Bull Market Altitude: Rate Cuts and Tech Titans

Fresh news and strategies for traders. SPY Trader episode #1409. The S&P 500 has surged past 6,800, driven by twin engines: widespread expectations of a Fed rate cut and exceptional corporate earnings, particularly within megacap technology. This highly concentrated rally, fueled by the Magnificent 7 and the AI narrative, pushes valuations well above historical averages. We analyze how to strategically overweight growth sectors (XLK, QQQ) while using core bond ETFs (AGG, TLT) to hedge against market volatility and capture the anticipated bond rally.

Episode Transcript

(00:00):
Welcome back to Spy Trader .
I'm your host , Barry Bullman , and it's 6 am on Tuesday , October 28th , 2025 ( Pacific ) .
We are still riding high on a magnificent bull market that just hit its threeyear milestone .
The S&P 500 recently closed above 6,800 for the first time ever , and the Nasdaq Composite is also notching record highs .

(00:26):
Now , most investors feel like ' reluctant bulls ' because valuations are stretched , but momentum is undeniable .
Let's break down the drivers and figure out how to navigate these heady heights .

The big story this morning is the twin engine driving this rally (00:38):
Tech dominance and rate cut euphoria .
The market is overwhelmingly optimistic about monetary policy easing .
The FOMC meeting begins this week , and the widespread expectation is for a 25 basis point rate cut , marking the second cut of the year .

(01:01):
This optimism is fueled by the delayed September CPI report showing a coolerthanexpected inflation rate of 3.0% yearoveryear .
Second , corporate earnings are phenomenal .
Approximately 83% of companies are beating analyst expectations .
In specific company news , Qualcomm saw a massive surge , up 11% in one session , after announcing a new AI chip for data centers , setting up a direct challenge to leaders like Nvidia and AMD .

(01:32):
Meanwhile , Amazon confirmed plans for its largestever corporate layoff , cutting 30,000 jobs , which the market surprisingly viewed as a positive sign of efficiency ahead of their Q3 report .
Diving into the analysis , this is not a broad market rally ; it's extremely concentrated The S&P 500’s forward P/E ratio is elevated at 22.7 , well above the 10year average of 18.6 , which explains the caution .

(02:02):
The rally is being driven by the ‘ Magnificent 7 ’ and the AI narrative .
Technology Select Sector SPDR Fund ( XLK ) is the clear sector leader , up nearly 29% yeartodate .

This makes sense when you consider the data (02:17):
megacap tech stocks are expected to see 15% earnings growth this quarter , compared to only 6.7% for the other 493 S&P 500 companies .
While defensive sectors like Utilities and Consumer Staples are mixed or negative , growth sectors , including Industrials , which is benefiting from strong economic activity , are performing well .

(02:45):
This concentrated strength means we need to align our portfolio with the leaders while hedging the valuation risk .
For core exposure , maintain diversified exposure through ETFs like Vanguard S&P 500 ETF ( VOO ) , but tactical allocation demands overweighting growth .

(03:06):
We strongly recommend increasing exposure to Invesco QQQ Trust ( QQQ ) or the Technology Select Sector SPDR Fund ( XLK ) to capture the continued upside from AI players and the Magnificent 7 earnings power .
Given the high conviction around a Fed rate cut , we also need to hedge and capture the bond market rally .

(03:28):
A safe bet here is adding to core bond funds like iShares Core U.S.
Aggregate Bond ETF ( AGG ) .
For a highconviction rate play , consider iShares 20 Year Treasury Bond ETF ( TLT ) , which is highly sensitive to falling longterm yields .
On the individual stock front , look for resilience .

(03:50):
UnitedHealth Group ( UNH ) reported betterthanexpected profit and raised its fullyear outlook , providing a strong anchor in the defensive Health Care sector .
On the other hand , monitor Berkshire Hathaway ( BRK.B ) following its recent downgrade , a potential sign of market rotation out of value and into pure growth .

(04:12):
Stay nimble , stay bullish , and I'll catch you on the next Spy Trader .