AI Drives the Rally: Chasing Cyclical Growth

Fresh news and strategies for traders. SPY Trader episode #1415. The US market continues its record rally, propelled by exceptional Q3 corporate earnings, particularly in technology and AI (exemplified by Amazon AWS). Money is rapidly rotating into cyclical growth sectors like Consumer Discretionary, while defensive stocks lag. Despite bullish Fed rate cuts, sticky inflation and slowing labor markets introduce caution, maintaining a focus on highgrowth sector exposure.

Episode Transcript

(00:00):
Good morning , traders !
It's 5 am on Monday , November 3rd , 2025 , Pacific time .
I’m your host , Barry Bullish , and welcome back to the Spy Trader podcast .
We are starting the week riding a powerful wave .
The US market is roaring , setting new records , largely ignoring some messy macroeconomic data .

(00:22):
Let's dive into what's driving this relentless rally .

Here’s the snapshot (00:26):
The S&P 500 is sitting pretty at 6,840 , up 0.26% recently , and the Nasdaq Composite is the clear leader , up 0.61% and extending its incredible seventh consecutive monthly rise in October .
This strength is fundamentally earningsdriven .

(00:50):
About 80% of S&P 500 companies beat profit expectations last quarter , and the overall S&P 500 is tracking for a 13.8% yearonyear profit increase for the third quarter .
The poster child for this is the AI trade , exemplified by Amazon , whose shares jumped nearly 10% after its Amazon Web Services cloud division reported 20% revenue growth , which topped expectations .

Geopolitical good news also includes China suspending extra export controls on rare earths , easing trade tensions , but watch out (01:19):
a prolonged US government shutdown is delaying crucial economic reports , like the monthly jobs data , creating uncertainty .
Our analysis shows this is a very selective , riskon rally .

(01:42):
Money is rotating heavily into cyclical growth .
Consumer Discretionary , tracked by XLY , jumped 2.64% , thanks to those strong ecommerce profits , and Energy ( XLE ) is up 0.73% .
These sectors show confidence in consumer spending and corporate resilience .
Who is struggling ?

(02:02):
Defensive sectors like Utilities ( XLU ) , down 0.69% , and Consumer Staples ( XLP ) , down 0.29% , are out of favor because investors are chasing growth , not safety .
On the macro front , the Fed did cut rates to 3.75% to 4.00% in October , which is bullish , but inflation is sticky at a 3% annual rate .

(02:27):
This sticky inflation suggests rate cuts might be slower than hoped , causing the 10year Treasury yield to tick up to 4.08% .
The labor market is also slowing down , with unemployment rising to 4.3% , signaling overall economic deceleration .
So , where do we put our capital ?

(02:48):
The market is clearly rewarding highgrowth and AI exposure .
My first recommendation is to maintain or add core exposure to the technology leaders through the Invesco QQQ Trust ( QQQ ) or the Technology Select Sector SPDR Fund ( XLK ) .
The AI narrative , grounded by results like Amazon’s 20% cloud growth , is the strongest force .

(03:11):
Second , for broad exposure , keep your foundation solid with the Vanguard S&P 500 ETF ( VOO ) .
Third , tactically overweight the Consumer Discretionary Select Sector SPDR Fund ( XLY ) to benefit from ongoing consumer strength .

Finally , a word on bonds (03:31):
for stability , use the Vanguard Total Bond Market ETF ( BND ) , but if you are betting aggressively on longterm yields dropping significantly from 4.08% , the iShares 20 Year Treasury Bond ETF ( TLT ) is your tactical weapon , but approach that longduration trade with caution due to inflation uncertainty .

(03:55):
Focus on the growth sectors this week .
That's all for today , traders !
Trade smart , stay bullish , and I’ll catch you next time on Spy Trader .