Goldilocks Rally: Record Highs Fuel Rate Cut Bets

Fresh news and strategies for traders. SPY Trader episode #1406. Major indices hit fresh record highs following cooler CPI data, cementing a massive riskon environment and nearly guaranteeing a Federal Reserve rate cut. This 'Goldilocks' scenario is driving strong rotation into growth sectors (Technology) and cyclicals (Financials), with key stocks like AMD and Ford leading the charge. Maintain exposure to QQQ and XLK while hedging with highquality fixed income.

Episode Transcript

(00:00):
Welcome back to Spy Trader .
I'm your host , Maximus Market , and if you’re listening to this , you’re probably still celebrating the monster market party we just threw .
It's 6 am on Saturday , October 25th , 2025 , Pacific time , and we need to break down how the major indices just closed the week at fresh record highs , cementing a massive riskon environment .

The headline is simple (00:24):
everything is green .
The S&P 500 , tracked by funds like SPY , gained about 1.9% .
The Dow Jones Industrial Average soared past 47,000 for the first time ever , and the techheavy Nasdaq Composite , tracked by QQQ , led the gains , soaring 2.3% for the week .

(00:47):
The catalyst was the coolerthanexpected September CPI data , which showed inflation rose 3.0% yearoveryear , slightly below the 3.1% forecast .
This slight deceleration , especially in shelter inflation , strongly reinforced the expectation for a Federal Reserve interest rate cut , with probabilities now nearing 99% .

(01:10):
Lower rates typically fuel risk assets , and that’s exactly what we saw .
The 10year Treasury yield held stable around 4.00% , which also provided crucial stability for equities .
This rally wasn't uniform .
The market experienced a clear rotation into growth and economically sensitive sectors .

(01:30):
Information Technology and Communication Services were the clear winners , making the Technology Select Sector SPDR Fund , XLK , a top performer .
Financials , tracked by XLF , also rallied strongly , betting that easier monetary policy will revive lending and boost economic growth .

(01:51):
Meanwhile , defensive sectors like Consumer Staples and Energy Minerals lagged behind .
We saw tremendous companyspecific catalysts .
Advanced Micro Devices , AMD , soared over 7% to an alltime high after news broke that IBM successfully ran a key quantum computing algorithm on AMD chips .

(02:12):
IBM itself jumped nearly 8% .
Cyclical stocks showed great resilience too ; Ford Motor , F , jumped over 12% after beating expectations with strong thirdquarter results .
Even Tesla , TSLA , managed to close up over 2% later in the week , shrugging off an earlier profit miss .

The primary insight here is that we are in a ' Goldilocks' macroeconomic scenario (02:33):
inflation is cooling enough to warrant Fed action , but corporate earnings and economic resilience are holding up .
This environment strongly supports equities , especially growth and cyclical plays .
Given this strong momentum and the monetary easing tailwind , our focus remains on growth and sector rotation .

(02:59):
First , maintain or increase your exposure to core growth indices like the Invesco QQQ Trust , QQQ , or the Technology Select Sector SPDR Fund , XLK .
These funds are the primary beneficiaries of the rate cut expectations .
Second , capitalize on the improving economic sentiment by looking at the Financial Select Sector SPDR Fund , XLF , for exposure to banks and insurers , or individual cyclical successes like Ford Motor , F.Third , while we are riskon , it’s wise to keep a small defensive hedge .

(03:38):
With rate cuts anticipated , broad , highquality fixed income funds like the Vanguard Total Bond Market ETF , BND , should see price appreciation and can stabilize your portfolio against any unforeseen shocks .
The market breadth is looking good , earnings are resilient , and the Fed is about to ease up .

(03:59):
Stay invested , stay diversified , and keep those eyes on the SPY .