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

**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.