Happy Tuesday!

Noteworthy: This is the last HoT Weekly Update for 2024 prior to the Annual Winter Think Weeks break. The HoT Weeklies will resume again in mid-January 2025. A huge thank you to all of our Investors and Supporters!

Have a fantastic Holiday Season: Happy Thanksgiving! Joyeux Noel! Merry Christmas! And Happy New Year!

26 NOV 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w48**: Fund Updates + Market Outlook + Question of the Week:

Carbonwolf Alpha, Fund Alpha: 

$QALM #Fund Alpha (Futures Algo Scalping) 2024 YTD Stats:

Total Portfolio Performance for 2023: +167%

Total Portfolio Performance 2024 YTD:  +91.17%

(Risk Level 3 -recently unlocked at 60%+ YTD)

Major Indices:

2024 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

$Amarok #Amarok II: 2024 YTD Stats:

2023 Closed Trade Win Rate: 2/2, 100%

Total Portfolio Performance for 2024:

Reopening Soon under Amarok II

Observations:

Tailwinds:

+Bullish Stalwart Sentiment. According to BofA Securities, they saw the highest inflows since September. Clients bought stocks in 9 of 11 sectors, led by Communication Services, Technology, Financials and Discretionary. Clients sold Real Estate and Health Care Stocks. Hedge Fund Positioning remains near all-time highs -implying risk-on environment through Inauguration Day. See Chart1.

Wall Street's S&P 500 Targets

Bank of America House 2025 Forecast: "We expect another year of unbalanced growth in 2025, characterized by U.S. outperformance and policy uncertainty, which will impact the Euro area and China the most. All in, this implies stable 2025-2026 global growth in the 3.2% to 3.3% range. After a better-than-expected 2024, we upgraded our forecasts for the U.S. but downgrade them for the Euro Area. Meanwhile, we expect China to grow below official targets."

Deutsche Bank 2025 Forecast: "Our base case for 2025 is stronger U.S. growth and inflation and a higher Fed terminal rate than previously expected with the opposite conditions for Europe. This is driven by the assumption of modest U.S. tax cuts, a strong deregulation push, and more supportive financial conditions."

+AI Acceleration. Certain software companies have been capitalizing on recent AI innovations.

Equity Performance versus IGV since announcing AI Agent Products

Microsoft CEO, Satya Nadella: "U.S. is leading across all of AI… [Microsoft] CoPilot is flying."

The cost to compute is growing; and it's a race hyperscalers can't afford to lose. Nvidia still remains well positioned to capture most of the incremental TAM. Only Broadcom, amongst other gainers, is making market progress. Microsoft and Meta signal spending trends stay the same or continue to grow.

Megatech CapEx

Quarterly, as of latest Earnings Reports

Dell Founder, Michael Dell: "The 1stin the world@nvidia GB200 NVL72 server racks are now shipping. We are thrilled to deliver our liquid-cooled PowerEdge XE9712 to @CoreWeave. The AI rocket just got a massive boost."

Headwinds:

-Trump Tariff Tactics. Trump said he would sign an Executive Order on 20 JAN. Order would impose 25% tariffs on Canada and Mexico imports. Plans to "raise" tariffs 10% on products coming from China. See Chart2.

U.S. Top Imports from Mexico -source: Trading Economics

U.S. Top Imports from Canada -source: Trading Economics

Exports to U.S. as a share of GDP. See Chart3.

Mexican President Claudia Sheinbaum: "To one tariff will follow another in response and so on, until we put our common businesses at risk." Sheinbaum added she would seek a call with Trump and send a letter to Canadian Prime Minister Justin Trudeau. She continued: "What sense is there?" in escalating cross-border tariffs, underscoring that they would hit particularly hard U.S. carmakers with plants in Mexico (ex: GM, Ford, eventually Tesla in 2026).

Mexico is America's top trade partner as of September, representing ~15.8% of total trade, followed by Canada at 13.9%.

-Lukewarm Consumer Spending Expectations. Walmart CFO, John Rainey: "We're keeping the Thanksgiving basket down 3% from last year… 75% of share gains came from households that make $100,000+… Convenience is a theme: in 30% of online orders, people paid extra for faster delivery, 1-3 hours… Feels similar to last year at this point, feels like a good one… Leading indicator is Halloween and back to school. They were good, not gangbusters."

Best Buy CEO, Corie Barry: "Performance was impacted by overall softer than forecasted customer demand during September and October. We attribute this to a combination of overall ongoing macro uncertainty, customers waiting for deals…"

TikTok Factor. According to New Consumer Surveys:

• 89% Social Media Impacts Holiday Shopping

• 24% Plan to buy holiday gifts on Social Media

TikTok Shop:

• 15 Million sellers globally

• Live sessions each month has tripled

• Forecasting record Christmas sales

• TikTok takes 6% fee

S&P Global Ratings forecasts:

•  Holiday sales growth will slow to about 3% in 2024 from 4.7% last year, remaining below the 10-year average of 5.3%. See Chart4.

• Value perception will separate retailers, and we expect those with the right merchandise at the right price will emerge as winners this holiday season

• Retailers that are exposed to discretionary spending are nearly 1.5x as likely to face a downgrade within the next one to two years than retailers whose sales rely on more stable nondiscretionary spending.

• We expect retailers' margins will remain steady because of broad cost-savings initiatives implemented throughout the year despite increased promotional activity.

Sentiment. Investor Sentiment ending 20 NOV 24:

Goldman Sachs Global Head of Hedge Fund Coverage, Tony Pasquariello: "[Equities] are not over their skis. If anything we saw decent trimming yesterday (Friday), so there should be some gas left in the tank from here to December 31st."

Charles Schwab Chief Global Investment Strategist, Jeffrey Kleintop: "Stocks have posted gains in every transition period from Election Day to Inauguration Day over the past 50 years, unless already in a recessionary bear market. Global stocks had a neutral reaction to trade war escalations during President-elect Trump's first term."

SPX Technicals.

Macro Data

Potential Factors for a Holiday Rally:

• Treasury Secretary announcement removes uncertainty

• The Fed's "slowing cuts" are a dovish sign

• Nvidia results are a "clearing event"

• Markets have pulled back to technical support

• AI-driven tech earnings growth is "scorching"

• Markets climb a wall of worry

Question of the Week:

Will the S&P 500 ("SPX") break 6,100 before the end of 2024?

Disciplined Alpha,

MFA

**These two CLOSED proprietary Hedge Fund Updates are for informational purposes only. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.

Happy Tuesday!

Noteworthy: This will be the second to last update for 2024 prior to the Annual Winter Think Weeks break. The HoT Weeklies will resume again in mid-January 2025. A huge thank you to all of our Investors and Supporters!

19 NOV 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w47**: Fund Updates + Market Outlook + Question of the Week:

Carbonwolf Alpha, Fund Alpha: 

$QALM #Fund Alpha (Futures Algo Scalping) 2024 YTD Stats:

Total Portfolio Performance for 2023: +167%

Total Portfolio Performance 2024 YTD:  +78.81%

(Risk Level 3 -recently unlocked at 60%+ YTD)

Major Indices:

2024 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

$Amarok #Amarok II: 2024 YTD Stats:

2023 Closed Trade Win Rate: 2/2, 100%

Total Portfolio Performance for 2024:

Reopening Soon under Amarok II

Observations:

Tailwinds:

+U.S. Equities vs The World. Global and domestic investors are largely going overweight in U.S. Stocks and going underweight non-U.S. stocks. See Chart1. The S&P 500 is expensive relative to Trump 1.0: value investors need to be selective.

S&P 500 "Expensive-ness"

Price-to-Earnings

Global Markets Under Trump 1.0

Price Returns 9 NOV 16 to 31 DEC 19 (Pre-Pandemic)

Goldman Sachs House View: "Our baseline forecast implies a benign risk backdrop and U.S. outperformance. We expect modest positive returns across equities, commodities and discount margin bonds*, alongside gradual U.S. dollar appreciation."

*Discount Margin Bonds: the average expected return of a floating-rate security (bond) that's earned in addition to the index underlying, or reference rate of, the security.

Goldman Sachs Chief Economist, Jan Hatzius: Trumponomics 2.0 Fiscal Base Case: "Reinstate more generous corporate incentives: 100% bonus depreciation and interest deductibility (~$60 Billion per year)… Allow enhanced ACA subsidies to expire (~-$20 Billion per year)… Limitations on green subsidies (~-$15 Billion per year)."

+Inline Inflation. CPI came in at largely unchanged last week. See Chart2.

Consumer Price Index (October):

Biggest CPI Gainers Month-over-Month

The U.S. spent $7 Billion less than the same month a year ago. The U.S. spent $82 Billion on interest costs in October. U.S. Deficit for October 2024: $121 Billion. Deficit was driven by heightened spending at education, Veterans Affairs Departments.

Yardeni Research Founder, Ed Yardeni: "Animal spirits are back and boosting the Roaring 2020s scenario… GDP growth 'might' keep pace with mounting government debt… Nevertheless, we note (and worry about) overly bullish sentiment."

Headwinds:

-DOGE Days Developing. DOGE ("Department of Government Efficiency"), the brainchild of Elon Musk, plans to cut an unprecedented $2 Trillion in total government spending -nearly one-third of the U.S. government's $6.7 Trillion current annual spending. Much of that annual spending in mandatory through programs including Social Security and Medicare. Granted, historically, most efforts like this end up producing small-scale symbolic changes. However, with a full Republican Sweep and the full-backing of the Trump Administration DOGE has better-than-average odds of defunding many core programs.

Example1:

Trump's Education Pitch: "Closing up the Department of Education in Washington, D.C. and sending all education and education working needs back to the states." Elon Musk (de facto DOGE chief) praised the statement as a "Good Idea."

Example2:

According to CBS News, Vivek Ramaswamy thanked Trump "for making sure Elon Musk and I are in position to start the mass deportations of millions of unelected Federal Bureaucrats out of the D.C. Bureaucracy… And I don't know if you've got to know Elon yet, but he doesn't bring a chisel, he brings a chainsaw, and we're going to be taking it to that bureaucracy… It's going to be a lot of fun."

Musk's bio on X, formerly Twitter, now reads, "The people voted for major government reform."

Example3:

According to the Washington Post, Trump's aides are working on a way to enact some of DOGE's spending recommendations without requiring congressional approval. Musk said he wants to reduce the number of federal agencies to 99 -down from 400. Among the areas being considered for partial or complete elimination, according to DOGE and the Citizens Against Government Waste:

• Medicare fraud

• Contributions to the U.N.

• Subsidies for Agricultural Products, ex: dairy and sugar

EV Subsidy Removal. Trump's Transition Team aims to kill the Electric Vehicle Tax Credit with support from Tesla.

Trump said Musk and Ramaswamy's work "will conclude no later than July 4, 2026," or by the 250th anniversary of the Declaration of Independence.

-Tariff Timing. Despite the expected relaxed regulatory stance and modest new tax cuts of the incoming Trump administration -tariffs remain a large question mark for economists and analysts. New tariffs are expected on China. However, the velocity is still largely an unknown. The current Trump proposal are blanket tariffs of up to 20% on ALL imports. Clearly, this would cause widespread repricing and damage throughout the markets. There is a similar parallel to the Trump Tariffs imposed on China -sparking a brief trade war in 2018. See Chart3.

Goldman Sachs Chief Economist, Jan Hatzius: "U.S. core PCE inflation should slow to 2.4% by late 2025, higher than our prior forecast of 2.0% but still benign. Our forecast would rise to around 3% with an across-the-board tariff of 10%."

Goldman Sachs Chief Economist, Jan Hatzius: Trumponomics 2.0 Fiscal Base Case:

• Trade: New Tariffs on China up to 60%

• Immigration: slows to 750,000 per year, due to increased funding and tighter enforcement

The number of times the word "Tariff" is mentioned in S&P 500 Earnings Calls has skyrocketed versus the last several quarters. See Chart4.

October Retail Sales:

• Total sales exceed estimates; core sales fall slightly

• Sales lower at clothing, furniture, sporting goods stores

Expected China Retaliation Countermoves:

• Impose Counter Tariffs

• Cut off U.S. Agricultural Purchases

• Tighten export controls on key parts to U.S. Industry

• Anti-foreign sanctions

  • Probes, Fines, Restrictions

• Anti-espionage law

  • Detentions, Exit Bans

• Day-to-day Regulations

  • Safety checks, approvals, etc.

Market Performance between Election Days

S&P 500 Performance by Administration

Raymond James, Ed Mills: "Trump will have bigger Senate majority in 2025 versus 2017… Will have much smaller House majority this time around… Will have considerably more allies in Congress than in 2017… Passage of Tax bill in 2025 difficult due to small House majority… also complicates repealing the IRA as a way to pay for tax cuts… Tariffs could provide a potential political off ramp."

Sentiment. Investor Sentiment ending 13 NOV 24:

Federal Reserve Chief Powell: "We are moving policy over time to a more neutral setting, policy path not preset… Expects inflation to continue to decline on a sometimes-bumpy path… Risks to achieving dual mandate roughly balanced… Sees October PCE at 2.3%, Core at 2.8%... Credibility is really everything in the Fed's work."

BTIG Head of Americas Portfolio Trading, Troy Donohue: "Now investors are looking back and analyzing what the actual impact of the election is, and they make their time to redo their portfolios and calls with the right sectors and international allocations that they need… It'll be some time before we see that momentum again, and it'll be more spread out over the coming months."

Investopedia's Latest Survey:

"Where are the Bubbles?":

SPX Technicals.

Broader markets fell to levels near before the Election-Night-Sugar-High. The Nasdaq Futures nearly touching its 200-EMA. The MSCI All Country World Index 20-Year Chart nearing its all-time highs and coming up against major trendline resistance -suggesting a pullback of some type is likely. U.S. 2YR/10YR spread continues to flirt with the zero baseline, slightly steepening on the positive side currently -as if to say undecided on recession fears or continued growth via incoming administration.

The latest Bank of America November Fund Manager survey: "…results show higher global and U.S. growth expectations, lower probability of a 'soft landing,' lower cash levels, higher allocations to U.S. and Japanese equities, higher tech weighting and big expectations for small caps…"

Sector Leaders

Performance since Election

Question of the Week:

Will DOGE be successful in cutting more than $1 Trillion in U.S. Annual Spending?

Disciplined Alpha,

MFA

**These two CLOSED proprietary Hedge Fund Updates are for informational purposes only. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.

Happy Tuesday!

12 NOV 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w46**: Fund Updates + Market Outlook + Question of the Week:

Carbonwolf Alpha, Fund Alpha: 

$QALM #Fund Alpha (Futures Algo Scalping) 2024 YTD Stats:

Total Portfolio Performance for 2023: +167%

Total Portfolio Performance 2024 YTD:  +79.64%

(Risk Level 3 -recently unlocked at 60%+ YTD)

Major Indices:

2024 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

$Amarok #Amarok II: 2024 YTD Stats:

2023 Closed Trade Win Rate: 2/2, 100%

Total Portfolio Performance for 2024:

Reopening Soon under Amarok II

Observations:

Tailwinds:

+Trump Inflation + Seasonality. Trump is inheriting a relatively strong U.S. Economy. Inflation is generally good for the Equities and related Markets. Further, it will likely be no earlier than Q2 2025 for the impact from immigration and tariff policy to be felt in economic data. Expectation of lower capital requirements and less regulation for many industries especially Megabanks, AI/Tech and energy sectors. Trump platform promised to repeal "dangerous Executive Order that hinders AI innovation."

Trump AI Order Draft:

• Roll back AI regulations

• Create "industry-led" agencies to evaluate AI models

• It may allow for more data centers and power plants for AI computing

• Remove required safety assessments and sharing data with government

Reduced financial regulation is also a strong catalyst for regional banks. Unlike the initial response after 2016 election, the group's performance is almost entirely about potential multiple expansion rather than EPS improvement. Improved outlook for defense spending, business jets and increased M&A. See Chart1.

U.S. Mergers and Acquisitions ("M&A") Announced Transactions

Strong seasonal tendencies, Tax policy and deregulation prospects likely to fuel rally well into 2025. Dow crosses 44,000 for the first time. Dow Jones gains 1,508 points post-election day. SPX crosses 6,000 for the first time. Fed Reserve Board cuts rates by 25 basis points. See Chart2.

Moody's Analytics Chief Economist, Mark Zandi: "The U.S. Economy is performing exceptionally well and will continue to do so if the Federal Reserve steadily normalizes interest rates and lawmakers maintain the economic policy status quo."

BofA Securities House View: "…Trump 2.0 = tariffs, immigration controls, tax cuts = 'US inflationary boom' and 'global deflationary bust' = long gold, long U.S. dollar, long U.S. stocks versus International stocks, short U.S. Treasuries and that Election to Inauguration Day a risk-on window."

+The New Number One: Nvidia. Nvidia officially joined the Dow last Friday. Index is price weighted, not valuation weighted. NVDA is only the 21st most expensive stock in the Dow. As a contrast, NVDA weights more than 7% of the S&P 500. NVDA is now the largest company by Market Cap on earth. NVDA YTD Performance: ~+198.15% as of 08 November.

Market Cap Titan vs. Titan (as of 08 November)

Jeffries House View: "…these ramps will exceed current expectations, and provide solid upside to current estimates. We see the most near-term upside at MRVL and NVDA, but do expect outperformance from AVGO later in 2025."

Headwinds:

-Overheating Valuations + Potential Renewable Rollback fears. Trump Administration has mentioned they will attempt to rollback as much of the Inflation Reduction Act as possible. While it remains to be seen whether they will be successful in repealing its entirety, Solar stocks and EV stocks were down double-digits immediately post-election last week. With Musk as de facto Chief Advisor to President Trump, EV incentives are likely to be rolled back. Ironically, this benefits Tesla because only the smaller EV companies will be disproportionately and adversely affected -effectively increasing Tesla's already dominant market share. Last week, Tesla crossed $1 Trillion Market Cap, once again.

Broader Market Valuations

Forward P/E Ratios -source: Factset Estimates

Forward Valuation

Stifel's Chief Equity Strategist, Barry Bannister: "This is your conductor… the train is approaching Crazy Town… The S&P 500 has upside to the low-6,000s in a few months and 1,000+ points of downside to ~5,250 a year later."

Renewable + EV Rollback Fears

Solar + EV Stock Performance (as of 06 November)

-Red Sweep Riskier Range. If Republicans do achieve a House and Senate Sweep, then many tariffs will likely happen without Congressional Approval. He will likely set on tariffs through Executive Actions immediately. This could re-ignite China trade wars. Trump 2.0 Proposals potentially suggest highest tariff rate in roughly 100 years. See Chart3.

Tariff Policy Exposed U.S. Companies

By Market Distribution -source: Morgan Stanley

Trump Tariff Proposals

Most At-Risk Sectors -source: Morgan Stanley

• Domestic Electronics

• Computer equipment

• Furniture

• Apparel

• Metal Products

Morgan Stanley House View: "…If it is a sweep, corporate credit goldilocks is at risk: The idea that credit likes 'moderation…' has been at the heart of our historically tight credit spread targets. A Republican sweep widens the band of uncertainty around the U.S. economic baseline, as well as trade policy toward Europe and Asia. We think it could also raise the chances of greater 'animal spirits' in the market, something that may not benefit."

Moody's Analytics Chief Economist, Mark Zandi: "With a Republican Congress, economic policy will change significantly… Higher broad-based tariffs and cut taxes that are deficit financed in significant part… Combination results in higher inflation and interest rates."

Sentiment. Investor Sentiment ending 06 NOV 24:

Federal Reserve Chief Powell: "Conditions in the labor market remain solid… won't resign if President-Elect Trump asks him to…"

Doubleline Capital Founder, Jeff Gundlach: "Base case, don't think we'll see a 3%-handle CPI rate in next 12 months… Will be interesting to see Fed reaction to potentially higher debt under Trump administration… I do not like long-term Treasury Bonds; last thing I did was sell them…

SPX Technicals.

Berkshire Hathaway increases Cash stockpile from $276.9 Billion (previous quarter) to $325.2 Billion (as of end of September) -likely for Election Week hedging. However, if on the next report the cash pile increases or remains at increased levels, it may foreshadow greater volatility over the short-term.

Election night saw ~11 times the typical overnight notional volume. More than 500 Million election contracts were traded on Robinhood platform. This Presidential election was the first where four asset classes were available to trade and hedge overnight.

Small caps (Russell 2000) are attempting to rally, but still underperform versus the Nasdaq 100. CPI is out tomorrow (Wednesday).

Question of the Week:

Will the S&P 500 end the year above 6,000?

Disciplined Alpha,

MFA

**These two CLOSED proprietary Hedge Fund Updates are for informational purposes only. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.