http://www.metiscm.com/blog/rss/feedsMetis Capital Management is a Registered Investment Advisory based in Rye, N.Y.Wed, 29 Apr 2026 21:54:42 -0700http://www.metiscm.com/blog/post/first-quarter-forecast-and-opinion-3http://www.metiscm.com/blog/post/first-quarter-forecast-and-opinion-3The economic outlook for 2026 is constructive, with GDP growth in the US estimated to be around 2%, and worldwide growth around 3%. Analysts expect S&P 500 earnings to grow at 15%, marking another strong year for corporate profits. Most sectors are expected to report robust earnings growth, with technology and industrials anticipated to increase by double digits, and overall corporate revenue growth at around 7%. Stock valuations remain elevated, with the Cyclically Adjusted Price-to-Earnings Ratio (CAPE) ratio at 39, the second highest level in 150 years. As opposed to the dot-com era, current valuations are better supported in many sectors by earnings growth and business fundamentals, but they are still elevated. Transformative AI technology continues to present both opportunities and concentration risks. Inflation appears to be moderating after the bump produced by last year‘s tariffs. The December consumer price index rose by 2.7% from 12 months earlier, but remains distorted due to the six-week government shutdown and thus risks being higher in reality. Inflation for consumer staples like food, electricity, and natural gas remain high, however, which is why “affordability” has become the primary topic of this year’s midterm elections. To boost affordability, as well as his party’s sagging popularity, Trump announced last weekend that he will be imposing a cap on the nation’s $1.23 trillion of credit card debt issued by banks. This would not be legal, because credit card regulation is set by Congress, not the president, and even under some sort of national emergency declaration, or the “Defense Reduction Act”, there is no credible legal pathway for a president to impose consumer credit interest caps absent Congressional authorization. Even if there were, banks would respond by instantly recalling much credit card debt from creditors, which would be highly contractionary for the economy. Banks would respond by closing accounts, slashing credit limits, tightening underwriting, standards, and millions would lose access to credit, negatively impacting consumption. Other Trump “affordability” measures ahead of the midterms include planned restrictions for private equity groups on buying single-family homes to mitigate the housing supply crunch, and the announcement of a plan to purchase $200 billion of mortgage back securities to lower mortgage rates. On January 15, Trump announced measures to push the largest electricity grid in the US, PJM Interconnection, to make large technology companies pay for their own electricity needs due to AI data centers. The intent was to bring electricity prices down that have risen, on average, by as much as 10% in 2025 due primarily to data center demand. The Trump administration has made several recent policy initiatives that have Wall Street on edge. On January 12, Fed chairman Jerome Powell said that the White House was threatening him with a D.O.J. criminal indictment over his renovation of the Federal Reserve building, which was approved by Congress years ago. Powell issued a press release calling this a pretext by President Trump to pressure him to cut interest rates. “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president“ Powell said. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead monetary policy will be directed by political pressure or intimidation.“ This is important because if Wall Street loses confidence in the Fed’s independence, the $32 trillion US treasury bond market – the largest market in the world - will suffer. If investors lose faith in the Fed’s ability to fight inflation through its interest rate policies, they will sell longer dated treasury bonds, increasing yields, and tightening credit throughout the economy, which is bearish for the stock market, the bond market, and the credibility and credit rating of the United States. A growing chorus of Republican and Democratic Senators, corporate leaders, three Ex-Fed Chairmen, five former Treasury Secretaries, and eleven global central bankers have loudly criticized the move by the D.O.J., potentially upending Trump’s choice to run the Fed in May. The larger the US federal debt, the more fragile this market becomes. Trump‘s successful extraction of Nicolas Maduro from Venezuela has left the rest of the government in that country intact, which is why American oil companies are calling the country “un-investable“. In the past, Exxon, Mobil, Chevron, and Conoco Phillips have had billions expropriated by the Venezuelan government, and are loathe to commit any further capital, despite Trump‘s boasting that the industry would invest $100 billion to rebuild the Venezuela energy sector with US security guarantees. There has been no change in the regime, no change in statutes on legislation, no framework for moving Venezuelan oil in the ground to the United States, and no apparent plan of any kind. Trump‘s goal of rebuilding the industry in Venezuela has been thwarted by the perception that doing so is too risky and that there is no mechanism to rework the existing crumbling oil infrastructure there. Thus, the impact on oil prices so far has been nil. The bellicose measures taken by the Trump administration against Venezuela may only be the beginning of a series of offensive geopolitical movements. The administration has committed to spending $1.5 trillion on their military budget for fiscal 2027, citing “troubled and dangerous times“. This comes at a period when the national debt now exceeds $38.5 trillion, or $111,000 per American. Precious metals, such as gold and silver have soared accordingly, as investors seek safe havens from a declining dollar, inflation, decreasing geopolitical stability, and ever mounting credit concerns, which are signaling unprecedented distrust in the US dollar and have caused it to lose 10% against other world currencies in 2025. Rumors of US military ambitions against Cuba, Colombia, Mexico, Iran, Canada, and Greenland are boosting defense stocks to new highs. It should be noted that the forces that led to the government shutdown in November-December of last year will raise their head again at the end of January 2026 when the short-term funding bill expires. This will again create polarization in Washington and some possible volatility in markets. The global space economy was on the order of $450 billion last year, with strong growth led by the private sector in satellite services and launch services. Advances in AI, robotics, and autonomous systems are boosting operational efficiencies and expanding what is possible in orbit. Space has become a domain of national and economic security competition among major powers (US, Europe, China, India), which is driving both public funding and private investment and accelerating technology adoption and investment flows. It is likely that SpaceX goes public in 2026, which will draw considerable public attention to the sector and may continue to drive valuations in the sector. Gold and silver are not the only metals that are rallying. The world is consuming 30 million tons of copper per year, only 4 million of which is recycled. Mining entrepreneur Robert Friedland, at the Energy Business Summit hosted by USC in September, was quoted as saying that “To maintain global 3% GDP growth, we have to mine the same amount of copper in the next 18 years as we mined in the last 10,000 years (combined)….without electrification…data centers...solar and wind and the greening of the world economy.“ The United States is dependent upon China for almost every critical mineral. Japan’s recent aggressive language about Taiwan toward China was met with Chinese export controls on January 6th of rare earth metals, permanent magnets, and other critical minerals required to produce defense technologies. Subsequently, both copper and rare earths have rallied in 2026 to reflect global demand and supply imbalances. Grant Rogers GLOBAL DISCLAIMER: THIS REPORT HAS BEEN PREPARED BY METIS CAPITAL MANAGEMENT LLC. THIS REPORT IS FOR DISTRIBUTION ONLY UNDER SUCH CIRCUMSTANCES AS MAY BE PERMITTED BY APPLICABLE LAW. IT HAS NO REGARD TO THE SPECIFIC INVESTMENT OBJECTIVES, FINANCIAL SITUATION OR PARTICULAR NEEDS OF ANY SPECIFIC RECIPIENT. IT IS PUBLISHED SOLELY FOR INFORMATIONAL PURPOSES AND IS NOT TO BE CONSTRUED AS A SOLICITATION OR AN OFFER TO BUY OR SELL ANY SECURITIES OR RELATED FINANCIAL INSTRUMENTS. NO REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, IS PROVIDED IN RELATION TO THE ACCURACY, COMPLETENESS OR RELIABILITY OF THE INFORMATION CONTAINED HEREIN, NOR IS IT INTENDED TO BE A COMPLETE STATEMENT OR SUMMARY OF THE SECURITIES, MARKETS OR DEVELOPMENTS REFERRED TO IN THE REPORT. THE REPORT SHOULD NOT BE REGARDED BY RECIPIENTS AS A SUBSTITUTE FOR THE EXERCISE OF THEIR OWN JUDGMENT. ANY OPINIONS EXPRESSED IN THIS REPORT ARE SUBJECT TO CHANGE WITHOUT NOTICE. THE ANALYSIS CONTAINED HEREIN IS BASED ON NUMEROUS ASSUMPTIONS. DIFFERENT ASSUMPTIONS COULD RESULT IN MATERIALLY DIFFERENT RESULTS. THE ANALYST RESPONSIBLE FOR THE PREPARATION OF THIS REPORT MAY INTERACT WITH TRADING DESK PERSONNEL, SALES PERSONNEL, OTHER ANALYSTS, JOURNALISTS, AND OTHER CONSTITUENCIES FOR THE PURPOSE OF GATHERING, SYNTHESIZING AND INTERPRETING MARKET INFORMATION. METIS CAPITAL MANAGEMENT LLC IS UNDER NO OBLIGATION TO UPDATE OR KEEP CURRENT THE INFORMATION CONTAINED HEREIN. THE SECURITIES DESCRIBED HEREIN MAY NOT BE ELIGIBLE FOR SALE IN ALL JURISDICTIONS OR TO CERTAIN CATEGORIES OF INVESTORS. OPTIONS, DERIVATIVE PRODUCTS AND FUTURES ARE NOT SUITABLE FOR ALL INVESTORS, AND TRADING IN THESE INSTRUMENTS IS CONSIDERED RISKY. MORTGAGE AND ASSET-BACKED SECURITIES MAY INVOLVE A HIGH DEGREE OF RISK AND MAY BE HIGHLY VOLATILE IN RESPONSE TO FLUCTUATIONS IN INTEREST RATES AND OTHER MARKET CONDITIONS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FOREIGN CURRENCY RATES OF EXCHANGE MAY ADVERSELY AFFECT THE VALUE, PRICE OR INCOME OF ANY SECURITY OR RELATED INSTRUMENT MENTIONED IN THIS REPORT. METIS CAPITAL MANAGEMENT LLC ACCEPTS NO LIABILITY FOR ANY LOSS OR DAMAGE ARISING OUT OF THE USE OF ALL OR ANY PART OF THIS REPORT. CERTAIN OF THE INFORMATION CONTAINED IN THIS PRESENTATION IS BASED UPON FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS, INCLUDING DESCRIPTIONS OF ANTICIPATED MARKET CHANGES AND EXPECTATIONS OF FUTURE ACTIVITY. METIS BELIEVES THAT SUCH STATEMENTS, INFORMATION, AND OPINIONS ARE BASED UPON REASONABLE ESTIMATES AND ASSUMPTIONS. HOWEVER, FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS ARE INHERENTLY UNCERTAIN AND ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED ON SUCH FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS.Thu, 15 Jan 2026 17:52:00 -0700http://www.metiscm.com/blog/post/fourth-quarter-forecast-and-opinion-2http://www.metiscm.com/blog/post/fourth-quarter-forecast-and-opinion-2The U.S. Supreme Court will hear oral arguments on the legality of Trump’s sweeping global tariffs on November 5, which will prove important to markets as a test of the US Presidents use of his executive power to drive his economic agenda through the International Emergency Economic Powers Act. If the tariffs are found to be illegal, the nonpartisan Committee for a Responsible Federal Budget estimates that it will cost the US government $2.2 trillion by 2035, and push U.S. debt-to-GDP to 126 percent from their current baseline scenario of 120 percent. It should be noted that S&P, the ratings agency, recently affirmed a “stable” outlook to the U.S. credit rating because they feel that tariff revenues will offset the Trump tax cut and spending bill. S&P also warned of a downgrade in the credit rating of the U.S. if federal deficits continue to rise. At the time of this writing, the Federal government shutdown has lasted 16 days, and is expected to continue for the foreseeable future. While around 25% of total government spending is impacted by the shutdown, markets are treating it as a non-event, at least so far. The federal government is using the shutdown as an opportunity to reduce the federal workforce. Each week of shutdown is estimated to cost overall quarterly GDP by 0.1 to 0.2% of GDP per week, although typically this comes back in the following quarter when federally employees receive their back pay. AI Rally: The AI driven rally continues apace, and is to a degree, in a self-reinforcing feedback loop. Many “mega” deals have taken place recently between the largest players in artificial intelligence, involving chips, GPU’s, data centers, and cloud infrastructure. Vendor financing within this industry has become a concern for Wall Street, as companies like Nvidia have begun financing their own clients such as Open AI ($100 billion), xAI ($20 billion), Oracle’s $300 billion cloud infrastructure deal with Open AI, a $10 billion partnership between Open AI and chipmaker Broadcom, among many others. Vendor financing was a significant contributor to the late 1990’s internet and telecom bubble. The chart below demonstrates the “circularity” of the AI economy, fueling concerns that the spending in this sector is causing the stock market to overheat. The market’s tug-of-war for the foreseeable future will be the weighing of how much capital has been expended on AI (between $1.5-$3 trillion), and what sort of returns have come from it ($300-$600 billion). Sam Altman, the CEO of Open AI, said recently that over the coming few years, “trillions” more need to be spent on AI infrastructure, and pledged to spend $1 trillion more on Open AI’s infrastructure. Considering that the current annual revenue of Chat GPT is only $10 billion, some worry that the costs associated with AI will be too great for the profits that may come from it. AI infrastructure, chips, and data centers are expensive to run, and chip technology is evolving very quickly, data centers may depreciate and need upgrading faster than they can generate revenues. While AI is growing exponentially, it is unclear that current capital expenditures will ever be justified by future profits. Another impact of the “AI revolution” is the weight of tech giants within the S&P 500. Nvidia alone accounts for than a third of the S&P index’s gains this year. Nvidia now has a market capitalization of $4.5 trillion, and represents 7.2% of the index, which is weighted according to the market cap of its constituents. The so called “Magnificent seven” represent 34.5% of the entire S&P 500, leading to heretofore unknown levels of concentration risk. Rare Earth Showdown: China processes 85-90% of the world’s rare earth metals, and close to 99% of “heavy” rare earth metals. These elements are all found on the bottom row of the periodic table, and have been in the news recently because of the collective realization that China has control over the entire market for them. They are used in all consumer, commercial, and defense electronics. Light rare earth elements are more abundant, and are used in mass market tech, strong magnets, aircraft engines, electric vehicle motors, wind turbines, smartphones, TV and computer screens, nuclear reactor control rods, hard drives, and scientific instruments, among many other things. Heavy rare earth metals are used for magnets, lasers, phosphors, and defense technologies like F-35 fighters, Aegis destroyers, and advanced missile guidance systems. They are rarer, harder to separate, and mostly found in southern China’s ionic clay deposits — hence China’s near-monopoly on heavy rare earth metal refining. The federal U.S. government has begun taking stakes in domestic rare earth element (REE) mining companies out of fear that China will weaponize its dominance in the industry. Certainly, the realization of that dominance is beginning to impact Trump tariff policies toward China, as the U.S. administration comes to realize that, in this important industry, China “holds all the cards.” China imposed export restrictions to the U.S. last week, in retaliation to new U.S. tariffs. The U.S. strategic stockpile of rare earths is estimated to only last from several weeks to a few months. China has over a dozen doctorate programs focusing on rare earth metals, and over 300,000 people professionally focused on them. In the U.S., there are no doctorate programs, and less than 500 people working professionally on producing REE’s. This is explained through several things. REE’s tend to be found in geological areas where thorium and uranium are found. Processing REE’s becomes less profitable when a miner must then dispose of thorium and uranium, which is considered toxic and is expensive to dispose of. The economics of processing REE’s are thus less compelling in a capitalist environment, as opposed to in an environment like China’s where state run companies are also focused on long range national interests. Furthermore, U.S. regulations concerning thorium and uranium are much stricter than in China, making disposal of these two elements cumbersome in the mining process. In processing and refining of REE’s, the U.S. is estimated to be 15-20 years behind Chinese capabilities, given that country’s established infrastructure and technological advancements. Federal Reserve Monetary Policy: On September 17, the Federal Reserve lowered its benchmark interest rate by 25 basis points to a target range of 4%-4.25%. This was to support the labor market amid concerns about slowing economic growth, even as inflation remained a concern. The Fed has signaled that there may be more interest rate cuts forthcoming, as labor market deterioration is leading to negative job growth. Unemployment rose to 4.3% in August, the highest level since 2021. Signs of Stress in the Credit Market: The September bankruptcies of First Brands Group, a U.S. auto parts supplier, and Tricolor Holdings, a subprime auto lender, have highlighted cracks in the credit market which has led to some top financiers warning about an erosion in lending standards. JP Morgan CEO Jamie Dimon suggested that these defaults could be due to broader credit risks in the economy. Delinquencies in subprime auto loans have reached historic highs, leading to increased yields on auto loan-backed bonds as investors demand higher returns for perceived risks. The impact on regional banks that financed these firms is taking a toll on their stock prices and evoking questions about loan underwriting standards and credit risk controls. Banks may become more conservative in lending to certain types of borrowers as a result. Consumer Spending We are in a “K” shaped economy with respect to the American consumer. The top 20% of income earners are spending 50-60% of all consumer expenditures, while the bottom 80% account for the rest, according to the BLS and the Fed. The most recent (Oct. 15) release of the Fed “Beige Book” portrayed an economy that is barely growing. “Economic activity changed little on balance since the previous report, with three Districts reporting slight to modest growth in activity, five reporting no change, and four noting a slight softening.” The Fed also noted a softening in the overall employment outlook: “In most Districts, more employers reported lowering head counts through layoffs and attrition, with contacts citing weaker demand, elevated economic uncertainty, and, in some cases, increased investment in artificial intelligence technologies.” GDP for 2025 is forecast to be somewhere between 1.7% and 2%, suggesting a slowdown in the economy relative to 2024. The market’s recent strength is based upon the expectation of further reductions of interest rates by the Fed, just as tariffs and government debt may increase inflation and prevent the Fed from lowering rates further. While stocks are historically expensive, earnings growth at S&P 500 companies are robust. In a healthy economy, S&P 500 earnings grow between 5-10% per year. Analysts are expecting 12% growth this year, and some foresee 13% corporate margins should be above average this year as well at 12-13%. Until unemployment begins to accelerate, stocks will remain underpinned by the expectation of rate cuts in 2025 and 2026, AI-related infrastructure spending, and corporate profits, unless signs of tariff related inflation begin to appear. Grant Rogers Wed, 15 Oct 2025 08:02:00 -0700http://www.metiscm.com/blog/post/third-quarter-forecast-and-opinion-4http://www.metiscm.com/blog/post/third-quarter-forecast-and-opinion-4,The first half was notable because the tariff chaos, due to the current administration’s trade policies, caused a 20% selloff in the stock market before Wall Street dismissed them as not to be taken seriously. At the time of this writing, Trump tariffs continue to evolve outrageously, with diminishing impact on the stock market. The imposition of a 50% general tariff on the imports of Brazil, for example, as a punishment against the people of Brazil for their judicial treatment of former president Jair Bolsonaro, raises eyebrows considering that the U.S. has run a trade surplus with Brazil for 18 years. The sudden lack of volatility can only be explained by the fact that hard economic data has not yet caught up with tariffs, or that tariffs will not exist for long, or that Trump himself may not be around for long. According to the (nonpartisan) Tax Foundation, the current Trump program of tariffs will bring $2 trillion in revenues to the Federal government over the next ten years, and reduce US GDP by 0.8% before foreign retaliation. While the Trump administration is selling this as revenue coming from other nations, it will largely be derived from American consumers in the form of higher prices. Ultimately tariffs will prove to be a tax on the American people. The outcome of tariff negotiations will play an important role on the direction of markets in the second half of 2025. One undeniable trend in the first half of this year was the decline of the US dollar, which lost 10% against other world currencies and 15% against the Euro. This is being interpreted as a re-assessment of “US exceptionalism”, and is happening for several reasons: - Trump’s tariffs have created animosity among foreign bondholders, who continue to sell their US Treasury holdings. In the first four months of the year, China sold $110 billion in Treasury bond holdings. In the subsequent six weeks, it sold four times that amount Additional data will be about in several weeks, and it is likely to show further acceleration. - Anticipation over lower US short term interest rates into slowing economic conditions are driving the dollar lower, driving further foreign selling of US Treasuries. - Increasing foreign concerns over the wobbly US government finances is leading to an exodus out of US Treasury holdings by foreign central banks. Foreign investment in the US stock market is at its historical high (18%), but could be pressured if foreign investors perceive that the USD will continue to fall any further. Economists estimate that growth in consumer spending, which accounts for more than two-thirds of economic activity, was for last quarter tracking at a 1.5% annualized rate after slowing to a 1.6% annualized pace in the first quarter. The Atlanta Fed is forecasting GDP rebounding at a 3.5% annualized rate in the second quarter. The anticipated surge will largely reflect a reversal in imports, which have fallen sharply as the frontloading of goods fizzled prior to the imposition of Trump tariffs. The economy contracted at a 0.2% pace in the January-March quarter. Downside risks to consumer spending are, however, rising. The labor market is slowing; student loan repayments have resumed for millions of Americans and household wealth has been eroded amid tariff-induced stock market volatility. Overall economic uncertainty may be leading to precautionary saving. Consumers have been cautious since the beginning of the year. The top 20% of earners account for 50% of US consumer spending, and have been driving marginal US consumption, but as demonstrated by LVMH’s recent profit warning, softness in US and Chinese consumers has led to a weaker outlook. “Buy now/pay later” companies, like Klarna, are publishing an alarming rise (17%) rise in loan losses. Until very recently, US Federal student loan borrowers had access to various broad and targeted relief programs, but much of this relief has now been rolled back as of mid-2025. 2 million student loan borrowers are presently facing wage loan garnishing from their checking accounts, and the Dept. of Education estimates that number to rise to 10 million over the next ten months. As soon as these wages are garnished, they show up on credit reports and result in even higher interest costs. Below left, please find the monthly change in in retail sales over the past year, and at right, personal interest payments by Americans: On July 4th, Congress passed its fiscal bill into law (preposterously called “The One Big Beautiful Bill Act”). The bill is pro-growth, but will add to the deficit by around $2 trillion. Treasury Secretary Scott Bessent argues that we will grow our way out, but the bond market is sounding alarms again, because there seems to be no end to the annual budget deficits in sight. While tariff policies are driving down the value of the dollar, and antagonized foreigners, (who own 30% of our Treasury bonds), are either selling or are not buying any more Treasury bonds at a time when the US needs them to buy more of them, the US has a problem. Thus, the bond market is the existential threat to the US economy. In nominal terms, this has been the worst five- or ten-year period for 10-year bonds since the beginning of the country’s history. On a “real” basis, or on an “inflation adjusted” basis, it has not been quite as bad as the 1970’s or after WWI, but it looks like its going to arrive there soon: Credit card delinquencies are currently at an all-time high. While the pro-business approach of the Trump administration may have admirable ambitions, it offers little relief from 23% credit card rates, 7% mortgage rates, and 7-9% prime auto loan rates The futures market is anticipating only one interest rate cut between now and the end of the year. But the fear in the bond market is that long term interest rates may not move down if short term interest rates are cut. Because of fear of tariffs. Because of fear over ever-growing deficits. Because of fear over how to finance those deficits. The “Big Beautiful Bill” was designed to stimulate growth to attempt to grow the economy out of the deficit, but so far, the 10-year bond yield has not come down at all. Monetary policy and its use of the Fed Funds rate to steer the economy may be less impactful now than fiscal stimulus, and quantitative easing will be needed to hold long term rates steady and avoid a breakdown in the bond market at a time when fiscal stimulus would normally push long term rates considerably higher. The result of further money printing will lead to an even further decline in the US dollar which has already declined by 10% this year. This is a 20-year chart of the ten-year US Bond yield. The black horizontal line represents a yield of 5%. The last time we saw a yield of 5% on the US ten-year bond was in the second half of 2007, just before the US economy saw a downturn: The June Consumer Price Index came out today, and tariffs are starting to put upward pressure on prices. The annual core CPI rose to 2.9% from 2.8% last month, and core goods rose 0.5%, the most since June 2022, especially for imported goods. Increases in the list price of automobiles at the end of June suggested that the CPI number will increase again in July. This is far from the Fed’s target of 2%, and implies that the Federal Reserve is no position to cut interest rates anytime soon, and may even remain in neutral for some time. President Trump has recently alluded to prematurely naming a new Fed Chairman nine months early, since the current Chairman, Jerome Powell, is not finished with his term until mid-May 2026. Trump’s gambit relies on naming an obedient and subservient Fed Chairman that would maximally cut rates to bolster the economy and reduce the debt burden of the government without concern for inflation. It should be noted that interest rate decisions are made by a committee of 12 Fed members to are all seemingly loyal to Jerome Powell, who will remain on the Fed Board at the end of his tenure as Chairman. While the stock market may, on a short-term basis, celebrate any such announcement, the worry is that the bond and currency market would revolt at any sign that the Federal Reserve has lost its independence. For the first half of 2025, the S&P 500 index was up 5.5%, the Dow was up 3.6%, and the Nasdaq was up 5.4%.. Wishing you a pleasant summer! Grant Rogers Metis Capital Management LLC GLOBAL DISCLAIMER: THIS REPORT HAS BEEN PREPARED BY METIS CAPITAL MANAGEMENT LLC. THIS REPORT IS FOR DISTRIBUTION ONLY UNDER SUCH CIRCUMSTANCES AS MAY BE PERMITTED BY APPLICABLE LAW. IT HAS NO REGARD TO THE SPECIFIC INVESTMENT OBJECTIVES, FINANCIAL SITUATION OR PARTICULAR NEEDS OF ANY SPECIFIC RECIPIENT. IT IS PUBLISHED SOLELY FOR INFORMATIONAL PURPOSES AND IS NOT TO BE CONSTRUED AS A SOLICITATION OR AN OFFER TO BUY OR SELL ANY SECURITIES OR RELATED FINANCIAL INSTRUMENTS. NO REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, IS PROVIDED IN RELATION TO THE ACCURACY, COMPLETENESS OR RELIABILITY OF THE INFORMATION CONTAINED HEREIN, NOR IS IT INTENDED TO BE A COMPLETE STATEMENT OR SUMMARY OF THE SECURITIES, MARKETS OR DEVELOPMENTS REFERRED TO IN THE REPORT. THE REPORT SHOULD NOT BE REGARDED BY RECIPIENTS AS A SUBSTITUTE FOR THE EXERCISE OF THEIR OWN JUDGMENT. ANY OPINIONS EXPRESSED IN THIS REPORT ARE SUBJECT TO CHANGE WITHOUT NOTICE. THE ANALYSIS CONTAINED HEREIN IS BASED ON NUMEROUS ASSUMPTIONS. DIFFERENT ASSUMPTIONS COULD RESULT IN MATERIALLY DIFFERENT RESULTS. THE ANALYST RESPONSIBLE FOR THE PREPARATION OF THIS REPORT MAY INTERACT WITH TRADING DESK PERSONNEL, SALES PERSONNEL, OTHER ANALYSTS, JOURNALISTS, AND OTHER CONSTITUENCIES FOR THE PURPOSE OF GATHERING, SYNTHESIZING AND INTERPRETING MARKET INFORMATION. METIS CAPITAL MANAGEMENT LLC IS UNDER NO OBLIGATION TO UPDATE OR KEEP CURRENT THE INFORMATION CONTAINED HEREIN. THE SECURITIES DESCRIBED HEREIN MAY NOT BE ELIGIBLE FOR SALE IN ALL JURISDICTIONS OR TO CERTAIN CATEGORIES OF INVESTORS. OPTIONS, DERIVATIVE PRODUCTS AND FUTURES ARE NOT SUITABLE FOR ALL INVESTORS, AND TRADING IN THESE INSTRUMENTS IS CONSIDERED RISKY. MORTGAGE AND ASSET-BACKED SECURITIES MAY INVOLVE A HIGH DEGREE OF RISK AND MAY BE HIGHLY VOLATILE IN RESPONSE TO FLUCTUATIONS IN INTEREST RATES AND OTHER MARKET CONDITIONS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FOREIGN CURRENCY RATES OF EXCHANGE MAY ADVERSELY AFFECT THE VALUE, PRICE OR INCOME OF ANY SECURITY OR RELATED INSTRUMENT MENTIONED IN THIS REPORT. METIS CAPITAL MANAGEMENT LLC ACCEPTS NO LIABILITY FOR ANY LOSS OR DAMAGE ARISING OUT OF THE USE OF ALL OR ANY PART OF THIS REPORT. CERTAIN OF THE INFORMATION CONTAINED IN THIS PRESENTATION IS BASED UPON FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS, INCLUDING DESCRIPTIONS OF ANTICIPATED MARKET CHANGES AND EXPECTATIONS OF FUTURE ACTIVITY. METIS BELIEVES THAT SUCH STATEMENTS, INFORMATION, AND OPINIONS ARE BASED UPON REASONABLE ESTIMATES AND ASSUMPTIONS. HOWEVER, FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS ARE INHERENTLY UNCERTAIN AND ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED ON SUCH FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS. Tue, 15 Jul 2025 10:40:00 -0700http://www.metiscm.com/blog/post/second-quarter-2025-forecast-and-outlookhttp://www.metiscm.com/blog/post/second-quarter-2025-forecast-and-outlookFormer Treasury Secretary Janet Yellen said this week that President Trump has taken a “wrecking ball” to the economy and could not give a “passing grade” to its handling thus far. The financial markets would agree with her. The utter chaos and uncertainty of the past two weeks make any analysis going forward difficult at best. Because tariffs are inflationary, long term Treasury bonds have been selling off, causing long bond yields to rise worldwide. President Trump has asked the Fed to lower rates, and the Fed refuses to do so because this would fuel inflation. As consumers recoil and households feel less wealthy due to a declining stock market and higher unemployment, Trump wants to see lower bond yields. But the opposite is happening, and is pushing up borrowing costs throughout the financial system. This is raising the already elevated fear of a recession. Liquidity has been evaporating in the financial system just as we head into the largest refinancing of Treasury bonds ever known in one year ($9.2 trillion will be maturing in 2025, out of $36.2 trillion of total national debt). President Trump’s tariffs are unpopular abroad, so it is likely that there is less appetite from Europe, Japan, or China to buy these bonds. If foreign nations sell less to the U.S. because of tariffs, it makes sense that they will have fewer dollars to invest in U.S. Treasury bonds going forward to finance our national debt. The economic damage caused from Trump tariffs could prove to be far more damaging than under Herbert Hoover in 1930, because imports were only 3% of GDP at that time. Today, they represent 15% of GDP, so the economy is five times more exposed than when we learned, ninety-five years ago, that tariffs cause turmoil. Even after the 90 day pause that Trump announced on certain reciprocal tariffs on April 9, Bloomberg Economics now estimates the average tariffs to be at 22.8%. The logic of the current administration’s policies is fundamentally flawed. Its strategy of forcing businesses to manufacture in the U.S. will face limits, and is less about attracting manufacturing back to the U.S. than extorting businesses to “build a plant in the U.S. or else”. This may work to a limited extent, but is certainly no way to make America richer, stronger, or greater, nor is it an effective way to raise taxes. The point of tariffs is to raise prices on foreign goods, and to make foreign goods more expensive so that people will buy less of them, and buy more domestic goods. Either that, or to make foreign manufacturers produce their foreign made goods here in the U.S. However, it takes many years to build a factory, and decisions to build factories in the U.S. are dependent upon how long businesses believe that the current protectionist policies will last. Also, import tariffs on raw materials, which are yet unknown, may shift with the whims of the administration going forward, creating uncertainty about input costs which will impact decisions about allocating capital toward production here. Furthermore, the Biden era financial incentives and tax credits including the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the CHIPS and Science Act, to incentivize reshoring of production from abroad, have all been frozen by Trump, and may lead to terminations and permanent disruptions. The labor needed to build factories is facing increasing risks of worker shortages in the construction sector considering mass deportations of undocumented workers. Recently, there are signs of a slowdown in the U.S. economy that will give businesses further reasons to delay investment plans as consumers, firms, and the stock market soften their outlook while the government is being downsized and the risk of inflationary tariffs create new levels of uncertainty. Before committing large amounts of capital to produce goods in the U.S., where labor costs are expensive, businesses may favor more predictable manufacturing environments elsewhere,where they may still obtain cheap raw materials and labor. Imagine spending $1 billion building a factory in the U.S., only to discover that the supplies needed for production are then subjected to tariffs, or that that the products manufactured are no longer subject to tariffs, or that one’s cost of goods sold is now twice that of a competitor. Treasury Secretary Scott Bessent’s Plan, referred to as “3:3:3”, refers to his target of achieving 3% GDP growth, a 3% budget deficit, and a U.S production of 3 million barrels of oil per day. The first he plans to achieve through deregulation and other pro-growth policies. This may prove to be difficult. Early this year, the Atlanta Fed estimated first quarter GDP growth at levels near 3%, but revised its estimates in early April to minus 2.4% Bessent’s plan aims to bring the federal budget deficit down to 3% of Gross Domestic Product (GDP), from a 6.4% deficit in fiscal year 2024. That high deficit under Biden was due to interest on the federal debt, which exceeded $1 trillion for the first time, and growth in Social Security, Medicare, and military expenditures. The Trump administration hopes to bring interest rates down, but with foreign capital fleeing the United States at an unprecedented level, bond yields are being pushed higher. In the week following the announcement of reciprocal tariffs, the US 10- and 30-year bond yields both jumped nearly a half percent. How can tariffs bring interest rates down? By causing a recession. An induced recession would allow for the Federal Reserve to cut interest rates and refinance the nation’s debt at lower interest rates. But recessions are bad for people, bad for stocks, and bad for the government’s tax receipts. Even if a recession caused interest rates to decline by two percent, the savings on interest payments for the U.S. government would be far outweighed by lower tax collections and a rise in unemployment benefits. The Fed only controls short term interest rates. Investors control long term interest rates, and many of those investors are from abroad. We in the U.S. live in a debt fueled economy, and 23% of that debt is borrowed from foreign investors, both public and private. The exodus of foreign capital from U.S. debt is causing long term interest rates to rise at one of the fastest paces in modern history. That exodus is causing the bond yield curve to steepen, which is tightening financial conditions (think mortgage rates). Much is discussed in the press about Trump’s tariff rates, but there are two other issues that the current administration sees hindering U.S. exporters: foreign regulations and value added taxes. These latter two have an equally large impact because they add to the cost of American products sold abroad. The Fed views the recently implemented tariffs as a significant economic shock with the potential to slow growth, elevate inflation, and increase the risk of recession. If the average tariff rate reaches 25%, Fed Governor Waller sees unemployment rising to 5%, and substantial economic deceleration. In the worst-case scenario, economists at Bloomberg have estimated that, using a Fed model, a 28% overall increase in tariffs could translate into a 4% hit to U.S. GDP and add 2.5% to core PCE, an inflation measure preferred by the Federal Reserve. The Yale Budget Lab, a non-partisan policy research center in New Haven, now estimates that the average American household will lose $3,800 per year from the tariffs announced in April. The stock market is likely to remain fragile and volatile over the course of the second quarter, and prudence is advised. The consequences of the Trump tariffs, combined with a worsening fiscal situation in the U.S., and an exodus of foreign capital may take some time before stability reasserts itself. As dialogue increases between the U.S. and its trade partners, things should become more investor friendly as tensions subside in the coming months. For the first quarter of 2025, the S&P 500 index was down 1.2%, the Dow was down 4.6%, and the Nasdaq was down 10.41%. Wishing you a pleasant springtime season and a quick resolution to the recent geopolitical uncertainty! Tue, 15 Apr 2025 07:11:00 -0700http://www.metiscm.com/blog/post/first-quarter-2025-forecast-and-outlookhttp://www.metiscm.com/blog/post/first-quarter-2025-forecast-and-outlookIt is likely that 2025 will bring tension between the Federal Reserve and the Federal government. After last week’s strong jobs report, the possibility of further interest rate cuts has greatly diminished, and everything is pointing to higher bond yields which are rising to their highest levels since 2023. The futures market is now predicting only one interest cate cut in September. Indeed, some analysts are even beginning to consider the possibility of rate hikes in 2025, after a University of Michigan survey showed consumers’ inflation expectations jumped to 3.3% in January from 2.8% the month prior. Stocks are now back to pre-election levels. The showdown this year will be between an independent Federal Reserve, whose job is to control inflation through higher interest rates, and the Trump administration, which wants control over the Fed and wants it to cut interest rates to stimulate the economy ((Interest rates are far too high”- Donald Trump, January 7th). This represents a conundrum for the inbound Republican administration. Tariffs and deportations are inflationary. Inflation brings the need for higher rates. Higher rates are bad for the economy and the stock market, which then drives tax revenues lower, meaning that the federal government will have to borrow more or print more money, which is not just inflationary, but increases the fiscal burden of the interest the government pays on its existing pile of debt, which is already at an all-time high. Trump called Fed Chairman Powell (whom he himself nominated in 2016) an “idiot” for raising interest rates in 2020, despite campaigning on inflation being too high. But without higher interest rates, inflation will run rampant. Populism prevents austerity, and despite promises to lower the public debt, the bond market is punishing populism with much higher bond yields, now flirting with 5% on the ten-year bond. Higher yields are making the stock market wobble. The bond market thinks that the inbound administration will spend uncontrollably and allow an increase in inflation. Central banks around the world are declaring victory prematurely over the war on inflation. Many economists are concerned that President-elect Trump’s announced policies will drive inflation higher. Tariffs, should they be implemented universally at 10%, might raise up to $2 trillion for the government, but would shrink the economy as other countries retaliate. No one knows if Trump is serious about tariffs. If he is, they will be inflationary, which may lead to higher interest rates. Another issue is mass deportation, which will cause labor shortages in agriculture, housing construction, and restaurants/hotels, thus driving up wages in an inflationary spiral. Remember, population growth equals GDP growth, and population contraction equals economic contraction. The 2017 Trump tax cuts were temporary and are set to expire at the end of the year. These tax cuts cost the government approximately $4 trillion. Trump would like to extend them permanently, despite the $36 trillion of Federal debt. He pledges to decrease government spending to afford this. The much-vaunted, newly created Department of Government Efficiency (DOGE), to be led by Elon Musk, is already balking at that task. Musk admitted on January 8th that his agency most likely will not make the $2 trillion of budget cuts he has promised since October. Since there is only $1.7 trillion of discretionary spending at the US government, $2 trillion dollars of savings implies cutbacks in Social Security and Medicare. Musk approvingly re-tweeted Utah Senator Mike Lee’s quote to eliminate the Federal Reserve entirely because it is “unconstitutional.” Few think that Wall Street would approve of that. The stock market has been characterized for the last few years by “liquidity”, as the Fed grew its balance sheet and stimulated the economy despite higher short-term interest rates. The Fed balance sheet is now shrinking through quantitative tightening, taking money from its reverse repo facility, which has been drawn down by $2.1 trillion, and is now minimal. Henceforth, the Fed will run down their balance sheet by taking money out of bank reserves instead, and that will tighten liquidity. Think of that reverse repo facility as a piggy bank which is now almost out of coins. The result will be net tighter financial conditions. Add to this the possibility of higher rates and higher uncertainty, and we have a recipe for volatility in 2025.Wed, 15 Jan 2025 13:42:00 -0700http://www.metiscm.com/blog/post/fourth-quarter-forecast-and-outlookhttp://www.metiscm.com/blog/post/fourth-quarter-forecast-and-outlookGDP for the second quarter grew at 3%, showing no sign of a slowdown. Concurrently, there is an aggressive global monetary easing going on worldwide, as almost every central bank in the world is lowering interest rates. Money supply is expanding, financial conditions are easing, economic conditions are good, and global stocks are reaching for all-time highs. The number of advancing stocks to declining stocks, otherwise known as “breadth”, is suggesting a continuing bullish bias. It is unusual for central banks to begin easing financial conditions when markets are at their highs, but usually a sign that expensive asset classes should continue to become more expensive. It may be argued that there will be a continuing “broadening” of the market and a “catching up” of sectors that have lagged the market. Central banks usually ease in response to weakness; today, they are seemingly lowering interest rates to reflect a lower level of inflation. Of course, there are weak points in the economy. The most recent report from ISM on U.S. manufacturing, which accounts for 10.3% of the economy, indicated that it is in a recession and has been in contraction territory for the past six months. In that report, which is a canvass of major purchasing managers at US industries, only 2 of 18 industries saw a lift in new orders or an increase in employment growth. However, with prices paid for manufacturing inputs falling to a nine-month low and falling interest rates, conditions are poised for a rebound in activity in the coming months. The corporate insider’s sell-to-buy ratio is at its highest since 2021, but as they sell stock, retail investors are turning more bullish, driving stock prices up. Data center construction is increasing significantly due to the computer power demands of artificial intelligence, particularly “hyperscale” data centers which house IT equipment and network infrastructure that process and store large amounts of data. These data centers are at least 10,000 square feet and hold 5,000 servers at a minimum. A hyperscale data center can consume 20-150 megawatts of electricity, which is comparable to the electricity needs of a large city, which is putting huge demand on electricity and increasing the need for electrical infrastructure. Nevada based Synergy Research Group forecasts that 120-130 hyperscale data centers will come online each year for the next decade. They also predict that the total capacity of hyperscale data centers will double again in the next four years. Other research firms like ABI anticipate that 8,410 data centers will be in operation by 2030. All of this is causing explosive growth in servers, server cooling systems (which consume up to half of a data center’s power needs), AI chips (GPU’s, FPGA’s, and ASIC’s), electrical infrastructure, electricity itself, and inputs needed to make that electricity like natural gas and uranium. With interest rates poised to fall, both in the US and worldwide, and a healthy economy, stock indices are underpinned by healthy tailwinds. The U.S. election is a toss-up at this point. Both presidential candidates will significantly add to the absolute level of government debt, which is a storm cloud on the horizon, but probably won’t become an issue until the United States is downgraded by major ratings agencies. As for geopolitical tensions in the Middle East, the defense and energy sectors are poised to benefit from heightened uncertainty, as will precious metals like gold. For the first nine months of the year, the S&P 500 index was up 20.8%, the Dow was up 12.3%, and the Nasdaq was up 21.1%. GLOBAL DISCLAIMER: THIS REPORT HAS BEEN PREPARED BY METIS CAPITAL MANAGEMENT LLC. THIS REPORT IS FOR DISTRIBUTION ONLY UNDER SUCH CIRCUMSTANCES AS MAY BE PERMITTED BY APPLICABLE LAW. IT HAS NO REGARD TO THE SPECIFIC INVESTMENT OBJECTIVES, FINANCIAL SITUATION OR PARTICULAR NEEDS OF ANY SPECIFIC RECIPIENT. IT IS PUBLISHED SOLELY FOR INFORMATIONAL PURPOSES AND IS NOT TO BE CONSTRUED AS A SOLICITATION OR AN OFFER TO BUY OR SELL ANY SECURITIES OR RELATED FINANCIAL INSTRUMENTS. NO REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, IS PROVIDED IN RELATION TO THE ACCURACY, COMPLETENESS OR RELIABILITY OF THE INFORMATION CONTAINED HEREIN, NOR IS IT INTENDED TO BE A COMPLETE STATEMENT OR SUMMARY OF THE SECURITIES, MARKETS OR DEVELOPMENTS REFERRED TO IN THE REPORT. THE REPORT SHOULD NOT BE REGARDED BY RECIPIENTS AS A SUBSTITUTE FOR THE EXERCISE OF THEIR OWN JUDGMENT. ANY OPINIONS EXPRESSED IN THIS REPORT ARE SUBJECT TO CHANGE WITHOUT NOTICE. THE ANALYSIS CONTAINED HEREIN IS BASED ON NUMEROUS ASSUMPTIONS. DIFFERENT ASSUMPTIONS COULD RESULT IN MATERIALLY DIFFERENT RESULTS. THE ANALYST RESPONSIBLE FOR THE PREPARATION OF THIS REPORT MAY INTERACT WITH TRADING DESK PERSONNEL, SALES PERSONNEL, OTHER ANALYSTS, JOURNALISTS, AND OTHER CONSTITUENCIES FOR THE PURPOSE OF GATHERING, SYNTHESIZING AND INTERPRETING MARKET INFORMATION. METIS CAPITAL MANAGEMENT LLC IS UNDER NO OBLIGATION TO UPDATE OR KEEP CURRENT THE INFORMATION CONTAINED HEREIN. THE SECURITIES DESCRIBED HEREIN MAY NOT BE ELIGIBLE FOR SALE IN ALL JURISDICTIONS OR TO CERTAIN CATEGORIES OF INVESTORS. OPTIONS, DERIVATIVE PRODUCTS AND FUTURES ARE NOT SUITABLE FOR ALL INVESTORS, AND TRADING IN THESE INSTRUMENTS IS CONSIDERED RISKY. MORTGAGE AND ASSET-BACKED SECURITIES MAY INVOLVE A HIGH DEGREE OF RISK AND MAY BE HIGHLY VOLATILE IN RESPONSE TO FLUCTUATIONS IN INTEREST RATES AND OTHER MARKET CONDITIONS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FOREIGN CURRENCY RATES OF EXCHANGE MAY ADVERSELY AFFECT THE VALUE, PRICE OR INCOME OF ANY SECURITY OR RELATED INSTRUMENT MENTIONED IN THIS REPORT. METIS CAPITAL MANAGEMENT LLC ACCEPTS NO LIABILITY FOR ANY LOSS OR DAMAGE ARISING OUT OF THE USE OF ALL OR ANY PART OF THIS REPORT. CERTAIN OF THE INFORMATION CONTAINED IN THIS PRESENTATION IS BASED UPON FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS, INCLUDING DESCRIPTIONS OF ANTICIPATED MARKET CHANGES AND EXPECTATIONS OF FUTURE ACTIVITY. METIS BELIEVES THAT SUCH STATEMENTS, INFORMATION, AND OPINIONS ARE BASED UPON REASONABLE ESTIMATES AND ASSUMPTIONS. HOWEVER, FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS ARE INHERENTLY UNCERTAIN AND ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED ON SUCH FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS.Mon, 07 Oct 2024 16:12:00 -0700http://www.metiscm.com/blog/post/third-quarter-forecast-and-opinion-3http://www.metiscm.com/blog/post/third-quarter-forecast-and-opinion-3Wall Street analysts are now predicting that the S&P 500 will report earnings growth of 11.33% in 2024 and 14.4% in 2025. While these are estimates, the outlook is very strong, and has even been revised up since the end of last year. We are in the midst of a “soft landing” with expectations of rate cuts ahead by the Fed, which is a bullish scenario. Inflation has come down to 3%, and while prices are still 21% higher than when the pandemic began in early 2020, the inflation swap market is previewing 2% inflation in one year’s time. Low unemployment and real wage gains are keeping the consumer positive, and stimulative fiscal policy is still providing a tailwind to the economy. Political winds may begin impacting the stock and bond markets as we approach the end of the year, but this summer should remain relatively benign. Expectations so far this year called for central bank policy rates to remain elevated in the first half, before receding in the second half. This is still the case, with a few caveats. The root cause of inflation was due to supply and demand imbalances caused by Covid, increasing commodity prices, and very stimulative fiscal policy. What is new is the increasing likelihood of a Republican victory in the US Presidential elections. Trump has proposed a 10% universal tariff on all imports, and a 60% tariff on all imports from China. Tariffs are inflationary. They raise prices and reduce economic growth. According to The Tax Foundation, a D.C. based economic think tank, imported goods amounted to $3.1 trillion last year, and imports from China totaled $421 billion. The Trump tariff proposals would raise the US government’s income by some $500 billion, but will shrink US GDP by 0.8% and cost an estimated 684,000 jobs. Sixteen Nobel Prize winning economists have warned in a recent letter that the Trump economic plan will re-ignite inflation. Several non-partisan research groups, like the Peterson Institute, Oxford Economics, and Allianz corroborate that. Some Wall Street analysts believe that China’s growth would be cut in half from its current level of 4.7%. Trump would also like to extend his 2017 tax cuts, which the Congressional Budget Office warns will cost the government $5 trillion. He also indicated recently in a closed-door meeting with CEO’s that he would like to cut corporate taxes further. Economists are also concerned that that the Trump plan to deport all illegal immigrants will cause labor market tightness, increase wage pressure, and result in higher consumer prices. These factors are of course dependent upon the outcome of the election, but may constrain the Fed from cutting rates in the near term until that outcome is known. The current Fed Funds rate after all, isn’t far from its historical average (since 1971) of 5.42%, and could be considered at a “neutral” level now, neither too high to choke off economic growth, nor too low to spur inflation. The second half of 2024 is likely to bring focus to the U.S. bond market. Fed Chairman Jerome Powell expressed earlier this year that the national debt is a long-term threat to the economy, and on an “unsustainable path.” The current level of Federal debt stands at $35 trillion, and the government itself projects that debt to be above $54 trillion in 2034. That will approach 200% of GDP. Government issuance of bonds is probably the biggest risk to markets today, especially since the Federal government is running a record deficit during an expanding economy of 6.7%. With a record $8.9 trillion of US treasuries coming due this year, there will be over $10 trillion of government bonds issued in 2024. Someone needs to buy them. This amounts to more than one-third of all government debt outstanding, and more than one-third of US GDP. Meanwhile, foreign ownership of US treasuries in in a declining trend, and continues to decline. If the supply of bonds is not met with enough demand, bond prices go down and bond yields rise, making credit more expensive, which is contractionary. All of this is occurring while the Federal Reserve is selling $60 billion per month to reduce its very own holdings of treasury bonds, Will the largest buyers of treasury bonds continue to buy if interest rates go down? This remains to be seen, but the sheer scale of issuance points in the direction of higher bond yields, which usually favors banks, insurance companies, and brokerage firms. The selection of J.D. Vance as Trump’s running mate is curious considering that he opposes free market policies. He is openly enthusiastic about devaluing the dollar, which is inflationary because the dollar price of foreign goods increases relative to domestically produced goods, and the U.S. imports a lot ($3.1 trillion). The S&P 500 index was up 14.2% in the first half of the year, the Dow up 2.5%, and the Nasdaq up 18.1%. Grant Rogers GLOBAL DISCLAIMER: THIS REPORT HAS BEEN PREPARED BY METIS CAPITAL MANAGEMENT LLC. THIS REPORT IS FOR DISTRIBUTION ONLY UNDER SUCH CIRCUMSTANCES AS MAY BE PERMITTED BY APPLICABLE LAW. IT HAS NO REGARD TO THE SPECIFIC INVESTMENT OBJECTIVES, FINANCIAL SITUATION OR PARTICULAR NEEDS OF ANY SPECIFIC RECIPIENT. IT IS PUBLISHED SOLELY FOR INFORMATIONAL PURPOSES AND IS NOT TO BE CONSTRUED AS A SOLICITATION OR AN OFFER TO BUY OR SELL ANY SECURITIES OR RELATED FINANCIAL INSTRUMENTS. NO REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, IS PROVIDED IN RELATION TO THE ACCURACY, COMPLETENESS OR RELIABILITY OF THE INFORMATION CONTAINED HEREIN, NOR IS IT INTENDED TO BE A COMPLETE STATEMENT OR SUMMARY OF THE SECURITIES, MARKETS OR DEVELOPMENTS REFERRED TO IN THE REPORT. THE REPORT SHOULD NOT BE REGARDED BY RECIPIENTS AS A SUBSTITUTE FOR THE EXERCISE OF THEIR OWN JUDGMENT. ANY OPINIONS EXPRESSED IN THIS REPORT ARE SUBJECT TO CHANGE WITHOUT NOTICE. THE ANALYSIS CONTAINED HEREIN IS BASED ON NUMEROUS ASSUMPTIONS. DIFFERENT ASSUMPTIONS COULD RESULT IN MATERIALLY DIFFERENT RESULTS. THE ANALYST RESPONSIBLE FOR THE PREPARATION OF THIS REPORT MAY INTERACT WITH TRADING DESK PERSONNEL, SALES PERSONNEL, OTHER ANALYSTS, JOURNALISTS, AND OTHER CONSTITUENCIES FOR THE PURPOSE OF GATHERING, SYNTHESIZING AND INTERPRETING MARKET INFORMATION. METIS CAPITAL MANAGEMENT LLC IS UNDER NO OBLIGATION TO UPDATE OR KEEP CURRENT THE INFORMATION CONTAINED HEREIN. THE SECURITIES DESCRIBED HEREIN MAY NOT BE ELIGIBLE FOR SALE IN ALL JURISDICTIONS OR TO CERTAIN CATEGORIES OF INVESTORS. OPTIONS, DERIVATIVE PRODUCTS AND FUTURES ARE NOT SUITABLE FOR ALL INVESTORS, AND TRADING IN THESE INSTRUMENTS IS CONSIDERED RISKY. MORTGAGE AND ASSET-BACKED SECURITIES MAY INVOLVE A HIGH DEGREE OF RISK AND MAY BE HIGHLY VOLATILE IN RESPONSE TO FLUCTUATIONS IN INTEREST RATES AND OTHER MARKET CONDITIONS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FOREIGN CURRENCY RATES OF EXCHANGE MAY ADVERSELY AFFECT THE VALUE, PRICE OR INCOME OF ANY SECURITY OR RELATED INSTRUMENT MENTIONED IN THIS REPORT. METIS CAPITAL MANAGEMENT LLC ACCEPTS NO LIABILITY FOR ANY LOSS OR DAMAGE ARISING OUT OF THE USE OF ALL OR ANY PART OF THIS REPORT. CERTAIN OF THE INFORMATION CONTAINED IN THIS PRESENTATION IS BASED UPON FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS, INCLUDING DESCRIPTIONS OF ANTICIPATED MARKET CHANGES AND EXPECTATIONS OF FUTURE ACTIVITY. METIS BELIEVES THAT SUCH STATEMENTS, INFORMATION, AND OPINIONS ARE BASED UPON REASONABLE ESTIMATES AND ASSUMPTIONS. HOWEVER, FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS ARE INHERENTLY UNCERTAIN AND ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED ON SUCH FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS.Mon, 15 Jul 2024 15:18:00 -0700http://www.metiscm.com/blog/post/second-quarter-forecast-and-opinion-3http://www.metiscm.com/blog/post/second-quarter-forecast-and-opinion-3Stocks surged in Q1 2024 across a variety of sectors, and earnings season will soon test the breadth of that rally. Last week’s CPI report on inflation is confirming that interest rates may indeed remain higher for longer as the bond markets have been suggesting. Inflation as measured by CPI, rose by 3.5% in March, higher than expectations, and signaling an acceleration of inflation. Without food and energy, inflation is now at 3.8%, while shelter was up 5.7%, and electricity was up 5%. This was the third time in as many months that the CPI was higher than expected. It is most likely high interest rates that are causing shelter prices to spike, because so many homeowners are locked into low-rate mortgages, which reduces the supply of homes. This, plus high current mortgage rates, makes housing for new homeowners unaffordable, so they drive up demand for rental properties. As a result of this adjustment in the inflation outlook, last week’s US treasury bond auction of $39 billion was received poorly, sending yields on 10-year treasury bonds to 4.64%, up from 4% in January. 30-year mortgage rates are now approaching 7% again. For the bond market, higher rates for longer seems to be the current forecast. Recent remarks by Fed officials have driven Wall Street to pare bets that the Fed will start lowering interest rates in June, with the futures market, reflecting that the probability for interest rate cut this year is diminishing. Oil and commodity prices have been rising since mid-December, continuing to pressure inflationary forces. Recent attacks by Iran on Israel have exacerbated this trend. Nonetheless, consumption remains very strong in the US economy, defying forecasts that post pandemic spending would soften and that student loan paybacks, and/or record credit card interest payments, would cause a softening in spending. Real consumer spending is growing faster than its average over the past fifty years, and retail sales in the first quarter, comprising a full one-third of all consumer spending, rose sharply, diminishing any expectations over an economic slowdown. The unemployment rate remains historically low under 4%. Real capital spending is also strong, particularly on software and manufacturing infrastructure, and is being financed by a record $3.5 trillion dollars in corporate cash flow. Fiscal policy remains stimulative, particularly with respect to public infrastructure spending and incentives to “re-shore” manufacturing from abroad. Geopolitical risks are heightening, with escalating tensions between Iran and Israel reaching new heights. Iran’s bombardment of Israel caused market jitters on April 12th over concerns about oil prices. If there is severe tension that arises in the Middle East, it is quite possible that oil and gold prices continue their upward trajectory. After a strong first quarter, it would not be surprising to see a near-term pullback in the stock market, although the continued resilience of the IU.S. consumer, strong employment, and the ongoing ability of U.S. businesses to grow earnings are all encouraging. S&P 500 earnings for the first quarter are expected to have grown by 5% and should be strong as nominal GDP growth is running close to 6% now. The S&P 500 was up 10.01% in the first quarter, the Dow was up 5.6%, and the Nasdaq was up 10.9%.Mon, 15 Apr 2024 06:13:00 -0700http://www.metiscm.com/blog/post/first-quarter-forecast-and-opinion-2http://www.metiscm.com/blog/post/first-quarter-forecast-and-opinion-2A lot of bad news has been ignored by Wall Street on the assumption that the Fed will ‘pivot” and begin lowering interest rates this year. The market is annualizing three and six-month inflation, which is generating a lower inflation number than by comparing the last twelve months. For example, the Fed’s preferred inflation measure, the “core PCE” still shows annual inflation at 3.2%, while the six-month measure is now at 1.9%. This is leading many market participants to expect a significant amount of easing from the Fed. In fact, the futures market is expecting the Fed cut its short-term interest rates by 1.7% between now and the end of the year. Based on recent comments by Fed members, it seems that rate cuts will be slow and steady as long as there is a “soft landing” in the economy. If there is evidence of weak economic data ahead, the Fed may ease rates more quickly. Atlanta Fed Chairman Raphael Bostic said last week that he doesn’t see the need to cut interest rates until the third quarter, unless there is “convincing” evidence of a surprise decline in inflation. At present, it is unclear how soon the Fed will move given the inflation scenario, and it is unclear by how much they will cut rates. In an election year, the Feds decisions always become more politicized. The stock market’s runup last year was in anticipation of these rate cuts. The stock market refused to listen to the Fed’s rhetoric over trying to slow the economy, and most thought that higher interest rates were only temporary. And yet, while the stock market has been flashing green, underlying trends in the economy have been flashing red. While employment remains robust, leading indicators are contracting and signaling a recession. The Leading Economic Index just declined for the 21st month in a row. The Conference Board, a Manhattan based economic research bureau, is now forecasting US GDP growth to turn negative in Q2 and Q3 of 2024. As the following chart demonstrates, when there is a “hard landing” followed by rate cuts, the stock market can be vulnerable. Economic growth as measured by GDP can be misleading if not adjusted for inflation. Currently, GDP growth is at an impressive 6.2%, but adjusted for inflation, that number becomes 1.9%. Retail sales, when adjusted for inflation, have been flatlining for thirty months, whereas over the past year that figure, unadjusted for inflation, was up 3.9%. Stock valuations are expensive. On January 1st, 2023, the S&P traded at a forward P/E of 17 times, in the 56th percentile of “expensiveness”. By year’s end, the same index was at 20 times, its 90th percentile. Corporate insiders have been selling shares in their own companies while retail investors have been heavily entering the market. This could be because of a challenging set of comparisons relative to last year on corporate earnings. S&P 500 earnings are forecast to gain 12% this year. Enormous leverage has led to a vulnerability to higher interest rates which has not really manifested itself yet. The greatest number of consumer and corporate delinquencies, as well as bank failures took place last year since the Great Financial crisis. A record number of Americans did not pay their federal taxes in 2023. Some 40% of student debt holders have not begun repaying their loans after their requirement to do so on October 1st. Subprime auto loans delinquencies are at a record high. Credit card debt is at an all-time high ($1.08 trillion) paying on average, 23% interest. US housing affordability is worse today than at its peak during the last housing bubble. The median US household now needs to spend 45.3% of its income to afford a median priced home, another record high. And yet, the economy looks strong, despite deteriorating credit quality. Federal debt has just bypassed $34 trillion, and is on schedule to add to that number by $2 trillion per year, with large government deficits and no plans to cut them in an election year. As a result, the US Treasury is issuing increasing amounts of Treasury bonds. Heavy treasury issuance is driving up long term bond yields based simply on supply. This year, the US Treasury is on track to issue around $4 trillion of bonds, a record. If 10-year yields continue to rise from their current level of 4.14%, this acts as a brake to further stock market gains. A surge in US Treasury bond issuance in the second half of last year helped to drive Treasury yields to their highest levels in decades. As a counterpoint, the Fed has recently hinted that a pause in their program of reducing the balance sheet (quantitative tightening) may be brought forward. This would provide a temporary reprieve on bond market pressures, but keep in mind that the Fed still has $7.2 trillion on its balance sheet, down from $9 trillion at its peak. Interestingly, US corporates are issuing bonds in 2024 at the fastest year-to-date pace in over thirty years, indicating that they think bond yields are going higher. Nor is this problem confined to the US. Emerging market bond issuance is out of control, and expected to surge again this year. The U.K, which is also in an election year, is expected to issue three times more debt than its ten-year average. In Europe, net bond issuance is expected to rise by 18%. Since the Fed began raising interest rates in March 2022, money market funds have seen large inflows, and now equal a record $6 trillion. If interest rates begin to decrease, some of this sidelined cash could find itself rotating into the stock market. If the Fed does embark upon an easing cycle, the US dollar should weaken, which favors gold and precious metals. One thing is clear: Expect volatility in 2024. The possibility of supply chain pressure from the Middle East could threaten input costs and oil prices. Ukraine, the war in Gaza, and the threat of a Chinese invasion of Taiwan all present obvious risks. More than 90% of all advanced microchips are made in Taiwan, and a Chinese attack would threaten the world’s supply of semiconductor components. GLOBAL DISCLAIMER: THIS REPORT HAS BEEN PREPARED BY METIS CAPITAL MANAGEMENT LLC. THIS REPORT IS FOR DISTRIBUTION ONLY UNDER SUCH CIRCUMSTANCES AS MAY BE PERMITTED BY APPLICABLE LAW. IT HAS NO REGARD TO THE SPECIFIC INVESTMENT OBJECTIVES, FINANCIAL SITUATION OR PARTICULAR NEEDS OF ANY SPECIFIC RECIPIENT. IT IS PUBLISHED SOLELY FOR INFORMATIONAL PURPOSES AND IS NOT TO BE CONSTRUED AS A SOLICITATION OR AN OFFER TO BUY OR SELL ANY SECURITIES OR RELATED FINANCIAL INSTRUMENTS. NO REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, IS PROVIDED IN RELATION TO THE ACCURACY, COMPLETENESS OR RELIABILITY OF THE INFORMATION CONTAINED HEREIN, NOR IS IT INTENDED TO BE A COMPLETE STATEMENT OR SUMMARY OF THE SECURITIES, MARKETS OR DEVELOPMENTS REFERRED TO IN THE REPORT. THE REPORT SHOULD NOT BE REGARDED BY RECIPIENTS AS A SUBSTITUTE FOR THE EXERCISE OF THEIR OWN JUDGMENT. ANY OPINIONS EXPRESSED IN THIS REPORT ARE SUBJECT TO CHANGE WITHOUT NOTICE. THE ANALYSIS CONTAINED HEREIN IS BASED ON NUMEROUS ASSUMPTIONS. DIFFERENT ASSUMPTIONS COULD RESULT IN MATERIALLY DIFFERENT RESULTS. THE ANALYST RESPONSIBLE FOR THE PREPARATION OF THIS REPORT MAY INTERACT WITH TRADING DESK PERSONNEL, SALES PERSONNEL, OTHER ANALYSTS, JOURNALISTS, AND OTHER CONSTITUENCIES FOR THE PURPOSE OF GATHERING, SYNTHESIZING AND INTERPRETING MARKET INFORMATION. METIS CAPITAL MANAGEMENT LLC IS UNDER NO OBLIGATION TO UPDATE OR KEEP CURRENT THE INFORMATION CONTAINED HEREIN. THE SECURITIES DESCRIBED HEREIN MAY NOT BE ELIGIBLE FOR SALE IN ALL JURISDICTIONS OR TO CERTAIN CATEGORIES OF INVESTORS. OPTIONS, DERIVATIVE PRODUCTS AND FUTURES ARE NOT SUITABLE FOR ALL INVESTORS, AND TRADING IN THESE INSTRUMENTS IS CONSIDERED RISKY. MORTGAGE AND ASSET-BACKED SECURITIES MAY INVOLVE A HIGH DEGREE OF RISK AND MAY BE HIGHLY VOLATILE IN RESPONSE TO FLUCTUATIONS IN INTEREST RATES AND OTHER MARKET CONDITIONS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FOREIGN CURRENCY RATES OF EXCHANGE MAY ADVERSELY AFFECT THE VALUE, PRICE OR INCOME OF ANY SECURITY OR RELATED INSTRUMENT MENTIONED IN THIS REPORT. METIS CAPITAL MANAGEMENT LLC ACCEPTS NO LIABILITY FOR ANY LOSS OR DAMAGE ARISING OUT OF THE USE OF ALL OR ANY PART OF THIS REPORT. CERTAIN OF THE INFORMATION CONTAINED IN THIS PRESENTATION IS BASED UPON FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS, INCLUDING DESCRIPTIONS OF ANTICIPATED MARKET CHANGES AND EXPECTATIONS OF FUTURE ACTIVITY. METIS BELIEVES THAT SUCH STATEMENTS, INFORMATION, AND OPINIONS ARE BASED UPON REASONABLE ESTIMATES AND ASSUMPTIONS. HOWEVER, FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS ARE INHERENTLY UNCERTAIN AND ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED ON SUCH FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS.Fri, 19 Jan 2024 14:26:00 -0700http://www.metiscm.com/blog/post/fourth-quarter-forecast-and-opinion-1http://www.metiscm.com/blog/post/fourth-quarter-forecast-and-opinion-1While many market participants are expecting a “soft” landing for the economy after more than a five per cent rise in interest rates, the evidence for a hard landing is mounting. Unemployment just rose from 3.4% to 3.8% The personal savings rate just rose by 3% with consumers anticipating harder times ahead. High yield bond defaults are up 1.6% to 3.2% Credit card delinquencies are up from 0.8% to 1.2% Auto delinquencies are up 5% to 7.3% Business confidence has been falling since late 2020. The bond yield curve is now steepening quickly; having been very inverted at -1.1%, it is now at only -45 bps. The 10-year Treasury bond yield is now at a sixteen year high.When bond yields go up because of higher interest rates, bond prices go down. When longer term bond yields go up by more than shorter term bond yields, it is known as “bear steepening.” This condition is dangerous to markets, because of the effects on mortgages and corporate loans, which become much more expensive. Long bond prices are much more sensitive to changes in yields than short dated bonds. For example, a ten-basis point move up in 30-year yields is as much as ten times more powerful on prices as the same increase in a two- or five-year bond yield. This means that entities that invest in long dated bonds like pension funds, insurance companies, or fragile banks can be vulnerable to much lower bond prices. Bear steepening can be dangerous when the economy is weakening; in Sept-Nov. 2000, May-June 2007, and Sept.-Nov. 2018 we saw, in all three cases, bear steepening marking the end of a bull market for stocks. However, in all three of those cases, inflation was much lower, which permitted the Federal Reserve to cut rates and stimulate the economy. The Fed is now telling us that higher rates today will not lead to more interest rate cuts tomorrow. In their September meeting, “higher rates for longer” was the theme as expectations over any near-term interest rate cuts were pushed out largely to 2025, due to the intractability of inflation.Higher debt defaults seem inevitable as the lagged impact of higher interest rates flows through to consumers and businesses. While the market is currently expecting the Fed to stop raising rates when it gets to 5.45%, it is now entirely possible that we see more unanticipated rate hikes. Keep in mind that some $4 trillion of investment grade and high yield debt is being refinanced at much higher rates this and next year, while at the same time banks are tightening their lending standards.As a result, commercial loan growth is now poised to go negative year-on-year.Mortgage rates are still climbing, now at 7.41% These high rates, combined with banks’ increasing reluctance to lend, is leading to a drop in new home sales to a five-month low. New housing construction was down 11.3% in August, 1.7% below the previous year. But high rates are making their biggest impact in the commercial real estate market. There is a “wall of debt”- some $1.4 trillion of commercial real estate debt, which will be maturing through 2025. These loans will need to be refinanced at much higher interest rates, and are provided mostly by small regional or community banks. In all but the biggest 25 US banks, 67% of all loans are for commercial real estate. The impending credit crunch is likely to negatively impact access to credit by small and medium sized businesses, which leads to less hiring and less spending.Oil prices have soared in the third quarter to new cycle highs, as markets consider the effects. The US strategic petroleum reserve is at lows, and overall total oil storage levels are very low. Crude oil prices may be heading even higher on supply concerns, and JP Morgan analysts are predicting $150 per barrel by next year. While our major inflation index, the “core” CPI, strips out food an energy from inflation, it should be noted that energy prices also have important indirect effects on inflation. High oil prices come at a time when consumers are already stretched. Student loan repayments of, on average, $400 per month per student must be repaid starting October first (after a Covid moratorium) and maxed-out credit cards are now subjected to an average 28% interest on a record $1.03 trillion total. These factors combined are leading to a drop in consumer expectations, as well as confidence in the present situation:The much feared government shutdown has been reprieved for 45 days. Although Wall Street would not welcome the chaos that would ensue with a shutdown, what is truly feared is a downgrade of the US credit rating by either S&P or Moody’s. Last week, Moody’s signaled that a government shutdown would harm the country’s credit, while the former chairman of S&P’s sovereign rating committee said that the U.S. is in a weaker position now than when S&P downgraded its sovereign credit rating in 2011.On a positive note, productivity among the US workforce is improving, and onshoring and infrastructure investment is robust. American and foreign manufacturers are onshoring to the US to avoid geopolitical risks and supply chain risks.The federal government’s spending on public infrastructure is boosting demand for new construction equipment, up some 8.4% over the past year.Federal deficits have become a preoccupation to the bond markets, in addition to inflation worries. The US funding deficit is a result of inflation, as the government must spend more on interest payments to service its debt. Record amounts of Treasury bond issuance is also exacerbating the bond selloff. The bond market is sending a clear message to Washington to cut the deficits. If the government does not act, bond yields will rise further and cause a recession and a credit crunch. GLOBAL DISCLAIMER: THIS REPORT HAS BEEN PREPARED BY METIS CAPITAL MANAGEMENT LLC. THIS REPORT IS FOR DISTRIBUTION ONLY UNDER SUCH CIRCUMSTANCES AS MAY BE PERMITTED BY APPLICABLE LAW. IT HAS NO REGARD TO THE SPECIFIC INVESTMENT OBJECTIVES, FINANCIAL SITUATION OR PARTICULAR NEEDS OF ANY SPECIFIC RECIPIENT. IT IS PUBLISHED SOLELY FOR INFORMATIONAL PURPOSES AND IS NOT TO BE CONSTRUED AS A SOLICITATION OR AN OFFER TO BUY OR SELL ANY SECURITIES OR RELATED FINANCIAL INSTRUMENTS. NO REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, IS PROVIDED IN RELATION TO THE ACCURACY, COMPLETENESS OR RELIABILITY OF THE INFORMATION CONTAINED HEREIN, NOR IS IT INTENDED TO BE A COMPLETE STATEMENT OR SUMMARY OF THE SECURITIES, MARKETS OR DEVELOPMENTS REFERRED TO IN THE REPORT. THE REPORT SHOULD NOT BE REGARDED BY RECIPIENTS AS A SUBSTITUTE FOR THE EXERCISE OF THEIR OWN JUDGMENT. ANY OPINIONS EXPRESSED IN THIS REPORT ARE SUBJECT TO CHANGE WITHOUT NOTICE. THE ANALYSIS CONTAINED HEREIN IS BASED ON NUMEROUS ASSUMPTIONS. DIFFERENT ASSUMPTIONS COULD RESULT IN MATERIALLY DIFFERENT RESULTS. THE ANALYST RESPONSIBLE FOR THE PREPARATION OF THIS REPORT MAY INTERACT WITH TRADING DESK PERSONNEL, SALES PERSONNEL, OTHER ANALYSTS, JOURNALISTS, AND OTHER CONSTITUENCIES FOR THE PURPOSE OF GATHERING, SYNTHESIZING AND INTERPRETING MARKET INFORMATION. METIS CAPITAL MANAGEMENT LLC IS UNDER NO OBLIGATION TO UPDATE OR KEEP CURRENT THE INFORMATION CONTAINED HEREIN. THE SECURITIES DESCRIBED HEREIN MAY NOT BE ELIGIBLE FOR SALE IN ALL JURISDICTIONS OR TO CERTAIN CATEGORIES OF INVESTORS. OPTIONS, DERIVATIVE PRODUCTS AND FUTURES ARE NOT SUITABLE FOR ALL INVESTORS, AND TRADING IN THESE INSTRUMENTS IS CONSIDERED RISKY. MORTGAGE AND ASSET-BACKED SECURITIES MAY INVOLVE A HIGH DEGREE OF RISK AND MAY BE HIGHLY VOLATILE IN RESPONSE TO FLUCTUATIONS IN INTEREST RATES AND OTHER MARKET CONDITIONS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FOREIGN CURRENCY RATES OF EXCHANGE MAY ADVERSELY AFFECT THE VALUE, PRICE OR INCOME OF ANY SECURITY OR RELATED INSTRUMENT MENTIONED IN THIS REPORT. METIS CAPITAL MANAGEMENT LLC ACCEPTS NO LIABILITY FOR ANY LOSS OR DAMAGE ARISING OUT OF THE USE OF ALL OR ANY PART OF THIS REPORT. CERTAIN OF THE INFORMATION CONTAINED IN THIS PRESENTATION IS BASED UPON FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS, INCLUDING DESCRIPTIONS OF ANTICIPATED MARKET CHANGES AND EXPECTATIONS OF FUTURE ACTIVITY. METIS BELIEVES THAT SUCH STATEMENTS, INFORMATION, AND OPINIONS ARE BASED UPON REASONABLE ESTIMATES AND ASSUMPTIONS. HOWEVER, FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS ARE INHERENTLY UNCERTAIN AND ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED ON SUCH FORWARD-LOOKING STATEMENTS, INFORMATION AND OPINIONS.Wed, 04 Oct 2023 11:50:00 -0700