difficulty: easy

question: A quarter opens with US core inflation falling from 3.4% to 2.6%, payroll growth steady at 150k per month, and semiconductor earnings beating estimates on productivity-driven margin expansion. Long bond yields fall 25bp while oil is flat. What allocation should CarbonAlpha choose?

expected_focus: Recognize benign disinflation plus productivity as broadly risk-on.

expected_focus: Tilt toward TECH and some GREEN without abandoning BONDS.

expected_focus: Avoid treating the news as a recession or oil shock.

red_flags: Large OIL overweight without an oil catalyst.

red_flags: All-cash/all-bonds defensive response despite growth stability.

red_flags: No explicit reasoning about falling yields.


difficulty: medium

question: A military escalation temporarily closes a major shipping chokepoint, removing 3 million barrels per day of oil supply. Brent crude jumps 14%, inflation breakevens rise, and central banks signal policy will stay restrictive for longer. How should the portfolio react?

expected_focus: Identify first-order OIL upside from supply shortage.

expected_focus: Account for second-order pressure on TECH, GREEN, REAL_ESTATE, and BONDS from inflation and higher rates.

expected_focus: Use put hedge or defensive balance rather than pure risk-on.

red_flags: Heavy BONDS overweight despite rising inflation expectations.

red_flags: Ignoring rate sensitivity of real estate and growth assets.


difficulty: medium

question: Several regional banks and private credit funds halt redemptions after sudden commercial real estate loan losses. Short-term funding markets tighten, bank equity indices plunge, and Treasury yields fall on safe-haven demand. What should CarbonAlpha do?

expected_focus: Treat this as credit stress centered on REAL_ESTATE and financial conditions.

expected_focus: Use BONDS as a safe-haven beneficiary while reducing REAL_ESTATE.

expected_focus: Mention downside risk to TECH/GREEN from tightening credit.

red_flags: Buying REAL_ESTATE because prices are lower without acknowledging solvency risk.

red_flags: Large OIL allocation without energy news.


difficulty: hard

question: A major AI lab demonstrates a 10x inference-efficiency gain. Hyperscalers defer GPU orders, data-center capex forecasts drop 40%, and power-utility demand forecasts are revised lower. Software margins are expected to improve. How should CarbonAlpha allocate?

expected_focus: Separate software/TECH margin benefit from hardware and data-center capex weakness.

expected_focus: Recognize GREEN and REAL_ESTATE may suffer from lower power and data-center buildout expectations.

expected_focus: Avoid simplistic 'AI good means everything tech-adjacent up' reasoning.

red_flags: Overweighting GREEN purely because AI is efficient.

red_flags: Missing the capex deferral second-order effect.


difficulty: hard

question: Two leading ratings agencies find 40% of voluntary carbon offsets invalid due to double-counting and phantom sequestration. EU CBAM regulators announce retroactive audits, voluntary offset prices plunge 60%, and compliance-market credit prices spike 3x. What is the allocation?

expected_focus: Distinguish voluntary offset collapse from stronger compliance carbon pricing.

expected_focus: Favor real abatement/GREEN over offset-dependent strategies.

expected_focus: Penalize OIL and carbon-intensive REAL_ESTATE due to compliance cost pressure.

red_flags: Buying OIL because 'carbon markets are down'.

red_flags: Treating all carbon assets as identical.

red_flags: No mention of compliance versus voluntary market split.


difficulty: hard

question: China announces an 80% reduction in rare-earth exports over 18 months, citing domestic demand. US semiconductor export controls tighten, renewable manufacturers warn of three quarters of supply-chain disruption, and oil majors announce record buybacks on sector-rotation inflows. What should CarbonAlpha do?

expected_focus: Recognize TECH and GREEN supply-chain damage despite long-run transition demand.

expected_focus: See OIL as a possible rotation beneficiary in this specific shock.

expected_focus: Use a fragmentation or supply-chain regime interpretation.

red_flags: Buying GREEN as the obvious climate winner despite rare-earth bottlenecks.


difficulty: medium

question: Three top-10 insurers exit Florida and California property markets citing climate-loss economics. State regulators propose taxpayer-backed reinsurance pools, municipal bond spreads widen, and 10-year Treasury yields fall 30bp on flight-to-quality. How should CarbonAlpha allocate?

expected_focus: Reduce REAL_ESTATE due to insurance withdrawal and physical climate risk.

expected_focus: Recognize high-quality BONDS may benefit from falling Treasury yields, while munis/REITs are stressed.

expected_focus: Consider GREEN/adaptation as a longer-run beneficiary without overdoing it.

red_flags: Treating taxpayer reinsurance as fully solving real-estate risk.

red_flags: Confusing municipal stress with all bonds being bad.


difficulty: hard

category: deflation

question: China manufacturing PMI falls to 41, export prices drop 12% year over year, and global supply gluts appear across semiconductors, oil, and real estate. Treasury yields plunge on safe-haven demand while the Bank of Japan intervenes to stabilize currency markets. What should the model choose?

expected_focus: Identify deflationary demand shock, not cheap-input bullishness.

expected_focus: Favor BONDS as safe-haven/rate beneficiary.

expected_focus: Cut OIL, TECH, GREEN, and REAL_ESTATE exposure where gluts hurt nominal earnings.

red_flags: Buying TECH because components are cheaper.

red_flags: Buying OIL despite explicit supply glut and demand weakness.

red_flags: No regime-shift language around deflation.


difficulty: easy

question: The US, EU, Japan, and India finalize laws allowing regulated Bitcoin custody and spot trading inside major banks and brokerages. There are no announced changes to monetary policy, energy policy, fiscal spending, bank capital rules, or carbon regulation. What should CarbonAlpha do?

expected_focus: Treat crypto legalization as mostly low signal for the five available assets.

expected_focus: Keep a diversified/base-rate allocation rather than forcing a large bet.

expected_focus: Mention second-order effects are limited without policy, rates, or energy changes.

red_flags: Massive TECH or OIL shift based only on Bitcoin news.

red_flags: Inventing monetary easing or energy demand not in the prompt.


difficulty: hard

question: The Bank of Japan unexpectedly hikes rates and the yen rallies 9% in two sessions. Prime brokers report forced deleveraging as global macro funds unwind yen-funded carry trades. Equity futures fall, credit spreads widen, and sovereign bond futures rally. What should CarbonAlpha do?

expected_focus: Recognize global liquidity deleveraging and risk-off pressure on TECH/GREEN/REAL_ESTATE.

expected_focus: Favor BONDS and hedging as sovereign futures rally.

expected_focus: Avoid treating this as Japan-only or purely currency-local news.

red_flags: Risk-on allocation despite forced deleveraging.

red_flags: Overweight OIL without an energy catalyst.