August 29, 2025 • 9 mins
Fresh news and strategies for traders. SPY Trader episode #1352.
This episode delves into the market's mixed signals, highlighting robust yeartodate stock performance driven by tech and AI, alongside underlying caution from persistent inflation, a cooling labor market, and tariff impacts. It discusses the Federal Reserve's likely interest rate cuts in September, a strong Q2 GDP rebound, and varied sector performances. Investment recommendations include growth in technology, value opportunities in energy, fixed income for stability, and alternative assets like gold and real estate for diversification, advocating a balanced, qualityfocused approach amidst current macro uncertainties.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome back to Spy Trader , your daily dive into the market's currents !
I'm your host , Market Maverick Mike , and it's 6 am on Friday , August 29th , 2025 , Pacific Time .
We've got a lot to unpack today as the market continues its fascinating dance between robust growth and underlying caution .
(00:20):
So grab your coffee , let's get trading!First up , a quick market rundown .
Our major US stock indices are flashing green yeartodate , with the Dow Jones Industrial Average hitting a new alltime high of 45,631.74 just last week on August 22nd .
(00:41):
The S&P 500 is up 13.2% and the Nasdaq Composite a solid 15.4% yeartodate .
Yesterday , the S&P 500 edged up 0.3% and the Nasdaq 100 closed 0.6% higher , even as futures dipped ahead of some key inflation data .
(01:03):
Now , let's talk sectors , because it's a real tale of two cities out there .
Technology , driven by that insatiable demand for Artificial Intelligence , continues to lead the charge .
The sector rose over 5% in July , with giants like Meta Platforms and Alphabet significantly boosting communications , which is closely tied to tech .
(01:27):
Utilities also showed strong performance , up nearly 5% in July , benefiting from renewable energy growth and AI's power hunger .
Energy is also making a comeback , outperforming the broader market in July .
On the flip side , Health Care and Consumer Staples have been notably weak , declining over 3% and 2% respectively in July .
(01:51):
Consumer Staples , usually our defensive play , is getting squeezed by inflationary tariffs and a shift towards growth stocks .
Financially , while the sector has done well this year , there's a whisper that longterm earnings growth might be overestimated .
The big news driving sentiment this week is the Federal Reserve .
(02:12):
Chair Jerome Powell hinted at a potential interest rate cut at the upcoming September meeting .
Market watchers are now pricing in an 80% to 87% chance of a September cut , with two quarterpoint reductions expected by yearend .
This comes alongside the Fed's new ' flexible inflation targeting ' framework .
Our current federal funds rate is holding steady at 4.25% to 4.50%.Another significant factor is the ongoing US tariffs .
(02:43):
These duties , from Brazilian coffee to EU goods and even copper , are creating supply chain headaches and putting pressure on corporate margins .
Remember that Q1 GDP contraction ?
Tariffs played a part as businesses frontloaded imports .
Speaking of GDP , the US economy bounced back in Q2 , growing at an annual rate of 3.3% .
(03:08):
This was a welcome rebound from Q1's 0.5% contraction , mainly thanks to a decrease in imports and an uptick in consumer spending .
However , inflation remains our stubborn guest .
The annual CPI was 2.7% for the 12 months ending July , and the Fed's preferred gauge , core PCE , rose to 2.9% yearoveryear – the highest since February .
(03:34):
These numbers are still above the Fed's 2% target , with tariffs showing signs of contributing to that creep higher .
And the labor market ?
It's showing signs of cooling .
Only 73,000 nonfarm payroll jobs were added in July , falling short of expectations , and the unemployment rate ticked up slightly to 4.2% .
(03:56):
Longterm unemployment is rising , with 1.8 million people now in that category .
Finally , on the corporate front , while Q2 earnings were generally strong with about 80% of S&P 500 companies beating expectations , we saw some specific volatility .
Nvidia , for example , reported record revenue but its cautious guidance on future AI chip demand led to a 3% afterhours dip on August 27th , reminding us that even the hottest stocks can cool down .
(04:30):
Fonterra also sold its global dairy business to Lactalis for NZ$4.22 billion , and Root Inc.
, the insurance tech company , had strong Q2 earnings , beating estimates .
Alright , let's move into our analysis and some actionable recommendations .
This market is definitely a mixed bag .
(04:51):
On one hand , you have the undeniable momentum in technology and AI .
On the other , macroeconomic uncertainties , particularly the evolving Fed policy and the impact of tariffs , demand a cautious and diversified approach .
The strong Q2 GDP looks good on paper , but if you dig deeper , that decline in imports , partly tariffdriven , flattered the numbers .
(05:15):
Inflation stubbornly above target , coupled with a cooling labor market , tells us the Fed's job isn't done , but their pivot towards cuts is significant .
So , what's a savvy Spy Trader to do ?
I've got some concrete ideas for you .
First , for those looking for GrowthOriented Exposure , the technology sector is still where the action is , thanks to AI .
(05:38):
The Invesco QQQ Trust ( QQQ ) , which tracks the Nasdaq100 , or the Technology Select Sector SPDR Fund ( XLK ) are excellent choices to get concentrated exposure .
Just be mindful of high valuations .
Companies like Microsoft , Alphabet , and Meta Platforms have driven huge returns , but their current prices mean you need to be selective .
(06:03):
While Nvidia saw a postearnings dip on cautious guidance , its longterm AI thesis remains strong , but that event underscores the need for caution even with leaders .
Next , let's talk Diversification and Value Opportunities .
The overall market is near fair value , and many growth stocks are overvalued .
This is where value investing shines .
(06:26):
The Energy Select Sector SPDR Fund ( XLE ) looks compelling .
This sector has shown resilience and is considered fundamentally undervalued .
While the broader Consumer Staples sector has underperformed , some specific packagedfood companies might be trading at attractive discounts , but that requires more focused stock picking .
(06:50):
For Industrials , the Industrial Select Sector SPDR Fund ( XLI ) has performed well yeartodate , but with expectations of decelerating economic growth , any individual stock investment in this sector needs a significant margin of safety .
Third , with the Federal Reserve eyeing rate cuts , Fixed Income for Stability and Income is back on the menu .
(07:13):
Lower rates generally mean higher bond prices .
Consider the iShares Core U.S.
Aggregate Bond ETF ( AGG ) or the Vanguard Total Bond Market ETF ( BND ) for diversified exposure to investmentgrade US bonds .
If you believe rates will fall sharply , the iShares 20 Year Treasury Bond ETF ( TLT ) could see significant gains as longduration bonds are more sensitive to rate changes .
(07:44):
This strategy is supported by the current environment of falling Treasury yields and rising gold prices due to increased rate cut probabilities .
Finally , let's look at Alternative Investments for Diversification .
SPDR Gold Shares ( GLD ) could be a smart hedge .
Gold prices have already moved past 3400 dollars an ounce with the increased probability of rate cuts .
(08:08):
In an environment of economic uncertainty and a potentially weakening dollar , gold tends to shine .
Also , the Vanguard Real Estate ETF ( VNQ ) provides exposure to REITs .
Real Estate saw an increase this past week and could benefit from lower interest rates , which reduce borrowing costs for real estate companies and potentially boost demand .
To sum it up (08:34):
Given the mixed signals — a strong Q2 GDP rebound that still has underlying nuances , persistent inflation above target , a cooling labor market , and the Fed signaling rate cuts amidst tariff concerns — a balanced approach is your best bet .
Keep a core portfolio with broad market exposure using ETFs like Vanguard Total Stock Market ETF ( VTI ) or SPDR S&P 500 ETF Trust ( SPY ) , and then complement it with strategic allocations to the sectors and assets we just discussed .
(09:11):
Focusing on quality companies with strong fundamentals , regardless of sector , will be your compass through any potential volatility .
That's all for today's Spy Trader .
Thanks for tuning in !
I'm Market Maverick Mike , and I'll catch you next time .
Happy trading !
Welcome back to Spy Trader , your daily dive into the market's currents !
I'm your host , Market Maverick Mike , and it's 6 am on Friday , August 29th , 2025 , Pacific Time .
We've got a lot to unpack today as the market continues its fascinating dance between robust growth and underlying caution .
(00:20):
So grab your coffee , let's get trading!First up , a quick market rundown .
Our major US stock indices are flashing green yeartodate , with the Dow Jones Industrial Average hitting a new alltime high of 45,631.74 just last week on August 22nd .
(00:41):
The S&P 500 is up 13.2% and the Nasdaq Composite a solid 15.4% yeartodate .
Yesterday , the S&P 500 edged up 0.3% and the Nasdaq 100 closed 0.6% higher , even as futures dipped ahead of some key inflation data .
(01:03):
Now , let's talk sectors , because it's a real tale of two cities out there .
Technology , driven by that insatiable demand for Artificial Intelligence , continues to lead the charge .
The sector rose over 5% in July , with giants like Meta Platforms and Alphabet significantly boosting communications , which is closely tied to tech .
(01:27):
Utilities also showed strong performance , up nearly 5% in July , benefiting from renewable energy growth and AI's power hunger .
Energy is also making a comeback , outperforming the broader market in July .
On the flip side , Health Care and Consumer Staples have been notably weak , declining over 3% and 2% respectively in July .
(01:51):
Consumer Staples , usually our defensive play , is getting squeezed by inflationary tariffs and a shift towards growth stocks .
Financially , while the sector has done well this year , there's a whisper that longterm earnings growth might be overestimated .
The big news driving sentiment this week is the Federal Reserve .
(02:12):
Chair Jerome Powell hinted at a potential interest rate cut at the upcoming September meeting .
Market watchers are now pricing in an 80% to 87% chance of a September cut , with two quarterpoint reductions expected by yearend .
This comes alongside the Fed's new ' flexible inflation targeting ' framework .
Our current federal funds rate is holding steady at 4.25% to 4.50%.Another significant factor is the ongoing US tariffs .
(02:43):
These duties , from Brazilian coffee to EU goods and even copper , are creating supply chain headaches and putting pressure on corporate margins .
Remember that Q1 GDP contraction ?
Tariffs played a part as businesses frontloaded imports .
Speaking of GDP , the US economy bounced back in Q2 , growing at an annual rate of 3.3% .
(03:08):
This was a welcome rebound from Q1's 0.5% contraction , mainly thanks to a decrease in imports and an uptick in consumer spending .
However , inflation remains our stubborn guest .
The annual CPI was 2.7% for the 12 months ending July , and the Fed's preferred gauge , core PCE , rose to 2.9% yearoveryear – the highest since February .
(03:34):
These numbers are still above the Fed's 2% target , with tariffs showing signs of contributing to that creep higher .
And the labor market ?
It's showing signs of cooling .
Only 73,000 nonfarm payroll jobs were added in July , falling short of expectations , and the unemployment rate ticked up slightly to 4.2% .
(03:56):
Longterm unemployment is rising , with 1.8 million people now in that category .
Finally , on the corporate front , while Q2 earnings were generally strong with about 80% of S&P 500 companies beating expectations , we saw some specific volatility .
Nvidia , for example , reported record revenue but its cautious guidance on future AI chip demand led to a 3% afterhours dip on August 27th , reminding us that even the hottest stocks can cool down .
(04:30):
Fonterra also sold its global dairy business to Lactalis for NZ$4.22 billion , and Root Inc.
, the insurance tech company , had strong Q2 earnings , beating estimates .
Alright , let's move into our analysis and some actionable recommendations .
This market is definitely a mixed bag .
(04:51):
On one hand , you have the undeniable momentum in technology and AI .
On the other , macroeconomic uncertainties , particularly the evolving Fed policy and the impact of tariffs , demand a cautious and diversified approach .
The strong Q2 GDP looks good on paper , but if you dig deeper , that decline in imports , partly tariffdriven , flattered the numbers .
(05:15):
Inflation stubbornly above target , coupled with a cooling labor market , tells us the Fed's job isn't done , but their pivot towards cuts is significant .
So , what's a savvy Spy Trader to do ?
I've got some concrete ideas for you .
First , for those looking for GrowthOriented Exposure , the technology sector is still where the action is , thanks to AI .
(05:38):
The Invesco QQQ Trust ( QQQ ) , which tracks the Nasdaq100 , or the Technology Select Sector SPDR Fund ( XLK ) are excellent choices to get concentrated exposure .
Just be mindful of high valuations .
Companies like Microsoft , Alphabet , and Meta Platforms have driven huge returns , but their current prices mean you need to be selective .
(06:03):
While Nvidia saw a postearnings dip on cautious guidance , its longterm AI thesis remains strong , but that event underscores the need for caution even with leaders .
Next , let's talk Diversification and Value Opportunities .
The overall market is near fair value , and many growth stocks are overvalued .
This is where value investing shines .
(06:26):
The Energy Select Sector SPDR Fund ( XLE ) looks compelling .
This sector has shown resilience and is considered fundamentally undervalued .
While the broader Consumer Staples sector has underperformed , some specific packagedfood companies might be trading at attractive discounts , but that requires more focused stock picking .
(06:50):
For Industrials , the Industrial Select Sector SPDR Fund ( XLI ) has performed well yeartodate , but with expectations of decelerating economic growth , any individual stock investment in this sector needs a significant margin of safety .
Third , with the Federal Reserve eyeing rate cuts , Fixed Income for Stability and Income is back on the menu .
(07:13):
Lower rates generally mean higher bond prices .
Consider the iShares Core U.S.
Aggregate Bond ETF ( AGG ) or the Vanguard Total Bond Market ETF ( BND ) for diversified exposure to investmentgrade US bonds .
If you believe rates will fall sharply , the iShares 20 Year Treasury Bond ETF ( TLT ) could see significant gains as longduration bonds are more sensitive to rate changes .
(07:44):
This strategy is supported by the current environment of falling Treasury yields and rising gold prices due to increased rate cut probabilities .
Finally , let's look at Alternative Investments for Diversification .
SPDR Gold Shares ( GLD ) could be a smart hedge .
Gold prices have already moved past 3400 dollars an ounce with the increased probability of rate cuts .
(08:08):
In an environment of economic uncertainty and a potentially weakening dollar , gold tends to shine .
Also , the Vanguard Real Estate ETF ( VNQ ) provides exposure to REITs .
Real Estate saw an increase this past week and could benefit from lower interest rates , which reduce borrowing costs for real estate companies and potentially boost demand .
To sum it up (08:34):
Given the mixed signals — a strong Q2 GDP rebound that still has underlying nuances , persistent inflation above target , a cooling labor market , and the Fed signaling rate cuts amidst tariff concerns — a balanced approach is your best bet .
Keep a core portfolio with broad market exposure using ETFs like Vanguard Total Stock Market ETF ( VTI ) or SPDR S&P 500 ETF Trust ( SPY ) , and then complement it with strategic allocations to the sectors and assets we just discussed .
(09:11):
Focusing on quality companies with strong fundamentals , regardless of sector , will be your compass through any potential volatility .
That's all for today's Spy Trader .
Thanks for tuning in !
I'm Market Maverick Mike , and I'll catch you next time .
Happy trading !
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