Happy Tuesday!

18 NOV 25

REMINDER: Winter Think Weeks will begin the Week of Thanksgiving. The HoT Weeklies will resume in Mid-January 2026 -with investor/audience suggested Upgrades!

Thank you for the amazing comments and inspiration… Have a fantastic Thanksgiving and Christmas Season!

Headwinds or Tailwinds Update (HoT Weeklies): 25w47**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +63.43%

Major Indices:

2025 YTD Performance:

Markets Performance Grid

Date: November 18, 2025

This report provides a snapshot of key market instruments, highlighting their performance and identifying significant weekly movements. The data is primarily sourced from MarketWatch, with cross-verification from the Yahoo Finance API.

Markets Performance Grid

Market Anomalies

This section highlights instruments with week-over-week movements of ±2.1% or greater, providing data analysis and market context. GDOW is excluded from this analysis.

U.S. Equity Indices (DJII, SPX, COMP)

Data Analysis: Major U.S. stock indices have experienced a significant downturn over the past week, with the Dow Jones Industrial Average (DJII), S&P 500 (SPX), and NASDAQ Composite (COMP) falling by 3.69%, 3.26%, and 3.80% respectively. This marks the fourth consecutive day of losses for these indices, reflecting a broad market sell-off.

Market Context: The primary driver behind this decline is growing concern among investors about a potential bubble in Artificial Intelligence (AI) related stocks. A recent Bank of America survey indicated that 45% of global fund managers now view an AI bubble as the top market risk. These fears, coupled with diminished expectations for a Federal Reserve interest rate cut, have prompted a risk-off sentiment, leading investors to take profits after a strong year-to-date performance.

Bitcoin (/BTC)

Data Analysis: Bitcoin has seen a dramatic decline of 9.79% over the past week, with its price falling below the psychological threshold of $90,000 for the first time since April 2025. The cryptocurrency has now erased all of its gains for the year.

Market Context: The sell-off in Bitcoin is part of the broader risk-off sentiment affecting all asset classes. However, the decline is amplified by crypto-specific factors, including profit-taking by long-term holders and a technical chart pattern known as a "death cross," which has created extreme fear in the market. The recent flash crash on October 10 has also resulted in thinner order books, making the price more susceptible to volatility.

Market Implications

The current market volatility carries several implications for investors. The concerns over an AI bubble draw parallels to the dot-com era, although many of today's tech companies have substantial revenues and profits, unlike their 1990s counterparts. Nevertheless, the theme of overinvestment followed by a correction is a historical pattern that warrants caution. For the cryptocurrency market, this downturn is consistent with previous Bitcoin bear markets, which have historically involved significant drawdowns followed by strong long-term rebounds. In the short term, continued volatility is likely across all risk assets, with the Federal Reserve's upcoming interest rate decision serving as a critical catalyst. Over the medium term, the tech sector may face an extended period of valuation adjustments, while the crypto market could enter a prolonged consolidation phase, often referred to as a "crypto winter."

Disclaimer

This report is for informational purposes only and should not be considered financial advice. Market data is subject to rapid changes, and this report reflects a snapshot at a specific point in time.

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Carbonwolf Alpha: Q4 2025 - W46/47

Observations: Tailwinds

Government Shutdown Ends, Removing Key Market Overhang

The longest government shutdown in U.S. history has finally come to an end, removing a significant source of uncertainty that has been weighing on the market for the past 43 days. The resolution of the shutdown has been a major positive catalyst, allowing for the release of delayed economic data and providing a much-needed boost to investor confidence. The market can now refocus on the underlying fundamentals, which remain supportive of further gains.

Liz Ann Sonders, Charles Schwab Chief Investment Strategist: "Even without the usual government data, the private sources of data tell a similar tale: overall growth is lukewarm, manufacturing is struggling, services maintain decent strength, labor demand is cooler, and consumer sentiment is weak."

Sonders' analysis suggests that while the shutdown created a data vacuum, the underlying economic picture remains one of moderate growth. With the shutdown now in the rearview mirror, the market can look forward to a clearer picture of the economy in the weeks ahead.

Mike Wilson's Bullish Turn Signals Further Upside

In a significant shift, Morgan Stanley's Mike Wilson, one of Wall Street's most prominent bears, has turned bullish on the market, raising his 12-month S&P 500 target to 7,800. This represents a 16% increase from current levels and is a major vote of confidence in the durability of the current bull market. Wilson's conversion is a powerful signal that the path of least resistance for the market remains higher, and it is likely to encourage more investors to embrace the rally.

Mike Wilson, Morgan Stanley Chief U.S. Equity Strategist: "Earnings growth and an accommodative Fed will support market multiples."

Wilson's bullish call is a game-changer for the market, as it removes one of the most credible bearish voices from the conversation. His focus on earnings growth and a supportive Fed should give investors comfort that the bull market has further to run.

AI-Driven Productivity Gains on the Horizon

The transformative potential of artificial intelligence continues to be a major tailwind for the market, with the technology poised to unlock significant productivity gains across the economy. While the immediate impact of AI is still being debated, the long-term implications are undeniable, and the companies that are at the forefront of this technological revolution are likely to be the big winners in the years to come.

Jan Hatzius, Goldman Sachs Chief Economist: "It is true that AI is starting to show up more clearly in the data."

Hatzius's observation that AI is beginning to have a measurable impact on the economy is a significant development. It suggests that the AI-driven productivity boom that many have been predicting may be closer than previously thought, which could provide a powerful tailwind for the market in the years ahead.

Observations: Headwinds

Bitcoin Collapse Signals Broader Market Risk

The dramatic collapse of Bitcoin, which has wiped out all of its 2025 gains, is a major red flag for the broader market. The crypto poster child has plunged 27% from its October high, triggering a "death cross" and extreme fear in the crypto market. This is not just a crypto story; it is a warning about the dangers of speculative excess and the potential for a wider market contagion. The Bitcoin bust is a clear sign that risk appetite is waning, and it could be a harbinger of a more significant market correction to come.

Eric Johnston, Cantor Fitzgerald Chief Equity and Macro Strategist: "Rally remains strong with sales growth and margins rising."

Johnston's bullish stance on the broader market, even in the face of the Bitcoin collapse, suggests that he sees the crypto weakness as a contained event. This is a key data point for traders who are trying to gauge the risk of a wider market contagion.

Investor Complacency at Dangerous Levels

Despite the recent market pullback and the collapse of Bitcoin, investor complacency remains at dangerously high levels. The prevailing "buy the dip" mentality has created a sense of invincibility among investors, who have become conditioned to believe that the market will always bounce back. This complacency is a classic late-cycle phenomenon, and it is a major risk for the market. When everyone is on the same side of the boat, it doesn't take much to tip it over.

Howard Marks, Oaktree Capital Co-Chairman: "The key observation is that good times lead to complacency, risk tolerance, and carelessness, as people bid aggressively for assets and compete to make loans."

Marks's warning about the dangers of complacency is particularly timely in the current environment. His words serve as a reminder that the good times don't last forever, and that the seeds of the next downturn are often sown during periods of market euphoria.

Ugly Technicals Threaten to Derail Rally

The market's technical picture has deteriorated significantly in recent weeks, with the S&P 500 breaking below its 50-day moving average for the first time in 139 sessions. This is a major warning sign that the current rally may be running out of steam, and it increases the risk of a more significant correction. While technical analysis is not a perfect science, the recent breakdown in the market's technicals is a development that investors should not ignore.

Sam Stovall, CFRA Chief Investment Strategist: "Bull markets don't die of old age; they die of fright."

Stovall's quote captures the current market mood perfectly. While the bull market has been resilient, the fear of a recession is a constant threat that could derail the rally at any time.

Alpha Insight: The Bitcoin Canary

The dramatic collapse of Bitcoin is more than just a crypto story; it is a canary in the coal mine for the broader market. The crypto poster child has been a leading indicator of risk appetite, and its recent plunge is a clear warning that the tide may be turning. While the mainstream market has so far shrugged off the crypto carnage, the longer the selloff continues, the greater the risk of a wider contagion. The key insight for traders is to watch Bitcoin closely. If it can find a bottom and begin to recover, it could be a sign that the risk-on trade is back in play. But if the selloff continues, it could be a harbinger of a more significant market correction to come.

Sentiment

Macro Data

Question of the Week:

Is the Bitcoin collapse a warning shot for the broader market, or just a crypto-specific event?

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!

11 NOV 25

REMINDER: Winter Think Weeks will begin the Week of Thanksgiving. The HoT Weeklies will resume in Mid-January 2026. Thank you for the brilliant feedback and amazing support…

Headwinds or Tailwinds Update (HoT Weeklies): 25w46**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +63.98%

Major Indices:

2025 YTD Performance:

Markets Performance Grid - 2025-11-11

Market Anomalies

Gold Futures (/GC) Surge

Gold futures experienced a significant weekly gain of 4.81%, closing at $4,137.70. This surge continues a strong upward trend, with a year-to-date performance of over 55%.

The rally is attributed to expectations of Federal Reserve rate cuts, a weaker U.S. dollar, and increased safe-haven demand. The potential end of the U.S. government shutdown and ongoing central bank purchases are also bolstering investor confidence in the precious metal.

Copper Futures (/HG) Climb

Copper futures saw a notable 2.90% increase over the past week, reaching $5.069. The industrial metal has posted a strong year-to-date gain of over 27%.

This price movement is supported by a combination of a weaker dollar, falling interest rates, and forecasts of a significant supply deficit in the coming years. Growing demand from renewable energy infrastructure and electric vehicles is a key long-term driver.

Market Implications

The sharp increase in gold prices reflects a broader market sentiment favoring safe-haven assets amidst economic uncertainty and potential shifts in monetary policy. This could signal a move away from riskier assets in the short term.

The rise in copper prices, often seen as a barometer of economic health, suggests an optimistic outlook on global industrial activity and the green energy transition. However, the supply constraints highlight potential inflationary pressures for manufacturing sectors.

Disclaimer

This report is for informational purposes only and should not be considered financial advice. Market data is subject to rapid changes, and this report reflects a snapshot at a specific point in time.

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Carbonwolf Alpha: Q4 2025 - W45/46

Observations: Tailwinds

Market Rallies on Trade Deal and Shutdown Optimism

The market staged a dramatic reversal this week, with the S&P 500 and Nasdaq posting their best single-day gains since May. The rally was fueled by a powerful combination of a historic trade deal with China and growing optimism that the end of the government shutdown is in sight. This one-two punch of positive news has reignited the market's animal spirits and has reinforced the prevailing "buy the dip" mentality that has been so profitable for investors this year.

Tom Lee, Fundstrat Managing Director: "That period where the markets fell sharply should have been used as a time for people to buy the pullback, but many instead became structurally bearish, and they missed one of the biggest opportunities over the last five years."

Lee's comments underscore the resilience of the current bull market and the folly of betting against it. His year-end target of 7,000 for the S&P 500 suggests that there is still more upside to come.

Santa Claus Rally on the Horizon

The market is now entering a seasonally strong period, with the fourth quarter historically being the best for U.S. stocks. This, combined with the recent positive catalysts, has set the stage for a classic "Santa Claus rally" into the end of the year. The underlying fundamentals remain strong, with corporate earnings continuing to surprise to the upside, and the path of least resistance for the market appears to be higher.

Ed Yardeni, Yardeni Research President: "The basic bottom line of it all is we're in a bull market."

Yardeni's bullish call is a reminder that the primary trend for the market remains up, and his prediction of a "good, solid Santa Claus rally" should give investors confidence to stay long into year-end.

AI-Driven Productivity to Reshape the Future

The transformative power of artificial intelligence is poised to usher in a new era of productivity growth, which could lead to a shorter workweek and a higher quality of life for many. While the transition will not be without its challenges, the long-term benefits of AI are undeniable, and the companies that are at the forefront of this technological revolution are likely to be the big winners in the years to come.

Jamie Dimon, JP Morgan CEO: "My guess is the developed world will be working three and a half days a week in 20, 30, 40 years, and have wonderful lives."

Dimon's vision of a future where AI has liberated humanity from the drudgery of a five-day workweek is a powerful reminder of the long-term potential of this technology. His comments also serve as a call to action for businesses and governments to prepare for the profound changes that are on the horizon.

Observations: Headwinds

Labor Market Softening Raises Economic Concerns

Beneath the surface of a resilient stock market, the labor market is showing signs of a significant slowdown, raising concerns about the underlying health of the economy. This softening is a key reason why some prominent investors are calling for the Federal Reserve to cut interest rates more aggressively. A weakening labor market could be a leading indicator of a broader economic downturn, and it is a risk that investors should not ignore.

Rick Rieder, BlackRock Chief Investment Officer of Global Fixed Income: "We have a softening of the labor market that is quite significant."

Rieder's assessment of the labor market is a sobering reminder that the economy is not without its vulnerabilities. His call for a 3% Fed funds rate highlights the growing concern that the Fed may be behind the curve in responding to the slowdown.

AI Shakeout Looms as Winner-Takes-All Dynamics Emerge

The AI boom is entering a new phase where the winners and losers will become increasingly clear. While the initial tide of AI enthusiasm has lifted all boats, the long-term reality is that this is a "winner-takes-all market." As the technology matures, a handful of dominant players will likely capture the lion's share of the profits, leaving many of the early-stage AI companies by the wayside. This consolidation is a natural part of the technology cycle, but it could lead to a painful shakeout for investors who are not positioned in the right names.

Dan Niles, Niles Investment Founder: "Tech is a winner-takes-all market."

Niles's prediction of an impending AI shakeout is a valuable warning for investors who may have become complacent about the risks in this sector. His comments suggest that the time for indiscriminate buying of AI stocks is over, and that a more selective approach is now required.

Overvalued Market Flashing Warning Signs

Despite the recent market rally, some of the most respected names in the industry are warning that U.S. stocks are overvalued and that a correction may be on the horizon. The combination of high valuations, a softening labor market, and a Federal Reserve that may be less accommodative than previously thought is a dangerous cocktail that could lead to a significant market downturn. While it is impossible to predict the timing of the next correction, the warning signs are there for those who are willing to see them.

Jeffrey Gundlach, DoubleLine Capital CEO & Chief Investment Officer: "U.S. stocks are very overvalued on almost all metrics."

Gundlach's stark warning about valuations should be a wake-up call for investors who may have become complacent in the current environment. His comments serve as a reminder that the market is not a one-way street, and that the risk of a significant correction is ever-present.

Alpha Insight: The Great Disconnect

The current market is characterized by a "Great Disconnect" between the bullish sentiment of equity investors and the growing concerns of the bond market. While stock market bulls are celebrating a historic trade deal and the prospect of a Santa Claus rally, the bond market is flashing warning signs of a significant economic slowdown. This divergence is most evident in the labor market, where a clear softening is being met with calls for more aggressive Fed rate cuts. The key insight for traders is that this disconnect cannot last forever. Either the bond market is wrong and the economy is stronger than it appears, or the stock market is in for a rude awakening. The resolution of this paradox will be the key to navigating the market in the weeks and months ahead.

Sentiment

Macro Data

Question of the Week:

With the Fed signaling a hawkish pause, is the market's current rally running on borrowed time?

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!

04 NOV 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w45**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +60.10%

Major Indices:

2025 YTD Performance:

Markets Performance Grid

Date: November 4, 2025

Performance Summary

Market Anomalies

The following instruments experienced week-over-week movements of ±2.1% or greater, indicating significant market activity that warrants closer examination.

Bitcoin (/BTC): -9.24% WoW

Bitcoin experienced a sharp decline of 9.24% from last Tuesday, falling below the psychologically significant $100,000 threshold to $100,415.49. This represents the cryptocurrency's first drop below $100,000 since June 2025, despite maintaining a modest year-to-date gain of 3.64%. The digital asset currently trades in mid-range territory within its 52-week band, positioned between $66,803.65 and $126,198.07, suggesting neither extreme bullish nor bearish technical positioning.

The magnitude of this weekly decline signals heightened volatility in the cryptocurrency market, potentially driven by profit-taking after Bitcoin's extended rally earlier in the year. The sharp reversal from recent highs indicates that investor sentiment may be shifting, with market participants reassessing risk exposure amid broader macroeconomic uncertainties. The fact that Bitcoin has retraced significantly from its 52-week high of $126,198.07 while maintaining positive year-to-date performance suggests a consolidation phase rather than a fundamental breakdown in the bull market thesis.

Copper Futures (/HG): -2.33% WoW

Copper futures declined 2.33% week-over-week to $4.93 per pound, despite maintaining strong year-to-date performance of +23.59%. The industrial metal remains in mid-range territory within its 52-week range of $3.97 to $5.89, indicating balanced technical positioning. This weekly decline represents a notable pullback from recent strength, as copper has been one of the year's best-performing commodities.

The weakness in copper prices may reflect concerns about global economic growth, particularly in China, which accounts for approximately half of global copper demand. As a leading economic indicator, copper's decline could signal softening industrial activity or reduced infrastructure spending expectations. However, the metal's robust year-to-date gain of 23.59% suggests that underlying fundamentals remain supportive, with the weekly decline potentially representing a technical correction rather than a fundamental shift in the supply-demand balance.

Market Implications

Historical Context: Bitcoin Volatility and Market Cycles

Bitcoin's 9.24% weekly decline, while significant, falls within the normal range of cryptocurrency volatility patterns observed throughout its trading history. Historical data shows that Bitcoin has experienced numerous corrections of 10% or greater during bull market cycles, often followed by periods of consolidation before resuming upward trends. The 2021 bull run, for example, saw multiple corrections exceeding 20% before Bitcoin reached its then-all-time high near $69,000. The current pullback from the $126,198 peak represents approximately 20% retracement, consistent with healthy consolidation phases in previous cycles.

The cryptocurrency's position in mid-range territory within its 52-week band suggests that the market has not reached extreme oversold conditions that typically precede major trend reversals. Historically, Bitcoin has found strong support after retracing 30-40% from cycle highs, with accumulation by long-term holders providing a floor for prices. The fact that Bitcoin remains above the psychologically important $100,000 level, despite briefly dipping below it, indicates that this price point may serve as a new support zone, similar to how $20,000 and $30,000 acted as support levels in previous cycles.

Historical Context: Copper as Economic Barometer

Copper's 2.33% weekly decline carries particular significance given the metal's reputation as "Dr. Copper" for its ability to diagnose global economic health. Historical analysis reveals that copper price movements have preceded economic turning points with notable accuracy, particularly during periods of Chinese economic slowdown. The 2015-2016 copper bear market, which saw prices fall from $3.75 to $2.00 per pound, accurately forecasted the global manufacturing slowdown and Chinese growth deceleration. Similarly, copper's rally from 2020 to 2022 correctly anticipated the post-pandemic economic recovery and infrastructure spending boom.

The current situation presents a nuanced picture: while the weekly decline suggests near-term growth concerns, the strong year-to-date performance of +23.59% indicates that market participants maintain confidence in medium-term demand fundamentals. This divergence may reflect competing forces, including China's ongoing property sector challenges offset by global energy transition investments that require significant copper for electric vehicles, renewable energy infrastructure, and grid modernization. Historical precedent suggests that when copper maintains year-to-date gains above 20% despite weekly volatility, the underlying bull market typically remains intact, as seen in 2006-2007 and 2010-2011 periods.

Cross-Asset Implications

The simultaneous weakness in both Bitcoin and copper, despite their different asset classes and investor bases, may signal broader risk-off sentiment in global markets. Historically, when speculative assets (Bitcoin) and industrial commodities (copper) decline together, it often reflects concerns about liquidity conditions or growth expectations. The 2018 fourth quarter and 2022 first half both exhibited this pattern, preceding Federal Reserve policy adjustments. The relatively modest declines in major equity indices (DJII -0.53%, SPX -1.17%, COMP -2.04%) suggest that the risk-off move remains contained to specific sectors rather than representing a systemic market shift.

Disclaimer

This report is for informational purposes only and should not be considered financial advice. Market data is subject to rapid changes, and this report reflects a snapshot at a specific point in time.

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Carbonwolf Alpha: Q4 2025 - W44/45

Observations: Tailwinds

Earnings Growth Poised to Exceed Expectations

Despite a backdrop of economic uncertainty, corporate earnings are projected to deliver better-than-expected growth into next year, providing a powerful catalyst for further market gains. The resilience of corporate profitability, particularly within the technology sector, has been a key driver of the market's advance. With 86% of S&P 500 companies beating Q3 earnings expectations, the stage is set for a continuation of this positive trend, which could propel the market to new highs.

Mike Wilson, Morgan Stanley Chief US Equity Strategist: "Earnings growth will be better than expected next year."

Wilson's forecast suggests that the market may be underestimating the durability of corporate earnings, and his bullish stance on profitability provides a strong counterpoint to the prevailing narrative of a slowing economy.

Market Momentum Signals Continued Upside

The market's upward momentum remains firmly intact, with the Nasdaq notching its seventh consecutive month of gains and the S&P 500 reaching new all-time highs. This persistent "drift and chase higher" is indicative of a market that is being driven by a powerful combination of positive earnings momentum and a fear of missing out. As long as this dynamic remains in place, the path of least resistance for the market is likely to be higher.

Cameron Dawson, NewEdge Wealth Chief Investment Officer: "Markets suggest a continued drift and chase higher."

Dawson's observation captures the essence of the current market environment, where the trend is your friend and fighting the tape has been a losing proposition.

AI-Driven Productivity Boom on the Horizon

The transformative impact of artificial intelligence on the labor market is poised to unlock a new wave of productivity growth, which could provide a significant long-term tailwind for the economy and the stock market. While the displacement of jobs is a valid concern, the potential for AI to enhance efficiency and drive innovation across a wide range of industries is a powerful force that could lead to a period of sustained economic expansion. This AI-driven productivity boom is a key reason to remain optimistic about the long-term outlook for the market.

Jan Hatzius, Goldman Sachs Chief Economist: "AI will have a transformative impact on the labor market."

Hatzius's assessment of AI's impact on the labor market highlights the profound changes that are on the horizon, and his focus on the transformative potential of this technology suggests that the market may be underestimating the long-term benefits of the AI revolution.

Observations: Headwinds

Fed Signals Potential Pause in Rate Cuts, Introducing Uncertainty

The Federal Reserve has injected a significant dose of uncertainty into the market by signaling that a December rate cut is no longer a certainty. After delivering a widely expected quarter-point cut in October, Fed Chair Jerome Powell adopted a more hawkish tone, stating that a further reduction in the policy rate is "not a foregone conclusion—far from it." This unexpected shift in language has led to a repricing of interest rate expectations and has raised concerns that the Fed may be less accommodative than previously thought, creating a potential headwind for the market.

Jerome Powell, Fed Chair: "A further reduction in the policy rate at the December meeting is not a foregone conclusion—far from it."

Powell's comments, described by some as "considerably more hawkish than expected," have forced the market to reconsider its assumptions about the future path of monetary policy, and have introduced a new element of risk into the equation.

AI Exuberance Creates Risk of Disappointment

The sky-high expectations surrounding the artificial intelligence boom have created a precarious situation where even minor disappointments could trigger a significant market correction. The bar has been set so high for AI-related companies that they are now priced for perfection, leaving little room for error. This sets up a classic scenario where the "ultimate risk" is not that AI fails to deliver on its long-term promise, but that it fails to live up to the market's increasingly unrealistic short-term expectations.

Liz Ann Sonders, Charles Schwab Chief Investment Strategist: "That's the ultimate risk — that you've set the expectations bar too high."

Sonders' warning highlights the danger of irrational exuberance, and her comments serve as a timely reminder that even the most promising of technologies can become a source of market turmoil when expectations become detached from reality.

Investor Complacency at Dangerous Levels

A growing sense of complacency among investors, who have become accustomed to a market that only goes up, is creating a dangerous environment where the risk of a significant correction is being underestimated. The belief that "the way things are today is the way it'll always be" is a classic sign of a market top, and it is a mistake that has been made by investors time and time again throughout history. While it is impossible to predict when the next correction will occur, the current environment of extreme optimism and low volatility is a textbook setup for a painful unwinding.

Howard Marks, Oaktree Capital Co-Chairman: "The single biggest mistake investors make is that they conclude that the way things are today is the way it'll always be."

Marks' timeless wisdom serves as a powerful warning against the dangers of extrapolating the recent past into the future, and his observation that the market is in the "early stages of a bubble" should be a major cause for concern for any prudent investor.

Alpha Insight: The Hawkish Pause Paradox

The current market is defined by a "Hawkish Pause Paradox." While the Federal Reserve has delivered its second rate cut of the year, Fed Chair Jerome Powell has simultaneously adopted a more hawkish stance, signaling that a December cut is "not a foregone conclusion." This creates a paradoxical situation where the market continues to rally on the assumption of future easing, even as the central bank itself is actively trying to temper those expectations. The longer this divergence persists—with the market chasing new highs while the Fed warns of a potential pause—the greater the risk of a sharp and sudden correction. The key insight for traders is that the market is currently in a direct standoff with the Fed. While momentum can carry prices higher in the short term, history has shown that fighting the Fed is a dangerous game, and the eventual reconciliation between market expectations and Fed policy could be a painful one.

Sentiment

Macro Data

Question of the Week:

With the Fed signaling a hawkish pause, is the market's current rally running on borrowed time?

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!

28 OCT 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w44**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +62.06%

Major Indices:

2025 YTD Performance:

Markets Performance Grid

October 28, 2025

This report provides a snapshot of key market instruments, their performance metrics, and an analysis of significant weekly movements. All data is sourced from MarketWatch.com as of October 28, 2025, and cross-verified for consistency.

Market Anomalies (±2.1% or greater WoW Chg.)

This section highlights instruments that have experienced significant week-over-week price movements, providing both a data-focused description and relevant market context.

U.S. Stock Indices (DJII, SPX, COMP)

A broad market rally has pushed all major U.S. indices to new record highs. The Dow Jones Industrial Average (DJII) rose by 2.14%, the S&P 500 (SPX) by 2.31%, and the NASDAQ Composite (COMP) led the gains with a 3.64% increase. This surge is primarily driven by optimism surrounding a new U.S.-China trade deal framework, strong corporate earnings from tech giants, and widespread expectations of a Federal Reserve interest rate cut. The simultaneous record closes across all four major indices is a rare event that historically suggests continued positive momentum.

Crude Oil (/CL)

Crude oil prices saw a significant weekly gain of 3.67%, with WTI futures rising from $57.82 to $59.94. This rally was initially triggered by the surprise announcement of fresh U.S. sanctions against major Russian oil companies, which raised immediate concerns about a tightening of global supply. However, prices have since pulled back from their highs as the market weighs the impact of the sanctions against plans from OPEC to increase output, creating a tense equilibrium in the energy market.

Gold (/GC)

Gold experienced a notable downturn, falling 2.72% week-over-week and officially entering a correction. The price dropped from $4,087.70 last Tuesday to $3,976.70, dipping below the key $4,000 level for the first time in October. This decline is largely attributed to a risk-on shift in investor sentiment following positive developments in U.S.-China trade talks, which has diminished the appeal of safe-haven assets. A stronger U.S. dollar and profit-taking after an eight-week rally have also contributed to the downward pressure.

Bitcoin (/BTC)

Bitcoin demonstrated strong bullish momentum with a 5.75% weekly gain, climbing from $107,688 to $113,880. A key catalyst for this rally was the announcement that the Mt. Gox repayment deadline has been postponed to 2026, which has alleviated near-term selling pressure. This, combined with the broader risk-on market environment and continued institutional interest through ETFs, has allowed Bitcoin to recover strongly from its mid-October correction.

Copper (/HG)

Copper prices surged by 4.87% over the week, rising from $4.93 to $5.17 per pound. As a key industrial metal, copper is highly sensitive to economic outlook and demand from China. The optimism surrounding the U.S.-China trade framework has been a primary driver of this rally. Furthermore, ongoing supply disruptions, including production caps in China, have fueled a supply deficit that is pushing prices toward record highs set in May 2024.

Market Implications

The week's market anomalies collectively signal a significant and broad-based shift toward risk-on sentiment among global investors. The simultaneous rally in equities, industrial metals, and cryptocurrencies, paired with a correction in the safe-haven asset gold, paints a clear picture. This trend appears to be driven by a confluence of positive macroeconomic developments, including the de-escalation of U.S.-China trade tensions and expectations of more accommodative monetary policy from the Federal Reserve.

The underlying strength is further supported by strong corporate earnings, particularly in the technology sector, which continues to be a primary engine of market growth. While the rally in crude oil is complicated by geopolitical factors, the strong performance of copper underscores a renewed confidence in global industrial demand and economic resilience. This environment suggests that investors are moving away from the defensive posturing seen earlier in the year and are now positioning for continued economic growth.

Disclaimer

This report is for informational purposes only and should not be considered financial advice. Market data is subject to rapid changes, and this report reflects a snapshot at a specific point in time.

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Carbonwolf Alpha: Q4 2025 - W43/44

Observations: Tailwinds

Year-End Rally Gains Momentum on Fed Easing and Investor FOMO

The S&P 500 is poised for a strong finish to the year, with prominent market strategists forecasting a potential surge to 7,000 and beyond. This bullish outlook is underpinned by a powerful combination of anticipated Federal Reserve rate cuts and persistent investor skepticism, which has historically fueled late-year market advances. The prevailing "fear of missing out" (FOMO) is further amplifying this momentum, as investors who have remained on the sidelines are now being compelled to enter the market to avoid being left behind in the current rally.

Tom Lee, Fundstrat Managing Director: "A typical year would add about 4%, which puts us over 7,000 into the end of the year."

Lee's analysis suggests that historical precedent, combined with current market dynamics, provides a strong basis for a continued rally into the year-end, with the potential for gains to reach as high as 10% from current levels.

AI Investment Cycle Proves Profitable, Fueling Further Growth

The massive investments made in artificial intelligence are now demonstrating tangible returns, with industry leaders like JPMorgan Chase reporting that their $2 billion annual AI expenditure has already paid for itself. This validation of the AI investment thesis is providing a significant tailwind for the technology sector and the broader market, as it signals that the AI boom is not just hype but a genuine driver of economic value. As more companies begin to report similar returns on their AI investments, it is likely to fuel a new wave of capital allocation into the sector, further propelling the market higher.

Jamie Dimon, JP Morgan CEO: "We have shown that for $2 billion of expense, we have about $2 billion of benefit."

Dimon's statement provides a powerful data point for the profitability of AI investments, and his observation that these gains are "just the tip of the iceberg" suggests that the AI-driven productivity boom is still in its early innings.

Market Rally Continues to Defy Skepticism

Despite stretched valuations and a wall of worry, the market continues to be propelled higher by a potent mix of adrenaline and a fear of missing out. This dynamic, described by some as running on "FOMO fumes," highlights the powerful psychological forces that are currently driving investor behavior. While the underlying fundamentals may be a cause for concern, the near-term outlook remains positive as long as the current momentum continues and the Federal Reserve remains on a path of monetary easing.

Sam Stovall, CFRA Chief Investment Strategist: "With the Fed likely to cut rates two more times this year, and with AI collaborations continuing, I think right now, we are trading on FOMO fumes."

Stovall's characterization of the market captures the current zeitgeist perfectly, acknowledging the speculative froth while also recognizing the powerful forces that are likely to keep the party going in the near term.

Observations: Headwinds

AI Sector Faces Potential 30-50% Correction

The explosive growth in AI-related stocks has led to concerns of a speculative bubble, with some prominent investors now warning of a significant correction on the horizon. The exuberance surrounding AI has driven valuations to extreme levels, and a pullback of 30-50% in the coming year is now being forecasted by some of the most respected names in the industry. This potential correction poses a significant headwind for the technology sector and the broader market, as a sharp decline in AI stocks could have a cascading effect on investor sentiment and trigger a wider market sell-off.

Dan Niles, Niles Investment Founder: "You will see a 30 to 50% correction in many AI-related names next year."

Niles' warning serves as a stark reminder that the AI boom is not without its risks, and his prediction of a significant correction should be a wake-up call for investors who may have become complacent in the current environment.

Runaway Deficits and Money Printing Threaten Long-Term Stability

The U.S. national debt has now surpassed $38 trillion, a staggering figure that is raising serious concerns about the long-term fiscal stability of the country. The combination of out-of-control deficits and unprecedented levels of money printing is creating a toxic cocktail that could lead to a decline in the value of the dollar and a host of other economic problems. While the market may be ignoring these long-term risks for now, they have the potential to create a significant headwind for the economy and the stock market in the years to come.

Jeffrey Gundlach, DoubleLine Capital CEO & Chief Investment Officer: "Deficits are out of control, the government is printing too much money, and the dollar is destined to decline."

Gundlach's dire warning highlights the unsustainable nature of the current fiscal path, and his prediction of a dollar decline should be a major concern for investors who are exposed to U.S. assets.

Fed Rate Cuts May Not Be a Panacea for the Labor Market

While the market is cheering the prospect of further Federal Reserve rate cuts, there is a growing concern that monetary policy may be losing its effectiveness as a tool for stimulating the economy. The labor market, in particular, is showing signs of weakness that may not be solvable by simply lowering interest rates. This suggests that the Fed may be pushing on a string, and that further rate cuts may do little to boost economic growth or corporate earnings.

Ed Yardeni, Yardeni Research President: "Lowering interest rates won't solve problems in the labor market."

Yardeni's comment challenges the prevailing narrative that Fed rate cuts are a magic bullet for the economy, and his focus on the labor market highlights a key vulnerability that could derail the current market rally.

Alpha Insight: The FOMO Fumes Paradox

The current market is running on what can only be described as "FOMO Fumes"—a paradoxical state where a fear of missing out is driving indices to record highs, even as fundamental risks mount. On one hand, the combination of expected Fed rate cuts and tangible returns from AI investments creates a compelling narrative for continued upside, pulling sidelined capital into the market. On the other hand, this adrenaline-fueled rally is occurring against a backdrop of bubble-like valuations in the AI sector, out-of-control government deficits, and a weakening labor market that monetary policy may not be able to fix. The paradox for traders is that while the momentum is undeniably bullish, the underlying structure is increasingly fragile. The key to navigating this environment is to ride the momentum while it lasts but to have a clear exit strategy for when the fumes inevitably run out and the market is forced to confront the fundamental realities it is currently ignoring.

Sentiment

Macro Data

Question of the Week:

As the market runs on "FOMO fumes," where is the greater risk: missing the rally or ignoring the fundamentals?

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!

21 OCT 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w43**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +59.32%

Major Indices:

2025 YTD Performance:

Markets Performance Grid - October 21, 2025

This report provides a snapshot of key market instruments, their performance metrics, and an analysis of notable market anomalies. Data is sourced from MarketWatch and cross-verified with Yahoo Finance for consistency.

Market Anomalies

Gold (/GC) Experiences Historic Single-Day Sell-Off

Gold futures experienced a significant anomaly on October 21, 2025, with a dramatic single-day price drop of -5.52%. This marks the steepest one-day decline for the precious metal in over a decade, since the notable crash in 2013. The sell-off occurred on exceptionally high trading volume, which was 230% above the 65-day average, indicating a strong consensus among traders.

This sharp correction comes after a prolonged and robust rally that saw gold prices increase by over 54% year-to-date. The immediate trigger for the sell-off appears to be a combination of profit-taking by investors after the recent record highs, a strengthening U.S. dollar, and signs of easing U.S.-China trade tensions, which has reduced the appeal of safe-haven assets like gold. Despite the sharp drop, gold remains significantly up for the year.

Market Implications

Historical Context of Gold's Correction

The sharp sell-off in gold is reminiscent of the 2013 gold market crash, where a similar rapid unwind occurred after a prolonged period of gains. In 2013, the primary drivers were the Federal Reserve's signaling of an end to its quantitative easing program and a surge in real interest rates. While the current situation shares similarities, such as a preceding rally and profit-taking, the underlying macroeconomic environment is different. Today's market is still contending with significant geopolitical uncertainty and persistent inflation concerns, which were less prominent in 2013.

Historically, such sharp corrections in gold do not necessarily signal a long-term trend reversal, especially when driven by technical factors and profit-taking rather than a fundamental shift in the market. Central bank buying, which has been a strong supportive factor for gold in 2025, may provide a floor for prices. The 2013 crash eventually led to a multi-year bear market for gold, but the current consensus among many analysts is that the fundamental drivers for gold remain intact. This event serves as a reminder of the volatility inherent in commodity markets, even for assets traditionally considered safe havens.

Disclaimer

This report is for informational purposes only and should not be considered financial advice. Market data is subject to rapid changes, and this report reflects a snapshot at a specific point in time.

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Carbonwolf Alpha: Q4 2025 - W42/43

Observations: Tailwinds

Earnings Season Kicks Off with Strong Momentum

The Q3 earnings season is off to a strong start, with major banks reporting a 19% increase in profits and S&P 500 earnings growth expectations being revised upwards to 9.3%. This positive momentum is providing a powerful tailwind for the market, as it suggests that corporate America is successfully navigating the current economic landscape. With a busy week of earnings reports ahead, continued positive surprises could further fuel investor optimism and drive the market higher.

Rick Rieder, BlackRock Chief Investment Officer of Global Fixed Income: "It doesn't mean necessarily that everything's going up, but there's a couple of things at play that are pretty extraordinary."

Rieder's comments underscore the exceptionally favorable conditions for investors, with strong earnings, high cash reserves, and the prospect of Fed rate cuts creating a powerful cocktail for asset appreciation.

Market Demonstrates Remarkable Resilience

Despite a backdrop of geopolitical tensions and a government shutdown, the market has demonstrated remarkable resilience, grinding higher in the face of uncertainty. This resilience is a testament to the underlying strength of the economy and the powerful influence of positive earnings momentum. The market's ability to shrug off negative headlines suggests that investors are more focused on the positive fundamentals, which could pave the way for further gains.

David Zervos, Jefferies Chief Market Strategist: "The market has been extremely resilient despite rising trade tension."

Zervos's observation highlights the market's ability to look past short-term noise and focus on the bigger picture, a characteristic that has been a hallmark of the current bull market.

Fed Rate Cut Expectations Provide a Tailwind

The market is increasingly pricing in a Federal Reserve rate cut at the upcoming October 29th meeting, providing a significant tailwind for risk assets. The prospect of lower interest rates is a powerful motivator for investors, as it reduces the cost of borrowing and increases the present value of future earnings. With the Fed seemingly on a path to further ease monetary policy, the central bank is providing a significant backstop for the market.

Jerome Powell, Fed Chair: "[The Fed is] on track to keep cutting rates."

Powell's recent statements have been interpreted by the market as a clear signal that the Fed is prepared to do whatever it takes to support the economy, a message that has been music to the ears of investors.

Observations: Headwinds

Near-Term Correction Risk Remains Elevated

Despite the market's recent strength, the risk of a near-term correction remains elevated. While the long-term outlook may be positive, there are a number of factors that could trigger a pullback in the short term, including stretched valuations, geopolitical uncertainty, and the potential for a hawkish surprise from the Federal Reserve. Investors should be prepared for a period of increased volatility and consider taking some profits off the table.

Mike Wilson, Morgan Stanley Chief Investment Officer: "[I need] to see more before giving the ‘all-clear’ on chances of a further near-term correction."

Wilson's cautious tone reflects a healthy respect for the risks that still exist in the market, and his comments serve as a reminder that the path of least resistance is not always higher.

Global Growth Deceleration Poses a Headwind

The global economy is expected to slow in the coming year, which could create a headwind for corporate earnings and stock prices. The International Monetary Fund recently lowered its global growth forecast, citing a number of factors, including the ongoing trade war between the United States and China, Brexit, and a slowdown in emerging markets. While the U.S. economy has been relatively resilient, it is not immune to a global slowdown.

Jan Hatzius, Goldman Sachs Chief Economist: "[The] US economy is in stall speed."

Hatzius's assessment of the U.S. economy suggests that it may be more vulnerable to a global slowdown than many investors currently believe, and his comments highlight the importance of monitoring global economic data closely.

Market Complacency Creates Downside Risk

The market's incredible ability to shake off bad news may be a sign of complacency, which could be setting the stage for a sharp correction. When investors become too complacent, they tend to take on more risk than they should, which can lead to a painful unwinding when the market eventually turns. While it is impossible to predict when the next correction will occur, the current environment of low volatility and high valuations is a classic warning sign.

Cameron Dawson, NewEdge Wealth Chief Investment Officer: "This market has an incredible ability to shake off bad news."

Dawson's observation is a double-edged sword. While it is a positive sign that the market is so resilient, it could also be a sign that investors are not paying enough attention to the risks.

Alpha Insight: The Resilience Paradox

The current market is defined by a "Resilience Paradox." On one hand, the market shows incredible strength, shrugging off a government shutdown, geopolitical tensions, and a global growth slowdown. This resilience is fueled by a powerful combination of strong corporate earnings and the prospect of continued Federal Reserve accommodation. On the other hand, this very resilience may be breeding complacency, leaving the market vulnerable to a sharp correction. The danger is that investors are becoming so accustomed to the market's ability to defy gravity that they are ignoring the flashing warning signs. The key to navigating this paradoxical environment is to maintain a balanced perspective, acknowledging the market's underlying strength while also respecting the very real risks that lie just beneath the surface.

Sentiment

Macro Data

Question of the Week:

Is the market's current resilience a sign of fundamental strength or dangerous investor complacency?

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!

14 OCT 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w42**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +59.87%

Major Indices:

2025 YTD Performance:

Markets Performance Grid - October 14, 2025

This report provides a snapshot of key market instruments, their performance metrics, and an analysis of significant weekly movements. Data is sourced from MarketWatch and cross-verified for consistency.

Market Anomalies

This section highlights instruments with week-over-week movements of +/-2.1% or greater, providing data analysis and market context.

Bitcoin (/BTC)

WoW Change: -2.87%

Bitcoin experienced a notable decline of 2.87% from the previous Tuesday, falling from $116,380 to its current value of $113,040. This movement represents a significant loss of $3,340 per contract. Despite this weekly downturn, Bitcoin remains positioned in the mid-range of its 52-week performance, indicating that it has not yet approached its recent highs or lows. Year-to-date, Bitcoin maintains a substantial gain of 17.75%.

The recent selloff in Bitcoin appears to be linked to broader market volatility, particularly the escalating trade tensions between the U.S. and China. Digital assets like Bitcoin have shown increasing sensitivity to macroeconomic uncertainty and a general aversion to risk. The decline may also be attributed to profit-taking by investors following strong year-to-date performance, as well as ongoing concerns about regulatory developments in the cryptocurrency space.

Copper (/HG)

WoW Change: -2.90%

Copper futures saw a significant drop of 2.90% week-over-week, with the price falling from $5.1440 to $4.9950 per pound. The industrial metal is currently positioned at the midpoint of its 52-week range, suggesting a balance between bullish and bearish sentiment. Despite the weekly decline, copper has maintained a strong year-to-date gain of 20.36%.

Copper's decline is often interpreted as a signal of growing concerns about global economic growth, particularly in China, which is the world's largest consumer of the metal. The ongoing trade disputes have heightened fears of reduced industrial demand and a slowdown in manufacturing activity. As a key barometer of economic health, copper's weakness suggests market anxiety about a potential deceleration in construction and infrastructure spending worldwide.

Market Implications

The observed anomalies in Bitcoin and copper prices carry important historical and economic implications. Bitcoin's sensitivity to geopolitical tensions and macroeconomic shifts is a relatively recent phenomenon, reflecting its growing integration into the global financial system. Historically, significant price swings in Bitcoin have been driven by factors within the cryptocurrency ecosystem, such as halving events or regulatory crackdowns. The current correlation with traditional market stressors suggests a maturation of the asset class, where its performance is increasingly tied to broader economic sentiment.

Copper, often referred to as "Doctor Copper" for its ability to diagnose the health of the global economy, has a long history as a leading economic indicator. A sharp decline in copper prices has frequently preceded economic slowdowns or recessions, as it signals a decrease in demand for industrial and construction materials. The current drop, occurring in the context of a trade war, aligns with historical patterns where protectionist policies and trade disputes have led to reduced global trade and economic contraction. The simultaneous weakness in both a modern digital asset and a traditional industrial commodity highlights the pervasive nature of the current market uncertainty.

Disclaimer

This report is for informational purposes only and should not be considered financial advice. Market data is subject to rapid changes, and this report reflects a snapshot at a specific point in time.

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Carbonwolf Alpha: Q4 2025 - W41/42

Observations: Tailwinds

Q3 Earnings Season Launches with Elevated Expectations

The third quarter earnings season has commenced with remarkably high expectations, creating a potential catalyst for continued market momentum as companies demonstrate their ability to navigate the current economic environment. With consensus expectations calling for S&P 500 earnings per share growth of 7.5%, Nasdaq-100 growth of 10.5%, and Russell growth of 19.5%, the bar has been set at levels that reflect genuine optimism about corporate performance. The peak reporting weeks between October 27 and November 14 will see over 2,000 companies report each week, providing ample opportunity for positive surprises to drive market sentiment. Major financial institutions leading the charge have already begun setting a constructive tone for the broader earnings cycle.

Tom Lee, Fundstrat Managing Director: "There are a lot of reasons for investors to stay optimistic."

Lee's continued bullish stance reflects Fundstrat's confidence that the earnings season will validate current market levels, particularly as the firm maintains its S&P 500 target of 7,000 despite recent volatility concerns.

AI Investment Cycle Gains Fed Policy Support

The artificial intelligence investment boom is receiving unexpected support from Federal Reserve monetary policy, as lower interest rates reduce the cost of capital for technology companies pursuing massive AI infrastructure buildouts. This monetary accommodation comes at a critical time when AI companies need substantial funding for research, development, and deployment of next-generation technologies. The combination of Fed rate cuts and sustained AI enthusiasm creates a powerful tailwind for technology sector performance, particularly as institutional investors seek growth opportunities in a lower-rate environment.

Dan Niles, Niles Investment Founder: "AI stocks will rise a lot as the Fed cuts rates."

Niles' prediction reflects the direct correlation between monetary policy and technology valuations, as lower discount rates make future AI cash flows more valuable in present-value terms.

Market Valuation Framework Remains Rational

Despite widespread concerns about market bubbles, sophisticated institutional analysis suggests that current valuations, while elevated, remain within reasonable bounds given the underlying economic fundamentals and earnings prospects. This rational valuation framework provides a foundation for continued market appreciation, as investors can justify current price levels through traditional metrics rather than speculative excess. The absence of true mania in market behavior indicates that the current rally is built on more solid ground than previous bubble periods.

Howard Marks, Oaktree Capital Management Founder: "The valuations are high but not crazy. Expensive and going down tomorrow are not synonymous."

Marks' measured assessment carries significant weight given his reputation for identifying market bubbles, suggesting that current conditions do not yet meet the psychological criteria for unsustainable speculation.

Observations: Headwinds

Market Correction Probability Significantly Underpriced

The probability of a serious market correction is substantially higher than current market pricing suggests, creating a dangerous disconnect between risk perception and reality. This mispricing of tail risk reflects widespread complacency among investors who have become accustomed to central bank support and may be unprepared for a significant downturn. The combination of geopolitical uncertainty, fiscal spending concerns, and global remilitarization creates multiple vectors for market disruption that are not adequately reflected in current volatility measures.

Jamie Dimon, JP Morgan CEO: "If the market's pricing in 10%, I would say it is more like 30%."

Dimon's stark warning about correction probability reflects JPMorgan's institutional view that markets are significantly underestimating downside risks, particularly given the bank's comprehensive global perspective on systemic threats.

Government Shutdown Creates Policy Uncertainty Cascade

The ongoing government shutdown has created a cascade of policy uncertainties that extend far beyond the immediate impact on economic data collection, potentially undermining the Federal Reserve's ability to make informed monetary policy decisions. This data blackout forces policymakers to operate with incomplete information during a critical period of economic transition, increasing the likelihood of policy errors that could destabilize markets. The delay of crucial economic indicators, including CPI data needed for Social Security calculations, demonstrates how political dysfunction can create systemic risks for financial markets.

Liz Ann Sonders, Charles Schwab Chief Investment Strategist: "Government shutdown drives reliance on other data."

Sonders' observation highlights the dangerous precedent of monetary policy decisions being made without comprehensive official data, potentially leading to misguided policy choices that could harm market stability.

Private Credit Bubble Threatens Financial Stability

The private credit market has emerged as a leading candidate to trigger the next financial crisis, as excessive leverage and inadequate oversight create conditions reminiscent of previous credit bubbles. This rapidly growing sector operates with less regulatory scrutiny than traditional banking, allowing for the accumulation of systemic risks that could propagate throughout the financial system. The concentration of risk in private credit vehicles, combined with their opacity and illiquidity, creates a potential flashpoint for broader market disruption.

Jeffrey Gundlach, DoubleLine Capital CEO & Chief Investment Officer: "Private credit would be the leading candidate to be the cause of the next financial crisis."

Gundlach's warning about private credit risks reflects DoubleLine's expertise in fixed income markets and their ability to identify emerging threats to financial stability before they become widely recognized.

Alpha Insight: The Earnings Expectation Paradox

The current earnings season presents an "Earnings Expectation Paradox" where elevated expectations create both opportunity and risk in equal measure. While high earnings forecasts reflect genuine optimism about corporate performance, they also establish a framework where even solid results may disappoint if they fail to exceed ambitious targets. This paradox is particularly pronounced in the current environment where government shutdown delays have reduced the availability of economic context that typically helps investors interpret earnings results. Companies that would normally benefit from positive economic data to support their narratives must now rely solely on their operational performance to justify valuations. The absence of comprehensive economic data creates a unique situation where earnings season becomes the primary driver of market sentiment, amplifying both the potential for positive surprises and the risk of disappointment. This concentration of market-moving information into a narrow window of corporate reporting creates heightened volatility potential that sophisticated investors can exploit through careful positioning around earnings announcements.

Sentiment

Macro Data

Question of the Week:

Does the Earnings Expectation Paradox suggest that corporate performance has become the market's primary truth-teller?

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!

07 OCT 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w41**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +57.44%

Major Indices:

2025 YTD Performance:

Markets Performance Grid - October 7, 2025

Markets Performance Grid

Market Anomalies

This section highlights instruments with significant week-over-week movements (±2.1% or greater) and provides context for the fluctuations.

Gold (/GC) Hits Record Highs

Gold futures surged by over 4% this week, breaking the $4,000 per ounce milestone for the first time in history. This significant rally is driven by a confluence of factors creating a safe-haven rush among investors. The ongoing US government shutdown and expectations of Federal Reserve interest rate cuts have weakened the US dollar, making gold a more attractive alternative. Additionally, strong central bank buying, particularly from China, and heightened geopolitical tensions are providing strong tailwinds for the precious metal.

Bitcoin (/BTC) Continues 'Uptober' Rally

Bitcoin experienced a weekly gain of over 3.5%, continuing its historically strong October performance, dubbed 'Uptober' by enthusiasts. The cryptocurrency reached a new all-time high above $126,000 before settling in the current range. The rally is fueled by a perfect storm of macroeconomic factors, including strong institutional demand through spot Bitcoin ETFs, a supply squeeze on exchanges, and the same safe-haven demand benefiting gold amid the US government shutdown.

Copper (/HG) Rallies on Supply Concerns

Copper prices saw a dramatic weekly increase of nearly 6%, pushing prices close to their all-time highs. The surge is primarily attributed to significant supply disruptions at major global mines, including Freeport-McMoRan's Grasberg mine in Indonesia. These supply snarls, combined with robust structural demand from the global energy transition and electrification projects, are creating a significant supply-demand imbalance and driving prices upward.

Market Implications

The simultaneous rallies in gold, Bitcoin, and copper signal a complex and uncertain macroeconomic environment. The movements in gold and Bitcoin underscore a flight to safety and a potential de-dollarization trend, as investors seek hedges against inflation, government instability, and currency weakness. This suggests a growing lack of confidence in traditional financial systems and a search for alternative stores of value.

The surge in copper, often seen as a barometer of economic health, points to a different narrative. While its rally is supply-driven, the underlying strong demand from green energy initiatives indicates that long-term structural trends are powerful enough to override short-term economic jitters. The convergence of these trends—safe-haven demand and structural commodity demand—paints a picture of a market grappling with immediate risks while simultaneously betting on a transformative future.

Disclaimer

This report is for informational purposes only and should not be considered financial advice. Market data is subject to rapid changes, and this report reflects a snapshot at a specific point in time.

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Carbonwolf Alpha: Q4 2025 - W40/41

Observations: Tailwinds

Government Shutdown Creates Fed Easing Urgency

The ongoing government shutdown has created an unexpected tailwind for dovish Fed policy by eliminating the risk of upside data surprises. With the Bureau of Labor Statistics unable to publish official employment data, the Fed must rely on private sector reports showing significant labor market weakness. This data blackout removes a key obstacle to aggressive monetary easing, as policymakers cannot be surprised by stronger-than-expected job growth that might derail their dovish narrative. The shutdown effectively shields the Fed from having to explain away robust employment data while maintaining their commitment to supporting the labor market.

Rick Rieder, BlackRock Chief Investment Officer of Global Fixed Income: "The primary focus has got to be let's keep full employment where it is, however we get there."

Rieder's emphasis on maintaining employment "however we get there" signals BlackRock's expectation that the

Fed will prioritize labor market stability over traditional policy constraints, particularly given the current data limitations.

Economic Resilience Drives Earnings Optimism

Despite widespread recession fears, the U.S. economy continues to demonstrate remarkable resilience, supporting corporate earnings growth and justifying current equity valuations. The economy's ability to maintain expansion while the Fed begins its easing cycle creates an ideal environment for risk assets. This resilience has allowed analysts to raise earnings forecasts and price targets, with expectations for another strong quarterly reporting season. The combination of economic durability and monetary accommodation provides a powerful foundation for continued market gains.

Ed Yardeni, Yardeni Research Founder: "We bet the resilience of the economy would boost S&P 500 earnings. So far, so good."

Yardeni's confidence in raising his S&P 500 target back to 7,000 reflects growing conviction that economic resilience will translate directly into earnings growth, validating the market's current valuation levels.

Early-Cycle Valuation Support Emerging

The U.S. economy appears to be entering an early-cycle phase that historically supports higher equity valuations, particularly as earnings recovery momentum builds across sectors. This early-cycle dynamic, combined with the Fed's dovish pivot, creates conditions where traditional valuation metrics become less constraining. The shift from late-cycle concerns to early-cycle optimism allows investors to pay premium multiples for growth prospects, especially as inflation expectations remain anchored and monetary policy turns accommodative.

Mike Wilson, Morgan Stanley Chief Investment Officer: "U.S. equity valuations appear justified as the economy enters an early-cycle phase."

Wilson's validation of current valuations marks a significant shift from his previous cautious stance, suggesting that Morgan Stanley's strategists now see fundamental support for elevated market multiples in the current economic environment.

Observations: Headwinds

Data Integrity Crisis Undermines Fed Credibility

The government shutdown has created a dangerous precedent where monetary policy decisions must be made without reliable official economic data, potentially undermining the Federal Reserve's credibility and effectiveness. This data blackout forces policymakers to rely on incomplete private sector reports that may not capture the full scope of economic conditions. The inability to access comprehensive labor market data during a critical period of policy transition raises questions about the Fed's ability to make informed decisions and could lead to policy errors that destabilize markets.

Jan Hatzius, Goldman Sachs Chief Economist: "Lack of BLS data is a significant handicap in forecasting."

Hatzius's acknowledgment of the forecasting handicap highlights the unprecedented challenge facing both the Fed and market participants in making critical decisions without comprehensive official data.

AI Displacement Threatens Labor Market Stability

The rapid advancement of artificial intelligence poses an existential threat to employment that the Federal Reserve appears unprepared to address, potentially creating massive labor market disruption in the coming years. Unlike previous technological shifts, AI's impact could be swift and concentrated, eliminating millions of jobs across multiple sectors simultaneously. This technological displacement risk creates a policy dilemma where traditional monetary tools may prove inadequate to address structural unemployment, potentially forcing the Fed into uncharted territory of crisis management.

David Zervos, Jefferies Chief Market Strategist: "The Fed is not ready for AI-induced job losses in the millions."

Zervos's warning about AI displacement highlights a structural risk that could overwhelm traditional Fed policy tools, particularly if job losses occur faster than the economy can create new employment opportunities.

Bubble Fear Paradox Signals Market Complacency

The emergence of widespread "bubble fears" across financial markets may paradoxically indicate dangerous levels of complacency among investors who believe they can time market tops. This psychological phenomenon often occurs near market peaks when participants become overly confident in their ability to identify and avoid bubbles. The proliferation of bubble warnings, rather than serving as a protective mechanism, may actually encourage riskier behavior as investors assume they can exit before any correction occurs.

Ed Yardeni, Yardeni Research Founder: "There is now a bubble in bubble fears."

Yardeni's observation about excessive bubble fears suggests that market participants may be using these warnings as justification for continued risk-taking, potentially creating the very conditions they claim to be monitoring.

Alpha Insight: The Data Blackout Paradox

The government shutdown has created an unprecedented "Data Blackout Paradox" where the absence of official economic information actually strengthens the case for aggressive Fed easing. Historically, central banks have relied on comprehensive data to guide policy decisions, but the current situation forces the Fed to err on the side of accommodation rather than risk policy mistakes. This paradox creates a unique market environment where bad news (data unavailability) becomes good news (policy certainty), as investors can be confident that the Fed will maintain its dovish stance without the risk of being derailed by unexpectedly strong employment data. The shutdown effectively removes the Fed's ability to pivot hawkish, creating a one-way policy bet that favors risk assets in the near term.

Sentiment

Macro Data

Question of the Week:

Does the Data Blackout Paradox signal that markets now prefer policy uncertainty over data transparency?

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!

30 SEP 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w40**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +54.38%

Major Indices:

2025 YTD Performance:

Markets Performance Grid - September 30, 2025

Enhanced Market Anomaly Analysis

September 30, 2025

Identified Anomalies (Weekly Movement ≥ ±2.1%)

Gold Futures (/GC): +2.80% Weekly

Current Price: $3,886.50

YTD Performance: +46.17%

52-Week Status: Near High

Data Analysis: Gold futures demonstrated significant weekly strength with a 2.80% gain, pushing the precious metal to within striking distance of its 52-week high of $3,899.20. The weekly movement represents a substantial $105.90 increase from the previous Tuesday's close.

Market Context & Interpretation: The gold rally is fundamentally driven by escalating safe-haven demand as the United States approaches a potential government shutdown deadline. According to recent market reports, gold briefly touched a new record high of $3,871.45 per ounce during the week, with futures opening above $3,800 for the first time. The precious metal is on track for its best monthly performance since August 2011, gaining approximately 11.6% in September 2025. This exceptional performance reflects investor anxiety over political uncertainty, potential delays in key economic data releases (including payrolls data), and broader concerns about fiscal policy stability. The near-record positioning suggests continued institutional and retail investor flight to traditional safe-haven assets amid heightened geopolitical and domestic political tensions.

Copper Futures (/HG): +6.27% Weekly

Current Price: $4.87

YTD Performance: +22.15%

52-Week Status: Mid-Range

Data Analysis: Copper futures exhibited the most dramatic weekly movement among all tracked instruments, surging 6.27% or approximately $0.29 per pound. This represents the largest weekly gain observed in the current analysis and positions copper for its best monthly performance in over a year.

Market Context & Interpretation: The copper rally is primarily attributed to supply-side disruptions and concerns about mine production constraints. Market reports indicate that copper is recording its biggest monthly advance since June 2024, with September 2025 marking approximately 5% gains for the month. The rally has been fueled by supply snarls and production setbacks at key mining operations, creating anxiety about near-term availability despite ongoing concerns about Chinese manufacturing activity. The metal's position in the mid-range of its 52-week trading band ($3.97-$5.89) suggests room for further upside if supply constraints persist. Industrial demand expectations, particularly from infrastructure and renewable energy sectors, continue to provide fundamental support for copper prices. The 22.15% year-to-date performance underscores the underlying strength in the commodity cycle and growing recognition of copper's critical role in the global energy transition.

Market Implications

The identification of these two commodity anomalies highlights a broader theme of supply-side pressures and safe-haven demand dominating market sentiment in late September 2025. Both gold and copper are benefiting from distinct but complementary factors: gold from financial uncertainty and copper from physical supply constraints. The absence of equity index anomalies suggests that traditional financial markets remain relatively stable despite the political uncertainty, with volatility concentrated in commodity markets where fundamental supply-demand dynamics are more pronounced.

The concentration of anomalies in the commodities sector, particularly precious and industrial metals, indicates that investors are positioning for both defensive (gold) and growth-oriented (copper) scenarios simultaneously, reflecting the complex macroeconomic environment as the fourth quarter of 2025 approaches.

Disclaimer

This report is for informational purposes only and should not be considered financial advice. Market data is subject to rapid changes, and this report reflects a snapshot at a specific point in time.

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Carbonwolf Alpha: Q3 2025 - W39/40

Observations: Tailwinds

Government Shutdown Paradox Creates Fed Urgency

The looming government shutdown, while threatening to delay critical economic data releases including Friday's September jobs report, paradoxically strengthens the case for aggressive Fed easing. Markets are pricing in nearly 90% probability of a 25bp cut at the October 28-29 meeting, with the potential data blackout removing a key obstacle to dovish policy. The shutdown threat eliminates the risk of stronger-than-expected employment data derailing rate cut expectations, while the 43,000 jobs forecast already signals significant labor market deterioration that would justify continued easing.

Tom Lee, Fundstrat Managing Director: "The government shutdown actually removes a major risk to our year-end rally thesis. Without the jobs data to potentially surprise to the upside, the Fed has a clearer path to cut rates aggressively."

Lee's positioning reflects Fundstrat's view that political dysfunction, while creating short-term volatility, ultimately accelerates Fed accommodation that benefits risk assets through year-end.

Market Breadth Expansion Beyond Mega-Cap Concentration

The rotation away from mega-cap technology stocks is creating significant opportunities across broader market segments, with equal-weighted indices beginning to outperform their cap-weighted counterparts. This breadth expansion suggests the market is transitioning from a narrow AI-driven rally to a more sustainable broad-based advance supported by Fed easing expectations. Small and mid-cap stocks are particularly well-positioned to benefit from lower rates, while international diversification through global indices offers additional alpha generation potential as the dollar weakens on dovish Fed policy.

Liz Ann Sonders, Charles Schwab Chief Investment Strategist: "There's a lot of performance to be found in the market outside of the Magnificent Seven. We're seeing clients increasingly interested in diversification plays."

Sonders' commentary reflects Schwab's institutional positioning away from concentrated mega-cap exposure toward broader market participation as the Fed easing cycle unfolds.

Economic Weakness Justifies Aggressive Fed Response

The emerging consensus around economic deceleration, while concerning for fundamentals, creates the perfect backdrop for sustained Fed accommodation that supports asset prices. JPMorgan's acknowledgment of economic weakening, combined with uncertainty about recession timing, provides the Fed with political cover for aggressive rate cuts without appearing to panic. This "bad news is good news" dynamic supports risk assets as markets price in multiple rate cuts through 2026, with the terminal rate potentially falling below neutral levels.

Jamie Dimon, JPMorgan CEO: "I think the economy is weakening. Whether it's on the way to recession or just weakening, I don't know."

Dimon's cautious stance reflects JPMorgan's defensive positioning while acknowledging that economic uncertainty creates Fed policy accommodation that benefits the bank's trading revenues.

Observations: Headwinds

Fed Policy Division Threatens Easing Consensus

The growing schism within the Federal Reserve between Chair Powell's cautious approach and Trump-appointed governors pushing for aggressive cuts creates dangerous policy uncertainty that could destabilize markets. Powell's warning about cutting "too aggressively" directly contradicts Stephen Miran's call for rates to fall to 2%-2.5%, suggesting the Fed may deliver smaller cuts than markets expect. This division threatens the dovish consensus that has supported risk assets, with the potential for hawkish surprises that could trigger significant corrections across equities and credit.

Jerome Powell, Fed Chair: "If the Fed were to cut rates 'too aggressively,' we could leave the inflation job unfinished and need to reverse course later."

Powell's measured tone contrasts sharply with market expectations, suggesting the Fed may disappoint on the dovish side, particularly given his concern about maintaining credibility on inflation.

AI Revenue Generation Questions Threaten Tech Valuations

The fundamental disconnect between massive AI infrastructure spending and actual revenue generation is creating a dangerous bubble in technology valuations that threatens broader market stability. With companies spending billions on AI deployment without clear monetization pathways, the sector faces a potential reckoning similar to the dot-com era. This revenue gap is particularly concerning given tech's outsized influence on major indices, where any significant correction could trigger broader market weakness and undermine the Fed's wealth effect strategy.

Dan Niles, Niles Investment Management Founder: "The main question around AI is if the deployers are generating any revenue. The hope around AI spend may be overdone."

Niles' skepticism reflects growing institutional concern about AI valuations, with his firm likely positioning defensively against potential tech sector corrections.

Bond Market Signals Economic Stress Despite Fed Accommodation

The persistent strength in precious metals and defensive positioning in credit markets suggests institutional investors are preparing for more severe economic deterioration than current Fed policy implies. Jeffrey Gundlach's $4,000 gold target reflects deep concerns about fiscal sustainability and currency debasement that Fed rate cuts cannot address. This flight to real assets indicates sophisticated money is positioning for stagflationary outcomes that would force the Fed to choose between fighting inflation and supporting growth, potentially triggering policy errors that destabilize markets.

Jeffrey Gundlach, DoubleLine CEO: "The Fed's rate cuts in 2025 are 'too little, too late' to offset structural weaknesses in the U.S. economy."

Gundlach's positioning in precious metals and international bonds reflects DoubleLine's expectation that Fed policy accommodation will prove insufficient to address underlying economic imbalances.

Alpha Insight: The "Shutdown Shield" Phenomenon

The market's counterintuitive positive reaction to government shutdown risks reveals a sophisticated understanding of Fed policy dynamics that creates unique trading opportunities. By eliminating the possibility of stronger-than-expected economic data, the shutdown effectively removes the primary obstacle to aggressive Fed easing, creating what we term the "Shutdown Shield" - a protective barrier around dovish expectations. This dynamic suggests markets have evolved beyond traditional government dysfunction concerns to focus purely on Fed policy implications, creating opportunities for contrarian positioning in sectors that typically suffer during political uncertainty but benefit from accelerated monetary accommodation.

Market Sentiment

Macro Data

Question of the Week:

Does the "Shutdown Shield" phenomenon signal that markets now view government dysfunction as a bullish catalyst?

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!

23 SEP 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w39**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +55.49%

Major Indices:

2025 YTD Performance:

Markets Performance Grid - September 23, 2025

This report provides a snapshot of the market performance for eight key financial instruments as of September 23, 2025. The data has been gathered and verified from multiple reliable financial sources to ensure accuracy.

Performance Grid

The following table summarizes the current market status for each instrument, including year-to-date (YTD) performance, change from last Tuesday (September 16, 2025), and 52-week status.

Data Verification and Market Anomalies

Data Sources

Primary data was sourced from the Yahoo Finance API via the Manus Data Hub. Cross-verification was performed using data from the Yahoo Finance homepage to ensure consistency and accuracy. All major indices and commodity prices showed exact matches between the API and web data, confirming high data integrity.

Market Anomalies Detected

•Major Indices Near 52-Week Highs: The Dow Jones Industrial Average (DJII), S&P 500 (SPX), and NASDAQ Composite (COMP) continue to trade near their 52-week highs, although they experienced a slight pullback today. This suggests that while the long-term bullish sentiment remains, some short-term caution is entering the market, as noted in market headlines.

•Gold Continues its Record Run: Gold (/GC) has once again reached a new high, with a significant YTD gain of +42.80%. This sustained momentum reinforces the view that investors are actively seeking safe-haven assets, likely driven by inflation concerns and a cooling of the recent tech-driven market euphoria.

•Bitcoin Pullback: Bitcoin (/BTC) shows a notable negative change from last Tuesday (-3.80%), contrasting with the positive performance of most other instruments. This divergence could indicate a sector-specific correction or a shift in sentiment within the cryptocurrency market.

Disclaimer

This report is for informational purposes only and should not be considered financial advice. Market data is subject to rapid changes, and this report reflects a snapshot at a specific point in time.

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Observations: Tailwinds

Fed Easing Cycle Officially Launched

The Federal Reserve delivered its first rate cut since December 2024, reducing the benchmark rate by 25 basis points to a range of 4.0%-4.25%. Chair Powell characterized the move as a "risk-management cut," signaling the central bank's acknowledgment of deteriorating labor market conditions while maintaining flexibility for future policy adjustments. The decision removes a significant policy overhang that had been weighing on risk assets throughout the summer. With the Fed now officially in easing mode, interest-sensitive sectors and small-cap stocks are positioned to benefit disproportionately from the lower borrowing cost environment that lies ahead.

David Zervos, Jefferies Chief Market Strategist: "The market could be looking at the Fed decision as a small policy mistake, but it opens the door for more aggressive easing ahead."

Zervos's positioning reflects Jefferies' view that the Fed may need to accelerate cuts beyond current market expectations, with the firm maintaining overweight positions in duration-sensitive assets and small-cap equities.

Gold Surge Signals Safe Haven Demand

Precious metals reached new record highs during the period, with gold touching $3,757 per ounce as investors embraced the combination of Fed easing and persistent geopolitical uncertainties. The 42.36% year-to-date gain in gold reflects not just monetary policy accommodation but also growing concerns about currency debasement and fiscal sustainability. Silver futures hit $44 per ounce for the first time in 14 years, indicating broad-based precious metals strength. This precious metals rally provides portfolio diversification benefits while serving as an inflation hedge in an environment where tariff-related price pressures continue building.

Rick Rieder, BlackRock Chief Investment Officer of Global Fixed Income: "The combination of Fed easing and persistent inflation risks makes precious metals an essential portfolio component in the current environment."

Rieder's emphasis on precious metals allocation reflects BlackRock's defensive positioning amid policy uncertainty, with the firm increasing gold exposure across multiple client portfolios.

Rolling Recovery Momentum Building

Economic data suggests the "rolling recession" that characterized 2024 may be transitioning into a "rolling recovery" with pent-up demand emerging across previously depressed sectors. Housing, shorter-cycle industrials, consumer goods, and transportation sectors are showing signs of stabilization after years of underperformance. This rotation away from mega-cap technology toward more cyclical areas of the economy creates opportunities for value-oriented investors. The breadth of earnings revisions is accelerating, suggesting corporate fundamentals may surprise to the upside as economic momentum builds in previously lagging sectors.

Mike Wilson, Morgan Stanley Chief Investment Officer: "Our view remains consistent that the rolling recession ended with Liberation Day and we are now transitioning to an early cycle/rolling recovery when earnings growth is likely to be stronger than expected."

Wilson's optimistic assessment reflects Morgan Stanley's tactical shift toward cyclical sectors, with the firm reducing defensive positioning in favor of early-cycle beneficiaries.

Observations: Headwinds

Market Expectations Exceed Fed Willingness

Despite delivering the anticipated 25 basis point cut, the Fed's measured approach may disappoint markets that have priced in aggressive easing through year-end. Fed funds futures currently price in another 50 basis points of cuts by December, potentially setting up for disappointment if economic data doesn't deteriorate sufficiently to justify such accommodation. The tension between market expectations for rapid easing and the Fed's data-dependent approach creates near-term volatility risks. Powell's emphasis on the cut being "risk management" rather than the start of an aggressive cycle suggests the central bank remains cautious about over-easing in response to market pressure.

Ed Yardeni, Yardeni Research Founder: "The Fed's priority should always be on inflation, and cutting too aggressively risks reigniting price pressures."

Yardeni's inflation-focused stance reflects his firm's concern that premature easing could undermine the Fed's credibility on price stability, with Yardeni Research maintaining defensive positioning until inflation trends become more definitively disinflationary.

Liquidity Stress Building Beneath Surface

The Federal Reserve's continued quantitative tightening program, combined with heavy Treasury issuance and elevated corporate debt sales, is creating potential liquidity stress in financial markets. The combination of asset sales from the Fed's balance sheet and increased government borrowing needs is draining liquidity from the system at a time when markets are demanding more accommodation. Early warning signs include potential widening in the spread between the Secured Overnight Financing Rate and Fed Funds, along with rising Treasury volatility as measured by the MOVE index. This liquidity dynamic could trigger sharp corrections if the Fed doesn't address emerging funding pressures.

Jan Hatzius, Goldman Sachs Chief Economist: "While we continue to expect two additional 25 basis point rate cuts this year, liquidity conditions require careful monitoring as QT continues."

Hatzius's cautious tone reflects Goldman's concern about the interaction between monetary policy and market liquidity, with the firm maintaining shorter duration positioning until liquidity stress subsides.

Seasonal Weakness Window Approaching

Historical market patterns suggest September through October represents one of the most challenging seasonal periods for equity performance, particularly in election years with significant policy uncertainty. The combination of portfolio rebalancing, tax-loss selling, and reduced institutional activity creates headwinds for risk assets during this period. Current market positioning shows elevated bullish sentiment and extended technical indicators that leave equities vulnerable to any disappointment in economic data or Fed policy. The S&P 500's relative strength index has remained above 45 for over 100 days, a streak that historically has preceded near-term weakness.

Cameron Dawson, NewEdge Wealth Chief Investment Officer: "We're maintaining neutral positioning despite strong equity performance, as seasonal patterns and elevated valuations create near-term risks."

Dawson's defensive stance reflects NewEdge's tactical approach to the challenging seasonal window, with the firm reducing equity exposure and increasing alternative investments to navigate potential volatility.

Sentiment

Macro Data

Alpha Insight: The "Liberation Day" Recovery Paradox

The concept of "Liberation Day" - marking the end of the rolling recession - creates a unique investment paradox where good economic news becomes bad for markets expecting aggressive Fed accommodation. As sectors like housing, industrials, and consumer goods show signs of recovery, the Fed's justification for rapid easing diminishes, potentially disappointing markets that have priced in substantial accommodation. This dynamic suggests investors should focus on sectors benefiting from economic normalization rather than those dependent on ultra-low rates. The key insight is that the Fed's success in engineering a soft landing may paradoxically create near-term market volatility as rate cut expectations recalibrate to economic reality.

Question of the Week:

Should sophisticated traders reduce equity exposure ahead of the October employment report given the Fed's emphasis on labor market data as the primary easing catalyst?

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!

16 SEP 25

Headwinds or Tailwinds Update (HoT Weeklies): 25w38**: Fund Updates + Market Outlook + Question of the Week:

CWA Managed Funds: 

Carbonwolf Alpha, Fund Alpha Performance:

2023 = +167%

2024 = +102%

2025 YTD = +54.24%

Major Indices:

2025 YTD Performance:

Markets Performance Grid - September 16, 2025

Performance Grid

The following table summarizes the current market status for each instrument, including year-to-date (YTD) performance, change from last Tuesday (September 9, 2025), and 52-week status.

Data Verification and Market Anomalies

Data Sources

Primary data was sourced from the Yahoo Finance API via the Manus Data Hub. Cross-verification was performed using data from Bloomberg Markets to ensure consistency and accuracy. Minor discrepancies were observed in some index values, likely due to slight timing differences in data reporting, but overall data integrity was confirmed.

Market Anomalies Detected

•Major Indices Near 52-Week Highs: The Dow Jones Industrial Average (DJII), S&P 500 (SPX), and NASDAQ Composite (COMP) are all trading near their 52-week highs, indicating strong bullish sentiment in the US equity markets.

•Gold at 52-Week High: Gold (/GC) is also trading near its 52-week high, suggesting that investors may be seeking safe-haven assets amidst potential inflation concerns or geopolitical uncertainty.

•GDOW Data Anomaly: The Global Dow (GDOW) index shows no year-to-date or weekly change. This is likely due to the data source initiating tracking on the current date. Further historical data is needed for a complete performance analysis of this instrument.

•Commodities vs. Equities: The analysis indicates that commodities, particularly Gold, have outperformed equities on a year-to-date basis. This could suggest a broader market trend of rotation into hard assets.

Disclaimer

This report is for informational purposes only and should not be considered financial advice. Market data is subject to rapid changes, and this report reflects a snapshot at a specific point in time.

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

Observations: Tailwinds

Fed Rate Cut Certainty Removes Overhang

The Federal Reserve's upcoming September 17 meeting is widely expected to deliver a 25 basis point rate cut, which would mark the first reduction since December 2024. With 100% probability priced in by markets, the anticipated move would remove a significant policy overhang that has been weighing on risk assets. The expected dovish pivot would signal the Fed's acknowledgment of deteriorating labor market conditions, with the central bank likely to continue its easing cycle through year-end. This anticipated policy shift is creating a more favorable backdrop for equities, particularly interest-sensitive sectors and small-cap stocks that would benefit disproportionately from lower borrowing costs.

Tom Lee, Fundstrat Managing Director: "Any pullbacks since April 2025 have been really shallow."

Lee's positioning reflects Fundstrat's continued bullish stance despite market volatility, with the firm maintaining overweight allocations to small-cap and AI-related equities ahead of the Fed's dovish pivot.

Labor Market Goldilocks Deceleration

The massive 911,000 downward revision to nonfarm payrolls represents the largest adjustment on record, paradoxically creating a bullish setup for risk assets. The revision confirms the labor market was never as robust as initially reported, validating the Fed's dovish stance while removing concerns about an overheating economy. Summer job growth averaging just 29,000 per month signals a controlled deceleration rather than a collapse, providing the Fed with justification for aggressive easing without triggering recession fears. This "Goldilocks" labor market weakness supports the soft-landing narrative while enabling continued monetary accommodation.

Jerome Powell, Fed Chair: "The labor market has shown signs of cooling, and we are committed to supporting maximum employment while maintaining price stability."

Powell's measured response to labor market deterioration suggests the Fed will prioritize employment support over inflation concerns, signaling a more aggressive easing cycle than previously anticipated.

Small-Cap Positioning Reset Opportunity

The combination of Fed easing and economic uncertainty has created an attractive entry point for small-cap equities, which have underperformed large-caps by significant margins throughout 2025. Lower interest rates disproportionately benefit smaller companies with higher debt burdens and limited access to capital markets. The Russell 2000's relative weakness versus the S&P 500 has reached levels historically associated with major outperformance cycles. Institutional positioning data shows record underweights in small-caps, creating potential for significant flows as the Fed easing cycle gains momentum.

Jamie Dimon, JPMorgan CEO: "I think the economy is weakening. Whether it's on the way to recession or just weakening, I don't know."

Dimon's cautious assessment reflects JPMorgan's defensive positioning, but the bank's substantial small-cap lending exposure suggests they're well-positioned to benefit from any economic stabilization driven by Fed easing.

Observations: Headwinds

CPI Inflation Acceleration Threatens Dovish Narrative

September's CPI reading of 2.9% year-over-year represents an acceleration from July's 2.7%, marking the highest inflation rate since January 2025. Core CPI remaining elevated at 3.1% suggests underlying price pressures persist despite economic softening. The uptick in inflation complicates the Fed's easing narrative, particularly with tariff-related price increases beginning to filter through the economy. Any further acceleration in inflation metrics could force the Fed to pause its cutting cycle, undermining the dovish assumptions currently supporting equity valuations.

Liz Ann Sonders, Charles Schwab Chief Investment Strategist: "We're seeing mixed signals in the inflation data that could complicate the Fed's path forward."

Sonders' cautious tone reflects Schwab's more defensive positioning in client portfolios, with the firm reducing duration exposure and maintaining higher cash allocations ahead of potential Fed policy uncertainty.

BLS Data Integrity Crisis Undermines Market Confidence

The ongoing controversy surrounding Bureau of Labor Statistics leadership and data collection methods creates unprecedented uncertainty around economic indicators. President Trump's firing of BLS Commissioner Erika McEntarfer and nomination of Heritage Foundation economist E.J. Antoni signals potential politicization of economic data. The record 911,000 jobs revision raises questions about the reliability of real-time economic indicators that markets depend on for decision-making. This data integrity crisis could lead to increased market volatility as investors lose confidence in official statistics.

Jeffrey Gundlach, DoubleLine CEO: "The reliability of economic data has become a significant concern for fixed-income markets."

Gundlach's emphasis on data quality reflects DoubleLine's cautious approach to duration positioning, with the firm maintaining shorter-duration strategies until data integrity improves.

Manufacturing Recession Signals Broader Weakness

The manufacturing sector's continued contraction, with four consecutive months of job losses totaling over 150,000 positions, suggests deeper economic weakness than headline numbers indicate. Industrial production data shows persistent declines in factory output, while new orders continue falling across multiple sectors. The manufacturing recession typically precedes broader economic downturns by 6-12 months, raising concerns about spillover effects into services sectors. Trade policy uncertainty and tariff implementation continue weighing on manufacturing confidence and capital investment decisions.

Dan Niles, Niles Investment Founder: "Manufacturing weakness is often the canary in the coal mine for broader economic deterioration."

Niles' defensive positioning in technology and growth stocks reflects his view that manufacturing weakness could spread to other sectors, particularly those sensitive to business investment cycles.

Sentiment

Macro Data

Alpha Insight: The "Revision Recession" Paradox

The historic 911,000 jobs revision creates a unique market dynamic where bad news becomes good news for risk assets. This "revision recession" reveals the economy was never as strong as reported, validating Fed dovishness while removing overheating concerns. Historically, large downward revisions of this magnitude have preceded significant monetary easing cycles, with the 2001 and 2008 episodes showing similar patterns. The paradox suggests current economic weakness may be the catalyst for sustained Fed accommodation, potentially extending the equity bull market despite deteriorating fundamentals. Traders should monitor revision patterns in upcoming data releases, as continued large adjustments could signal systematic measurement issues requiring more aggressive Fed intervention.

Question of the Week:

Should sophisticated traders hedge equity exposure ahead of the October jobs report given the BLS data integrity crisis and potential for another massive revision?

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.