Market Headwinds: Strategic Investing

Fresh news and strategies for traders. SPY Trader episode #1254. Hey everyone, and welcome back to Spy Trader! I'm your host, Chip Dip, and it's 6 pm on Friday, June 20th, 2025, Pacific time. What a whirlwind week it's been in the markets, closing out with some mixed signals. Let's dive right in. The US stock market wrapped up the week with a bit of a split personality. The Dow Jones Industrial Average managed to inch up, posting modest gains for the day and the week. However, both the S&P 500 and the Nasdaq Composite saw declines today, with the S&P 500 marking its second consecutive weekly drop. Interestingly, small and midcap indices showed a bit more pep in their step. Looking at sectors, it was a mixed bag. Today, Retailing saw a notable gain, while sectors like Hardware, Software, and Healthcare pulled back. Over the year, valuestyle sectors like Industrials and Utilities have been leading the charge, outperforming growth sectors like Technology and Consumer Discretionary. On the news front, geopolitical tensions, particularly the ongoing IsraelIran conflict, continue to keep us on edge, though worstcase scenarios seem to have been avoided for now. The Federal Reserve's recent meeting saw Chair Powell confirm interest rates are holding steady between 5.25% and 5.50%. The market's now leaning towards just two rate cuts this year, possibly starting in September, a step back from earlier, more optimistic projections. There's even some talk of potential stagflation, which is something we're keeping a close eye on. Positive economic data from China offered a small global lift, but concerns about US trade tariffs loom large, threatening higher inflation and potentially slowing down our labor market. We've also seen some companyspecific news, like the cyberattack targeting insurance giant Aflac. Looking at the broader economy, US real GDP dipped slightly in the first quarter of 2025. While inflation eased a bit in April, the Fed has actually raised its inflation forecast, and folks are expecting prices to keep climbing long term. The labor market is showing signs of cooling, with job growth projected to decelerate significantly this year. Now, for some company highlights: Kroger led the S&P 500 gainers today after reporting strongerthanexpected firstquarter profit and sales. CarMax also had some good news with increased earnings and used car sales. Looking ahead, next week brings Global flash PMIs and PCE data, plus Fed Chair Powell's testimony before Congress. So, what does all this mean for your portfolio? Well, the market's definitely on a cautious footing. Inflation is proving to be pretty sticky, and the Fed's stance of 'higher for longer' on interest rates really puts pressure on growth stocks. Geopolitical uncertainty adds to the shortterm volatility, and the slight dip in GDP, along with forecasts for slower job growth and consumer spending, suggests our economy might be hitting a bit of a 'stall speed.' Plus, those tariffs are a real concern, potentially hurting both your wallet and company profits. We're also seeing a clear shift in investor preference towards more stable, valueoriented companies. So, my concrete recommendations for you, the savvy Spy Trader, are these: First, Favor Quality and Value. In this environment, companies with strong balance sheets, consistent earnings, and reasonable valuations are your friends. Think about sectors like Industrials and Utilities; they've been strong performers yeartodate for a reason. Look into established industrial players, stable utility providers, or even certain healthcare and consumer staples companies that can pass on costs. Second, Be Cautious with Highly Valued Growth Stocks, but Monitor for Opportunities. High interest rates can hit growth stocks hard, but the longterm innovation, especially in AI, is still a powerful force. So, avoid the super speculative stuff, but if you see a pullback in established, profitable tech giants with strong cash flow, th

Episode Transcript

(00:00):
Hey everyone , and welcome back to Spy Trader !
I'm your host , Chip Dip , and it's 6 pm on Friday , June 20th , 2025 , Pacific time .
What a whirlwind week it's been in the markets , closing out with some mixed signals .
Let's dive right in .
The US stock market wrapped up the week with a bit of a split personality .

(00:20):
The Dow Jones Industrial Average managed to inch up , posting modest gains for the day and the week .
However , both the S&P 500 and the Nasdaq Composite saw declines today , with the S&P 500 marking its second consecutive weekly drop .
Interestingly , small and midcap indices showed a bit more pep in their step .

(00:43):
Looking at sectors , it was a mixed bag .
Today , Retailing saw a notable gain , while sectors like Hardware , Software , and Healthcare pulled back .
Over the year , valuestyle sectors like Industrials and Utilities have been leading the charge , outperforming growth sectors like Technology and Consumer Discretionary .

(01:04):
On the news front , geopolitical tensions , particularly the ongoing IsraelIran conflict , continue to keep us on edge , though worstcase scenarios seem to have been avoided for now .
The Federal Reserve's recent meeting saw Chair Powell confirm interest rates are holding steady between 5.25% and 5.50% The market's now leaning towards just two rate cuts this year , possibly starting in September , a step back from earlier , more optimistic projections .

(01:34):
There's even some talk of potential stagflation , which is something we're keeping a close eye on .
Positive economic data from China offered a small global lift , but concerns about US trade tariffs loom large , threatening higher inflation and potentially slowing down our labor market .
We've also seen some companyspecific news , like the cyberattack targeting insurance giant Aflac .

(02:00):
Looking at the broader economy , US real GDP dipped slightly in the first quarter of 2025 .
While inflation eased a bit in April , the Fed has actually raised its inflation forecast , and folks are expecting prices to keep climbing long term .
The labor market is showing signs of cooling , with job growth projected to decelerate significantly this year .

Now , for some company highlights (02:24):
Kroger led the S&P 500 gainers today after reporting strongerthanexpected firstquarter profit and sales .
CarMax also had some good news with increased earnings and used car sales .
Looking ahead , next week brings Global flash PMIs and PCE data , plus Fed Chair Powell's testimony before Congress .

(02:46):
So , what does all this mean for your portfolio ?
Well , the market's definitely on a cautious footing .
Inflation is proving to be pretty sticky , and the Fed's stance of ' higher for longer ' on interest rates really puts pressure on growth stocks .
Geopolitical uncertainty adds to the shortterm volatility , and the slight dip in GDP , along with forecasts for slower job growth and consumer spending , suggests our economy might be hitting a bit of a ' stall speed .

(03:15):
' Plus , those tariffs are a real concern , potentially hurting both your wallet and company profits .
We're also seeing a clear shift in investor preference towards more stable , valueoriented companies .

So , my concrete recommendations for you , the savvy Spy Trader , are these (03:29):
First , Favor Quality and Value .
In this environment , companies with strong balance sheets , consistent earnings , and reasonable valuations are your friends .
Think about sectors like Industrials and Utilities ; they've been strong performers yeartodate for a reason .

(03:51):
Look into established industrial players , stable utility providers , or even certain healthcare and consumer staples companies that can pass on costs .
Second , Be Cautious with Highly Valued Growth Stocks , but Monitor for Opportunities .
High interest rates can hit growth stocks hard , but the longterm innovation , especially in AI , is still a powerful force .

(04:16):
So , avoid the super speculative stuff , but if you see a pullback in established , profitable tech giants with strong cash flow , that might be a chance to dollarcost average into them or diversified tech ETFs .
Third , Diversify Geographically .
Don't put all your eggs in the US basket .
International developed and emerging markets have shown strong performance this year , partly due to factors like fiscal stimulus in Europe and strong Chinese tech .

(04:46):
Broad international equity ETFs could be a good play here .
Fourth , Monitor Macroeconomic Data and Fed Commentary Closely .
The Fed's every move is crucial .
Any surprises in inflation data or their outlook could cause big market swings .
So , pay attention to those upcoming PCE numbers and Chair Powell's testimony .

(05:07):
Finally , Maintain Liquidity and Rebalance Periodically .
Keep some cash on hand for emergencies or for those moments when the market throws us a sale .
And make sure you're regularly rebalancing your portfolio .
It helps keep your investments aligned with your risk tolerance , especially when the market gets choppy .
This US market is definitely complex right now , balancing economic resilience with inflation and geopolitical jitters .

(05:35):
So , stay smart , stay strategic , and keep those eyes on the prize .
That's all for this episode of Spy Trader .
I'm Chip Dip , and I'll catch you next time !