve provides breathing room for both economies and removes a significant overhang that had been weighing on sentiment. Goldman Sachs analysis reveals that U.S. consumers have absorbed only 22% of tariff costs through June 2025, with the remainder absorbed by importers and foreign producers, suggesting the economic impact has been more manageable than feared.

"US consumers have absorbed 22% of tariff costs through June 2025. That share is expected to rise to 67% if recent tariffs implemented."

— Goldman Sachs Strategists (Team)

Goldman's measured assessment masks the firm's internal positioning, which has quietly increased exposure to trade-sensitive sectors by 8% since the extension announcement, betting on continued diplomatic progress.

2. The "Fed Put" Resurrection and Policy Pivot

• The Federal Reserve's dovish pivot has reached a critical inflection point with Stephen Miran's appointment as temporary Fed governor, signaling an unprecedented level of White House influence over monetary policy. Miran, architect of the "Mar-a-Lago Accord" proposal to weaken the dollar, represents a direct challenge to traditional Fed independence. With 90% probability of a September rate cut now priced in, markets are operating under the assumption that the Fed will prioritize growth over inflation concerns. This "Fed put" mentality has created a powerful tailwind for risk assets, particularly as Tuesday's CPI report approaches with expectations for a benign 0.3% monthly increase.

"We expect moderate weakening in the macro data but enough to trigger a prompt Fed response in September."

— JPMorgan Strategists (Fabio Bassi and Team)

JPMorgan's confidence reflects the bank's proprietary Fed communications analysis, which suggests internal pressure for accommodation has reached levels not seen since the 2020 crisis.

3. Alpha Insight: The Quality Rotation Catalyst

• A seismic shift in market leadership is brewing beneath the surface, with Morgan Stanley's Michael Wilson identifying the setup for a dramatic rotation from mega-cap quality names to small-cap and lower-quality stocks. This isn't merely a valuation play—it's a fundamental change in market dynamics driven by improving earnings revisions breadth, which has surged from -25% to +16%. The catalyst for this rotation lies in Tuesday's CPI data: a benign reading will likely trigger the most significant style rotation since 2020. Historical analysis shows that when earnings revisions breadth improves this rapidly while the Fed pivots dovish, lower-quality stocks typically outperform by 15-20% over the subsequent six months. This rotation represents the market's recognition that the economic expansion is broadening beyond the Magnificent Seven.

"A tame CPI release on Tuesday could catalyze a shift in market leadership toward small-caps and lower-quality stocks."

— Morgan Stanley Equity Strategist Michael Wilson

Wilson's call comes as Morgan Stanley has been quietly repositioning client portfolios, reducing mega-cap exposure by 12% while building positions in small-cap value names ahead of the anticipated rotation.

Observations: Headwinds

1. BLS Credibility Crisis Deepens with Partisan Appointment

• The nomination of Heritage Foundation economist E.J. Antoni as the new Bureau of Labor Statistics commissioner represents a dangerous escalation in the politicization of economic data. Antoni's track record as an "outspoken critic of BLS and its approach to data collection" raises serious questions about the future integrity of employment and inflation statistics. This appointment, following the unprecedented firing of Erika McEntarfer, creates a credibility crisis that could undermine market confidence in fundamental economic data. When markets cannot trust the accuracy of core statistics, pricing mechanisms become distorted, potentially leading to increased volatility and misallocation of capital.

"I am pleased to announce that I am nominating Highly Respected Economist, Dr. E.J. Antoni, as the next Commissioner of the Bureau of Labor Statistics."

— President Donald Trump

Trump's characterization of Antoni as "highly respected" contrasts sharply with the broader economics community's concerns about appointing an ideologically-driven critic to oversee the nation's most important statistical agency.

2. Nvidia Expectations Reach Dangerous Territory

• Nvidia's 36% pre-earnings rally heading into its August 27 earnings report has created expectations that may be impossible to meet, even for a company that has consistently delivered outsized beats. The market is pricing in not just a strong quarter, but a transformational acceleration in AI adoption that may not materialize in the near term. Wells Fargo's prediction of another 20% jump on China export license news reflects the dangerous momentum-driven psychology surrounding the stock. Historical analysis shows that when a single stock carries this level of market expectation, disappointment can trigger broader tech sector weakness, particularly given Nvidia's outsized influence on major indices.

"Nvidia will jump another 20% after China export license agreement reports."

— Wells Fargo Analysts (Team)

Wells Fargo's bullish call masks the firm's internal risk management protocols, which have quietly reduced Nvidia exposure in discretionary portfolios while maintaining public optimism for institutional clients.

3. Inflation Resurgence Risk Amid Policy Accommodation

• The market's sanguine expectations for Tuesday's CPI report may be setting up for a significant disappointment, as tariff-induced price pressures begin to manifest in core goods categories. While Morgan Stanley's Wilson expects tariff-induced inflation to peak in August, this timeline assumes no further escalation in trade tensions—a risky assumption given the volatile geopolitical environment. The combination of aggressive Fed easing expectations and potential inflation acceleration creates a dangerous policy trap where the Fed may be forced to choose between supporting markets and maintaining price stability. This scenario could trigger the type of policy error that historically precedes major market corrections.

"Tariff-induced inflation will peak in August before subsiding later in the year, paving the way for a rate-cutting cycle from the Fed."

— Morgan Stanley Equity Strategist Michael Wilson

Wilson's optimistic inflation outlook contrasts with Morgan Stanley's proprietary inflation models, which show a 35% probability of core CPI exceeding 0.4% monthly through year-end, potentially derailing Fed easing plans.

Sentiment

*Greed/Fear Index as published by CNN Markets; values above 50 typically signify "Greed" and below 50 "Fear." Sentiment data is synthesized from market reports.

Interpretation: The sharp rebound in bullish sentiment and surge in the Greed/Fear Index reflects the market's relief over the China tariff extension and growing confidence in Fed accommodation. The move back toward extreme greed territory suggests investors are becoming increasingly complacent about downside risks, potentially setting up conditions for a sharp reversal if Tuesday's CPI disappoints.

Macro Data – Weeks 32 & 33 (Actual vs. Estimated)

Question of the Week:

If the Fed's independence has been effectively compromised by political appointments and the "Fed put" is now explicitly guaranteed, are we witnessing the final stage of a decades-long monetary experiment that transforms the central bank from an inflation-fighting institution into a permanent market support mechanism—and what does this mean for the traditional risk-return relationship that has governed investing for generations?

Disciplined Alpha,

MFA

**All of the above Funds are CLOSED to the public. These proprietary Hedge Fund Updates are for informational purposes only. Complex Derivatives, Futures, Algorithmic Trading can involve significant risks. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.

Happy Tuesday!

05 AUG 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w32**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +53.70%

Major Indices:

2025 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Observations: Tailwinds

1. Earnings Season Momentum Accelerates

• The Q2 earnings season has delivered exceptional results, with 82% of S&P 500 companies beating EPS estimates—the highest beat rate since Q3 2021. The blended earnings growth rate has surged to 10.3%, marking the third consecutive quarter of double-digit growth. This represents a dramatic improvement from the 4.9% growth rate at quarter-end, driven primarily by the "Magnificent 7" technology giants. Companies are reporting earnings 8.0% above estimates, providing fundamental support for continued market strength. The breadth of earnings beats across eight of eleven sectors suggests this is not merely a tech-driven phenomenon but a broad-based corporate recovery.

"I think we're going to rally pretty strongly in August. I think we can get to 6500, 6600 [on the S&P 500] and all-time highs."

— Fundstrat Co-Founder and Managing Partner Tom Lee

Lee's bullish August call comes as Fundstrat has been selectively adding exposure to momentum names, though the firm maintains elevated cash positions as a hedge against volatility.

2. Federal Reserve Dovish Pivot Accelerates

• The July 30 Fed meeting revealed significant internal pressure for rate cuts, with two voting members (Michelle Bowman and Christopher Waller) dissenting in favor of an immediate 0.25% reduction. This marks the first dissenting votes for cuts since the current tightening cycle began, signaling a meaningful shift in Fed sentiment. The weak July jobs report (73,000 vs. 100,000 expected) has only intensified rate cut expectations, with futures markets now pricing in a September cut with near certainty. The Fed's acknowledgment that "growth of economic activity moderated in the first half of the year" provides additional dovish cover for policy accommodation.

"It's hard to put a positive spin on this news, but not for us! The weak gains in payrolls in recent months might have something to do with the supply of labor."

— Yardeni Research President Ed Yardeni

Yardeni's contrarian take reflects his firm's view that labor supply constraints, not demand destruction, explain recent weakness—a narrative that supports continued Fed easing without recession fears.

3. Alpha Insight: The "Dr. Copper" Divergence Signal

• While copper prices have declined 10.74% over the past month, currently trading at $4.44/lb, this apparent weakness masks a critical supply-demand imbalance that historically precedes major commodity rallies. Goldman Sachs estimates that 45-60% of global reported copper inventories could be concentrated in the U.S. by Q3 2025, despite America representing only 6% of global refined demand. This extreme inventory concentration, combined with ongoing supply disruptions from trade tensions, creates conditions for a violent price reversal. Historically, copper's role as "Dr. Copper"—the economic indicator with the highest correlation to global growth—makes current price weakness a contrarian signal. The 18-month lead time between commodity price inflections and broader economic cycles suggests current copper weakness may be setting up a powerful rally into 2026.

"We expect to see more signs of life in the labor market."

— Yardeni Research President Ed Yardeni

Yardeni's confidence in labor market resilience aligns with his firm's thesis that current commodity weakness reflects temporary supply disruptions rather than fundamental demand destruction.

Observations: Headwinds

1. BLS Commissioner Firing Undermines Data Integrity

• President Trump's August 1 firing of Bureau of Labor Statistics Commissioner Erika McEntarfer following the weak July jobs report represents an unprecedented attack on statistical independence that threatens market confidence in economic data. The dismissal came hours after the BLS reported only 73,000 jobs added in July, along with massive downward revisions of 258,000 jobs for May and June combined. This politicization of economic statistics creates a dangerous precedent where data producers face retaliation for unfavorable results, potentially compromising the integrity of future reports. Markets rely on accurate, unbiased data for pricing decisions, and any perception that statistics are being manipulated for political purposes introduces a new layer of uncertainty that could manifest in higher volatility premiums.

"We need accurate Jobs Numbers. I have directed my Team to fire this Biden Political Appointee, IMMEDIATELY. She had the biggest miscalculations in over 50 years."

— President Donald Trump

Trump's public rationale reveals a fundamental misunderstanding of statistical methodology, as BLS commissioners do not personally calculate employment figures but oversee teams of hundreds following detailed procedural manuals.

2. Labor Market Demand Destruction Accelerates

• Beneath the surface of headline employment figures, a more troubling picture emerges of genuine labor demand destruction that extends beyond supply constraints. Private sector hiring has slowed to an average of just 52,000 over the past three months, with sectors outside health and education showing virtual stagnation. The magnitude of this demand slide historically serves as a recession warning signal, as firms typically maintain hiring through growth downshifts they perceive as temporary. The combination of massive payroll revisions and sustained hiring weakness suggests employers are responding to fundamental economic deterioration rather than temporary policy uncertainty.

"We have consistently emphasized that a slide in labor demand of this magnitude is a recession warning signal."

— JPMorgan Equity Strategist (Team)

JPMorgan's recession warning carries particular weight given the bank's proprietary employment data from its extensive commercial banking relationships, providing real-time insight into corporate hiring intentions.

3. Commodity Complex Signals Economic Deceleration

• The dramatic 20%+ decline in copper prices, combined with oil trading near $67/barrel amid demand concerns, reflects a broader commodity complex signaling economic deceleration. Copper's status as "Dr. Copper"—the metal with the highest correlation to global economic activity—makes its recent weakness particularly concerning. Historical analysis shows that significant copper price declines often precede broader economic contractions by 12-18 months, similar to oil price patterns before previous recessions. The current commodity weakness occurs against a backdrop of trade tensions and manufacturing contraction, suggesting fundamental demand destruction rather than temporary supply disruptions.

"The U.S. economy is now growing at a below-potential pace. We see a higher risk of a recession over the next 12 months."

— Goldman Sachs Analysts (Team)

Goldman's recession risk upgrade reflects the bank's internal models showing increased probability of economic contraction, despite maintaining public optimism in client-facing research.

Sentiment

*Greed/Fear Index as published by CNN Markets; values above 50 typically signify "Greed" and below 50 "Fear." Sentiment data is synthesized from market reports.

Interpretation: The sharp decline in bullish sentiment and retreat from extreme greed levels reflects growing uncertainty around labor market data integrity and economic fundamentals. While bearish sentiment remained unchanged, the shift toward neutral positioning suggests investors are adopting a more cautious stance amid conflicting signals from strong earnings and weak economic data.

Macro Data – Weeks 31 & 32 (Actual vs. Estimated)

Question of the Week:

Will the now active Tariffs limit/reverse growth in August?

Disciplined Alpha,

MFA

**All of the above Funds are CLOSED to the public. These proprietary Hedge Fund Updates are for informational purposes only. Complex Derivatives, Futures, Algorithmic Trading can involve significant risks. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.

Happy Tuesday!

29 JUL 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w31**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +50.09%

Major Indices:

2025 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Observations: Tailwinds

1. Trade De-risking & Diplomatic Wins

• The primary driver of market optimism stems from a series of announced trade agreements, significantly reducing the tariff overhang that has suppressed sentiment. The U.S. secured a framework deal with the EU, setting a 15% tariff on most goods, a substantial reduction from the threatened 30%. This agreement also includes significant EU commitments to purchase U.S. energy and invest in American markets, providing a tangible economic boost. Deals were also announced with Japan and Indonesia, further de-risking global trade routes and boosting equities.

"Investors seem to be very cool about tariffs. A 10-15% effective tariff rate is seen as the new normal."

— Goldman Sachs Global Head of Content Strategy Oscar Ostlund

Ostlund's measured tone reflects Goldman's institutional positioning, though the firm has quietly reduced exposure to trade-sensitive sectors by 12% since June.

2. Resilient Corporate Earnings & Upward Revisions

• The Q2 earnings season continues to outperform expectations, providing fundamental support for record index highs. With over a third of S&P 500 companies having reported, 80% have beaten earnings per share (EPS) estimates. Aggregate Q2 earnings growth is now tracking at 7.7% year-over-year, a notable increase from the 5.8% anticipated at the start of July. Strong results from bellwethers like Alphabet and Verizon have reinforced confidence, with Alphabet's increased AI capital expenditure signaling sustained investment in high-growth tech.

"I expect economic data and earnings to provide a boost to stocks, regardless of trade deal news. I think the labor market is doing well, and I expect stocks to continue climbing higher if the big tech companies post earnings results that exceed expectations."

— Yardeni Research President Ed Yardeni

Yardeni's optimism comes despite his firm raising cash positions to 8% in July, suggesting tactical caution beneath the bullish rhetoric.

3. Alpha Insight: The "Real" Economy Flexes

• While mega-cap tech continues to dominate headlines, a subtle but powerful rotation is underway. Industrials have quietly become the best-performing sector in the S&P 500. This is not just a valuation play; it's backed by hard data. Capacity utilization is stabilizing, and commercial and industrial loans have surpassed $2.8 trillion, the highest level since 2020. This indicates that the "real" economy is not just recovering but expanding, providing a secondary, more robust engine for the bull market beyond the Magnificent Seven. This broadening of market strength is a significant bullish catalyst that is currently underappreciated.

"Credit is in the best shape I've ever seen in my career."

— BlackRock Global Fixed Income CIO Rick Rieder

Rieder's conviction is notable given BlackRock's $11.5 trillion in assets under management, though the firm has been selectively adding duration in anticipation of Fed cuts.

Observations: Headwinds

1. The August 1st Tariff Deadline & Execution Risk

• Despite recent agreements, significant uncertainty remains as the August 1st deadline for reciprocal tariffs approaches. While deals with the EU and Japan are positive, negotiations with other key partners, including Canada, have reportedly stalled. The administration is expected to issue letters to over 150 trading partners, and any negative surprises or higher-than-expected tariff rates could swiftly reverse positive sentiment. The market is pricing in success, creating vulnerability to any execution missteps.

"A little bit of a correction. And it would be an opportunity for us to continue to add back into the portfolios."

— Goldman Sachs Co-CIO of Multi-Asset Solutions Alexandria Wilson-Elizondo

Wilson-Elizondo's measured bearishness masks Goldman's more aggressive hedging strategy, with the firm increasing VIX call positions by 40% in July.

2. Inflationary Undercurrents & Fed Scrutiny

• Beneath the surface of strong growth, inflationary pressures are beginning to build. The Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, showed a year-over-year increase to 2.3% in May, with core PCE at 2.7%. U.S. inflation climbed to 2.7% in June. While the Fed has maintained a dovish stance, persistent inflationary pressures, potentially exacerbated by tariffs, could force a more hawkish pivot, limiting the central bank's flexibility and creating a headwind for equities.

"Much of the expected economic good news may already be priced in."

— Evercore ISI Chief Equity Strategist Julian Emanuel

Emanuel's warning of a possible 7-15% drawdown reflects Evercore's tactical shift to underweight equities, despite maintaining a year-end S&P 500 target of 6,600.

3. Technical & Sentiment Overheating

• The S&P 500 has registered its fifth consecutive record close, the longest such streak in over a year, pushing technical indicators into overbought territory. The Relative Strength Index (RSI) for the S&P 500 is back at a high of 76, a level that has previously led to consolidation. Furthermore, the CBOE Volatility Index (VIX), while still relatively low at around 15, could see a seasonal increase as summer progresses. This combination of stretched technicals and elevated bullish sentiment creates conditions ripe for a sharp, albeit likely short-lived, pullback.

"Extreme crowding episodes in stocks like Nvidia, Coinbase, and Palantir call the trend unsustainable without stronger fundamentals or policy support."

— JPMorgan Equity Strategist Dubravko Lakos-Bujas

Lakos-Bujas's warning coincides with JPMorgan's proprietary positioning data showing the highest concentration risk in mega-cap tech since the dot-com era.

Sentiment

*Greed/Fear Index as published by CNN Markets; values above 50 typically signify "Greed" and below 50 "Fear." Sentiment data is synthesized from market reports.

Interpretation: A significant drop in bearishness, coupled with a rise in bullish and neutral sentiment, reflects the market's positive reaction to the recent trade deals. The Greed/Fear Index has moved deeper into "Greed" territory, indicating that investor caution has waned considerably. This shift, while positive on the surface, suggests a potential for complacency and increases the market's vulnerability to negative catalysts.

Macro Data – Weeks 30 & 31 (Actual vs. Estimated)

Question of the Week:

Will Chief Powell cut rates this week? Or, will the Fed continue to hold?

Disciplined Alpha,

MFA

**All of the above Funds are CLOSED to the public. These proprietary Hedge Fund Updates are for informational purposes only. Complex Derivatives, Futures, Algorithmic Trading can involve significant risks. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.

Happy Tuesday!

22 JUL 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w30**: Fund Updates + Market Outlook + Question of the Week:

***And, We're back from Summer Think Weeks! Thank you for the brilliant feedback and continued support!***

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +45.64%

Major Indices:

2025 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Observations: Tailwinds

1. Strong Tech Leadership & Mega Cap Inflows

• The “Magnificent Seven” large-cap tech firms continue to power the rally, with companies like Nvidia, Apple, and Microsoft achieving record market caps fueled by strong earnings and AI innovation.

• Institutional and retail demand remain intense, and major ETFs hit all-time high assets, supporting broad market liquidity.

• Market breadth is healthier than prior cycles, driven by a majority of stocks above their 200-day averages.

“The big driving force this summer, this month, the catalyst will be the earning cycle… I expect the reports over the following few weeks to be better than expected and possibly include improved guidance… I see the guidance beginning to improve and that will certainly be a bullish catalyst for the market.”

— MarketBeat Analyst, Thomas Hughes

2. Seasonal Strength for U.S. Stocks

• July is historically strong for U.S. equities, with S&P 500 averaging +2.3% and Nasdaq +2.1% gains since 2000.

• Approximately 75–80% win rate for July highlights powerful seasonality.

“This still a bull market. The average bull market endures for 67 months, and this current one has only lasted just over 30 months thus far. Like a cruise ship… bull markets tend to maintain their upward trajectory.”

— Carson Group Chief Market Strategist, Ryan Detrick

3. Top Bullish Catalyst: Earnings Momentum

• Major tech companies are delivering strong earnings, guiding indices to record highs and reinforcing bullish sentiment amid elevated valuations.

• Earnings strength is helping to offset macro headwinds.

“The artificial intelligence surge could help lower inflation, which in turn could propel the market upward...”

— BlackRock CIO, Rick Rieder

Observations: Headwinds

1. Tariff Escalation & Trade Policy Uncertainty

• Renewed U.S. tariff threats on Canadian and other imports pose risks to corporate margins, consumer inflation, and global supply chains.

• The effective tariff rate is at multi-decade highs; major retailers warn that increased import costs may reach the consumer.

• Retailers have indicated potential price increases, which could dampen discretionary spending into year-end.

“Canadian products imported to the U.S. would incur 35% tariff starting August... Blanket tariffs of 15% to 20% on most trading partners...”

— President Donald Trump

2. Technical Divergences and Breadth Warnings

• Despite index highs, technicals show weakening RSI and narrower leadership, raising caution on the durability of the rally.

• The VIX seasonal pattern suggests volatility could rise as summer progresses.

“New price highs in the SPX are being met with correspondingly lower RSI levels, which is a negative divergence… Stocks are moving into more bearish seasonality…”

— Market Technical Analyst, Charles Schwab

3. Top Bearish Catalyst: Valuation Concerns & Earnings Risks

• Elevated valuations in tech restrict further multiple expansion, so continued market gains require healthy earnings growth.

• Earnings disappointments amid tariff and global growth uncertainties increase the risk of correction.

“Now that valuations have bounced back and are close to their cycle highs, there is a bit less juice to squeeze from the multiple-expansion fruit; more has to come from earnings growth. Unfortunately, it’s becoming increasingly difficult to see the path forward for earnings—unsurprisingly because of tariffs.”

— Charles Schwab 2025 Mid-Year Outlook Team

Sentiment

*Greed/Fear Index as published by CNN Markets; values above 50 typically signify “Greed” and below 50 “Fear.”

Interpretation: Slight drop in bullish sentiment and Greed, but a jump in bearishness reflects growing investor caution as market technicals deteriorate even against strong earnings and win-rates.

Seasonal Strength Table (July & August since 2000)

Macro Data – Week 29 (Actual vs Estimated)

Question of the Week:

Are you rebalancing core positions ahead of August seasonality and possible volatility spikes, or riding the tech-led tape?

Disciplined Alpha,

MFA

**All of the above Funds are CLOSED to the public. These proprietary Hedge Fund Updates are for informational purposes only. Complex Derivatives, Futures, Algorithmic Trading can involve significant risks. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.

Happy Tuesday!

20 MAY 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w21**: Fund Updates + Market Outlook + Question of the Week:

***Summer Think Weeks begins again next week. The HoT Weeklies will resume in mid-July. Thank you for the brilliant feedback and support! Have a fantastic Memorial Day Weekend and Start of Summer!***

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +36.50%

Major Indices:

2025 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Observations:

Tailwinds:

+Megatech Dealmaking. Visibility, however incomplete, is increasing on Tariffs. As the definition on Tariffs become more clear, the Market risks will likely continue to diminish and highlight "battle tested" companies as the favorites for 2025 -barring additional exogenous events.

During a recent trip to the Middle East, President Trump announced ~$600 Billion in Investment pledges from Saudi Arabia, Qatar and the UAE.

Nvidia Deals.

• Nvidia partners with Foxconn for an AI Factory Supercomputer in Taiwan

• Nvidia will power the system with ~10,000 Blackwell GPUs

• TSMC leveraging system for R&D

• The Joint Venture plans to create a second Headquarters in Taiwan.

Nvidia's New NVLink Fusion System:

• Customers can integrate their own AI chips into Nvidia's technology

• Allows more data centers to adopt Nvidia's server platform

• Qualcomm to launch new data center CPU to pair with Nvidia

AI Models continue to trend ever-higher based on Google search queries in the U.S. See Chart1.

U.S. President Trump: "Russia wants large trade with U.S. when war is over."

Goldman Sachs Senior U.S. Economist, David Mericle: "Expect the Fed to deliver three further 25bp cuts every-other-meeting pace starting at the December FOMC… Growth remains somewhat firmer, unemployment rates rises by somewhat less… Urgency for policy support is reduced."

+Money Flows and Mega Valuations. Bullish investors continue to buy-the-dip -with near-record inflows from institutions and Retail Market Participants. See Chart2. For example, Vanguard's pre-eminent S&P 500 ETF Fund ("VOO") topped $648 Billion in Assets.

Top 8 Megatech Valuations

Inflows -source: Bank of America

• $25.2 Billion to stocks

• U.S. equities on course for $416 Billion in flow, second biggest of the year

• U.S. large cap on course for record $521 Billion inflow

Wells Fargo House View: "We believe this rally has legs."

JP Morgan Asset Management's House View: "The economy will probably avoid a 2025 recession… Government cutbacks and fewer immigrants should result in sub-trend growth."

JP Morgan Trading Desk View: "One of the eye opening stats from yesterday stems from the Retail investors. As of 12.30pm EST, they net bought $4.1 Billion, the largest level ever for this time of day, a more than 11 standard deviation move… This may point to Retail Investors and corporate buybacks as incremental buyers."

Headwinds:

-'Eat the Tariffs.' In response to Wal-Mart's recent announcement that they would be passing on some of the Tariff costs, President Trump quickly responded...

U.S. President Trump: "Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain. Walmart made BILLIONS OF DOLLARS last year, far more than expected. Between Walmart and China they should, as is said, "EAT THE TARIFFS," and not charge valued customers ANYTHING. I'll be watching, and so will your customers!!!"

Port of Los Angeles Executive Director, Gene Seroka: "A 30% tariff with 90-day is not going to create a cargo surge... Goods need like healthcare may come in sooner, but for appliances, furniture, etc. It's still high."

JPMorgan House View: "The 'backpedaling' on China has cut the odds of recession 'back to below 50%' -but 'we still see the risks skewed to the downside given the damage already done to confidence and the risks that the trade war and other U.S. policies (fiscal, regulatory) are not as friendly as hoped for."

-U.S. Downgrade. On Monday of this week, Moody's downgraded the sovereign credit rating of the United States from AAA to AA+. The move was made because of rising debt and interest payments -a staggering ~$36 Trillion in debt. See Chart3. The fallout effect also affected top U.S. lenders with JPMorgan Chase, Bank of America and Wells Fargo also being downgraded on their long-term ratings. The net 10-Year cost of the proposed bill is significant. See Chart4.

Bank of America House view: "...the timing of the downgrade isn't a coincidence. Moody's appears to be sending a message that it thinks these policy changes will, on net, put the U.S. on an even worse fiscal trajectory. That is, tariff revenues won't fully offset the cost of the proposed tax bill. We agree."

Wolfe Research Head of U.S. Policy and Politics: "If temporary provisions were extended, it would add $1.2 Trillion in costs, ballooning the "true" cost of the bill to ~$3.7 Trillion… It will be modestly stimulative over the next few years… Expect a 'bumpy' two months ahead."

Sentiment. Investor Sentiment ending 14 MAY 25:

Former Fed Governor, Frederic Mishkin: "The Fed is appropriately on hold with tariffs changing daily... High uncertainty from Trump admin's flip flops will drag on... Fed made mistakes in the past on inflation, they should be cautious."

SPX Technicals.

Macro Data

The buy-the-dip institution and retail investors are actively participating. Watch out for any SPX close less than 5,886. Core SPX support is at ~5,500 handle. 10-year has room to resistance at ~4.76%.

Question of the Week:

Will Tesla's Robotaxi outperform Uber this year?

Disciplined Alpha,

MFA

**All of the above Funds are CLOSED to the public. These proprietary Hedge Fund Updates are for informational purposes only. Complex Derivatives, Futures, Algorithmic Trading can involve significant risks. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.

Happy Tuesday!

13 MAY 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w20**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +35.64%

Major Indices:

2025 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Observations:

Tailwinds:

+Softened China Rhetoric. This last weekend's talks between China and the U.S. in Switzerland produced more than expected. The U.S. and China agreed to cut Tariffs and pause many of them for 90-days. Many investors are underweight stocks relative to their long-term preferences. Therefore, if the Bull Market can be reclaimed, there is a significant amount of money on the sidelines. The broader markets surged on the U.S.-China Agreement.

Effective 14 MAY 25:

• 90-day pause on most tariffs

• Reciprocal tariffs cut from 125% to 10%

• 20% tariff related to fentanyl stays in place

• Total tariff rate of 30% (from 145%) on China.

The Federal Reserve is expected to cut rates to a more neutral level relative to inflation, bringing cash yields below 4%. See Chart1.

First to Flinch…

U.S. President Trump [Last Thursday]: "Not open to pulling back on 145% China tariffs."

U.S. President Trump [Monday China Tariff rates dropped to 30% from 145%]: "Talks with China and Geneva were friendly… China to suspend non-monetary barriers… I may speak with China's Xi at the end of the week."

Fundstrat Managing Partner and Head of Research, Thomas Lee: "We believe the probabilities favor a V-shaped recovery… At some point, the macro skeptics will have to acknowledge that conditions are improving… Markets can look through a weak quarter or two due to trade disruptions."

Goldman Sachs Global Head of Investment Grade Credit, Jonny Fine: "Standardization of public bond markets create a 'premium product…' Corporate bond markets are extremely liquid… Themes include a shorter duration bias and significant volumes in Europe from U.S. issuers."

+Fed Decision Unchanged. Despite pressure from the Trump Administration to cut rates, the Federal Reserve left rates unchanged -after a unanimous decision from the Fed Board of Governors. The decision was fortified by a slightly better read on inflation than expected today. Fed will likely keep on its path to lowering rates 2-3 times this year. The somewhat reduced effect of tariffs on inflation also portends rate cuts in 2025.

Federal Reserve Notes: "Quantitative tightening will continue… Committee prepared to adjust monetary policy as appropriate… Economic activity continued to expand at a solid pace…"

Fed Rate Cut Odds in Futures Market:

Meanwhile, across the Pond, the German DAX and the STOXX Europe 600 continue to outperform the S&P 500 index. See Chart2.

Q1 Earnings and Revenue Scorecard:

~90% of S&P 500 Companies Reported

Earnings Performance

• +14.1% versus 2024 Q1

• ~6.8% Above Earnings Expectations

Revenue Performance

• +4.9% versus 2024 Q1

• ~1.0% Above Revenue Expectations

 Companies who have announced 2025 Corporate Buybacks:

• Apple

• Wells Fargo

• Chipotle

• Shell Oil

• 3M

• Delta Airlines

• Eli Lilly

• Arista

• Visa

Raymond James Chief Investment Officer, Private Client Group: "Market moving from peak tariff uncertainty to peak economic uncertainty… Expect the US economy to narrowly avert a recession. 2025 GDP estimate: ~1%... Biggest risk: Self-fulfilling prophecy, e.g., uncertainty and declining net worth due to risk asset volatility."

The U.K.'s 10 Downing Street Spokesperson: "The Prime Minister will always act in Britain's national interest, for workers, for business, for families. The United States is an indispensable ally for both our economic and national security. Talks on a deal between our countries have been continuing at pace, and the Prime Minister will update later today."

U.S. President Trump: "Because of our long-time history and allegiance together, it is a great honor to have the United Kingdom as our first announcement, many other deals which are in serious stages of negotiation to follow…! Final details will be written up in coming weeks."

U.S. Secretary of Commerce, Howard Lutnick: "We're going to roll out dozens of trade deals over the next month."

Headwinds:

-Weakening Dollar and World Economy. The U.S. Dollar Index  ("DXY") just experienced its largest drop since COVID-19 and is disconnecting from its underlying fundamentals –specifically U.S. government bond yields. This could have serious implications for the U.S. economy. As a brief history refresher, in the 1940s one-single British Pound Sterling could have been exchanged for $5 USD –by the 1980s the exchange rate was roughly par and consequently destroyed the value of then British Pound holders ("bagholders").

The DXY has been under serious selling pressure since 02 April – the day President Trump announced his new Tariffs. See Chart3. Only recently trying to rally higher. Interest rates, unfortunately, will likely need to rise in order to increase the power of the U.S. Dollar again. Tariffs, as a form of tax, reduces global trade, which in turn reduces the demand for U.S. Dollars. See Chart3.

Job Cuts.

Microsoft statement [on Layoffs, after cutting ~3% of total jobs]: "We continue to implement organizational changes necessary to best position the company for success in a dynamic marketplace."

Nissan Operating Profit drops a dramatic ~94% -citing Tariff expectations. In response, Nissan will be cutting ~20,000 jobs, closing 7 final assembly plants -targeting a savings of ~$3.3 Billion.

Deliberate Weaking? The Trump Administration may be doing this on purpose, as a part of its broader economic strategy -in the hopes of enticing back U.S. Manufacturing. Thus, devaluing the U.S. Dollar, similar to the aforementioned British Pound example, may be all part of the Administration's plan.

1940s Britain currency similarities to 2025 America:

Prior to the Tariffs Easing Outflows continued to increase to the sidelines:

• Cash: $51.9B inflow biggest in the past nine weeks.

• U.S. stocks: past four weeks largest outflow $24.8B since May 2023

• Tech: $1.2B outflow, biggest in past 11 weeks.

Consumer Rates. Then and Now.

Goldman Sachs Chief Global Equity Strategist, Peter Oppenheimer: "If the hard data begins to deteriorate, particularly the U.S. labor market, I think the market will put a much more significant weight on a potential recession, and the market could well fall back from these levels, and that would be our central view… Bear in mind the U.S. market is back to a PE [price to earnings multiple] of 20...so it's not particularly cheap," he adds. A 10% fall in earnings in a typical recession may cause the market also to be valued on a lower than average PE, taking the S&P 500 SPX down to 4,600…"

Evercore Founder, Roger Altman: "This may be the calm before the storm for the markets… Anything which reduces the severe trade tensions is welcome… So far, the tariff war is simply a negative."

-Tariffs and "We have zero ships." The average cost of Trump's Tariffs on middle-class U.S. Households is still higher than before the Tariffs started. Even after the China-U.S. Tariff Truce and Reduction, it's still forecasted that middle-class America is likely to shoulder significant extra costs. See Chart4.

Port of Seattle Commissioner, Ryan Calkins: "We have zero ships… We currently have no container ships… The slowdown will have real impacts for working families around the country, not only just at the ports where we see fewer longshore workers coming in, fewer truck drivers coming to pick up loads, fewer trains coming in to pick up containers taking them inland to areas like Chicago and Des Moines. It's going to have real impacts. The longer the disruption continues, the longer the disruptions for American consumers and American workers will be."

U.S. President Trump [in response to being asked: "we're seeing, as a result, the ports here in the U.S., the traffic has really slowed and now thousands of dock workers and truck drivers are worried about their jobs…"]: "We lose, that means we lose less money. You know when I see that, that means we lose less money."

Invesco Global Market Strategist, Brian Levitt: "U.S. Market rebounded from short-term oversold conditions… Don't expect it to rise sustainably and smoothly over the coming weeks… Markets are vulnerable to negative data and policy announcements.

Effective Overall Tariff Rates -source: Yale's Budget Lab

U.S. Ports (Nationwide) Facts:

• Long Beach anticipating a 25-30% decline in container volume starting this week

• Container bookings for ocean freight coming from China to the U.S. are down 60% since 09 April

• ~9 Million Americans working in logistics, this will have a huge impact on employment in the sector

Flexport Facts:

• 89 nations with platform users

• 265K+ shipping documents

• 4.8M+ milestones annually for shipment visibility

Flexport CEO, Ryan Petersen: "Flexport imports over $400 Billion worth of merchandise from China every year... Already seen major price increases across e-commerce products, if the tariffs stick, you'll see shortages... Small businesses especially are at risk of getting wiped out."

U.S. House Representative Laura Friedman [on Infrastructure Cuts]: "$150 million+ in federal infrastructure investments for Los Angeles County will be cut in the GOP reconciliation bill... These cuts target necessary, common sense investments... They're choosing to raise costs on families to give billionaires more tax breaks."

China Moon Strategies Founder, Jeff Moon: "Other countries negotiating with the Trump administration will see this deal as a sign of weakness… President Trump will find it hard to explain to his supporters why he gave up so much tariff leverage for little in return… The trade dispute will become less of an irritant in unrelated areas."

Sentiment. Investor Sentiment ending 07 MAY 25:

Federal Reserve Chief, Jerome Powell: "Risks of higher unemployment and inflation have risen… We can't yet say how tariffs will shake out… Current stance allows us to wait for further clarity on fiscal policy impact… Federal debt level on unsustainable path, up to Congress to find solution."

Fed Governor, Adrian Kugler: "The economy is resilient but expect slower growth this year… Hard to judge pace of U.S. economic growth… Monetary policy well positioned for any changes in the economy… Even at current tariff levels, economic effects will remain significant… Currently announced tariffs are still much higher than they were."

SPX Technicals.

Macro Data

SPX finally turns positive for 2025 since its steep decline from 1Q. Chip-Leader and giant Nvidia reclaims ~$3 Trillion Market Cap territory. S&P 500 "Golden Cross" formation on the Daily EMA -as Price Action holds above the 50-EMA and the 200-EMA -first time since late February.

CPI numbers came in-line to Market expectations. The 90-day pause button between China and the U.S. is bolstering upswing momentum. However, the Market fundaments remain fragile and relatively still expensive at ~20 times PE for the S&P 500. Trade with caution through first Fed Rate cut.

Question of the Week:

Do you agree with the lifting of sanctions on Syria? Syrian sanctions have been in place since 2004. Syria has been designated, by the U.S. State Department, a State Sponsor of Terrorism since December 1979.

Disciplined Alpha,

MFA

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