September 19, 2025 • 10 mins
Fresh news and strategies for traders. SPY Trader episode #1370.
The U.S. stock market is reaching alltime highs, driven by tech and smallcap strength, coinciding with the Federal Reserve's first rate cut of the year. While bullish momentum is strong, concerns persist regarding elevated inflation, a cooling labor market, and a 'stagflation lite' economic outlook. The episode offers strategic investment recommendations, including capitalizing on growth tech, exploring small caps and financials, and diversifying with fixed income and international equities, advocating for a cautious yet opportunistic approach.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hello , Spy Trader listeners !
It's 6 am on Friday , September 19th , 2025 , Pacific time , and I'm your host , Penny Stocker , here to give you the lowdown on what's moving the markets .
Grab your coffee , because we've got a lot to cover as we navigate this exciting , yet complex , financial landscape .
First up , let's dive into the headlines .
(00:22):
The U.S.
stock market is absolutely buzzing , riding a wave of bullish momentum .
We saw the S&P 500 , Nasdaq Composite , and Dow Jones Industrial Average all hit fresh alltime closing highs yesterday , Thursday , September 18th .
The S&P 500 , for instance , closed at an impressive 6,631.96 points , marking its 25th record high this year , and it's up 12% yeartodate !
(00:54):
Even smaller capitalization stocks are joining the party , with the Russell 2000 index gaining 2.5% to reach an alltime high , its first since 2021 .
So , a broad market rally across the board , folks !
Diving into sector performance , technology continues to be the star player , driving much of this growth .
(01:15):
We're seeing strong contributions from semiconductor firms , both in the broader market and within small caps .
Companies like NVIDIA , NVDA , are still dominating the AI chip market , with demand from data centers and AI startups fueling record sales .
Earnings expectations for Q3 are particularly strong for tech , with anticipated growth of nearly 12% in both earnings and revenues .
(01:43):
The Financial sector is also showing some promising momentum , with projected Q3 growth of over 7% , beating initial expectations .
This week's big news came from the Federal Reserve , which on September 17th , decided to lower its benchmark interest rate by 0.25 percentage points .
(02:05):
This is the first cut of the year , bringing the federal funds rate to a target range of 4% to 4.25% .
The Fed's dot plot suggests we might see at least another halfpoint of cuts by yearend , meaning two more quarterpoint reductions .
On the corporate side , Q3 earnings season is just around the corner , and we're eagerly awaiting results from tech giants like Apple , AAPL , Microsoft , MSFT , and NVIDIA , NVDA , which are all expected to deliver strong quarters .
(02:38):
Financial heavyweights like JPMorgan Chase , JPM , and Goldman Sachs , GS , will also give us key insights .
In a significant company event , Intel's stock surged by 22.8% yesterday after Nvidia announced a huge 5 billion dollar investment in the chipmaker for data centers and personal computers .
(02:59):
That's a partnership to watch !
And good news for Ionis Pharmaceuticals , IONS , which received EU approval for its drug TRYNGOLZA for a rare genetic condition .
Now , let's put on our analyst hats and dig into what all this means for you , our savvy traders .
The macroeconomic picture right now is a bit of a mixed bag , which calls for careful consideration .
(03:23):
While the stock market is celebrating record highs and a Fed rate cut , we're seeing some underlying currents that suggest cautious optimism is key .
Inflation , for instance , is still a bit sticky .
The Consumer Price Index rose 0.4% in August , bringing the 12month increase to 2.9% , with core inflation steady at 3.1% .
(03:47):
That's still above the Fed's 2% target , even with their preferred PCE inflation gauge forecast around 3% for 2025 .
And then there's the labor market .
It's showing signs of cooling down , with only 22,000 jobs added in August , and the unemployment rate rising to 4.3% , its highest since 2021 .
(04:10):
Longterm unemployment has also surged .
This is all happening while real GDP growth for 2025 is projected at a moderate 1.6% .
RBC Chief Economist Frances Donald describes the U.S.
economy as being in a ' stagflation lite ' phase , meaning growth is a bit below , and inflation a bit above , comfortable levels .
(04:32):
We also see a deepening ' Kshaped ' economic segmentation , where highincome households are doing great , but lowerincome households are feeling the squeeze .
Plus , those tariffs from the previous administration are still slowly pushing prices up .
All this means we're in a market characterized by a powerful equity rally , especially in tech , fueled by AI optimism and the Fed's recent dovish pivot .
(04:58):
But , high valuations and a weakening labor market suggest we need a strategic and diversified approach .
So , let's get to the good stuff (05:04):
concrete recommendations for your portfolio !
First , capitalize on growth and innovation , but keep an eye on valuation .
The technology sector , especially anything related to Artificial Intelligence , remains a powerhouse and is expected to drive earnings growth .
(05:24):
While valuations are indeed high — the S&P 500 is trading at 22.5 times forward earnings compared to its 10year average of 18.5 times — the underlying trends of innovation are incredibly strong .
My recommendation (05:40):
Maintain exposure to growth and technology .
Consider ETFs like the Invesco QQQ Trust ( QQQ ) for concentrated exposure to the Nasdaq100 , which is packed with tech .
For broader tech exposure , the Technology Select Sector SPDR Fund ( XLK ) is a great choice .
(06:02):
As a specific stock example , NVIDIA ( NVDA ) continues its strong run due to its dominance in AI chips .
Keep its longterm growth potential in mind , but also be aware of its current high valuation .
Microsoft ( MSFT ) is another strong contender with consistent cloud growth and AI integration .
(06:23):
Next , explore opportunities in smallcap stocks .
Smallcap stocks have recently outperformed larger companies in Q3 , particularly smallgrowth stocks .
This segment can really benefit from falling interest rates and a potentially reaccelerating economy .
For diversified exposure , consider a smallcap ETF .
(06:46):
The iShares Russell 2000 Growth ETF ( IWO ) could be a suitable option for smallgrowth companies , or for broader smallcap exposure , the iShares Russell 2000 ETF ( IWM ) is appropriate .
For specific stock examples , keep an eye on companies like Astera Labs ( ALAB ) and Credo Technology ( CRDO ) in the semiconductor space , which have been big contributors to smallcap gains .
(07:13):
Third , position for potential financial sector strength .
The Financial sector is showing positive earnings momentum and could benefit from further rate cuts , especially if they lead to a steeper yield curve , which is generally good for bank profitability .
Consider the Financial Select Sector SPDR Fund ( XLF ) for targeted exposure to large U.S.
(07:37):
financial companies .
For specific stock examples , JPMorgan Chase ( JPM ) and Goldman Sachs ( GS ) are bellwethers .
Their earnings reports provide crucial insights into the health of the U.S.
economy .
Fourth , exercise caution and diversify with fixed income .
Even with recent rate cuts , inflation remains a bit elevated , and the labor market is softening .
(08:02):
This ' stagflation lite' scenario , coupled with high equity valuations , means a degree of caution is warranted .
Maintain a diversified portfolio .
For stability and income , fixedincome ETFs are valuable .
Given the current interest rate environment , bond yields may gradually trend lower , but they are still attractive historically .
(08:26):
The iShares Core U.S.
Aggregate Bond ETF ( AGG ) or Vanguard Total Bond Market ETF ( BND ) offer broad exposure to investmentgrade bonds , providing a hedge against equity volatility and a source of income .
Consider allocating a portion to AGG to help dampen overall portfolio volatility .
(08:47):
Finally , consider international diversification .
While the U.S.
economy has outperformed , global diversification can help mitigate risks associated with domestic economic shifts and political factors , like those ongoing tariff discussions .
Incorporate international equity ETFs for geographic diversification .
(09:12):
The Vanguard FTSE Developed Markets ETF ( VEA ) for developed markets and the Vanguard FTSE Emerging Markets ETF ( VWO ) for highergrowth potential in emerging economies are solid choices .
For comprehensive international exposure , the Vanguard Total International Stock ETF ( VXUS ) is an option .
(09:35):
A specific ETF example that has reportedly outperformed is the VictoryShares International Value Momentum ETF ( UIVM ) , suggesting potential if emerging economies continue to grow faster .
To sum it all up , the U.S.
stock market is showing robust performance , mainly thanks to the technology sector and a more dovish Fed .
(09:57):
However , smart investors will stay vigilant regarding those elevated valuations , persistent inflation , and a cooling labor market .
A diversified approach , focusing on quality growth , selective smallcap exposure , and core fixedincome holdings , is your best bet in this dynamic environment .
(10:17):
That's all for this episode of Spy Trader !
I'm Penny Stocker , wishing you smart trades and prosperous investing .
We'll catch you again soon !
Hello , Spy Trader listeners !
It's 6 am on Friday , September 19th , 2025 , Pacific time , and I'm your host , Penny Stocker , here to give you the lowdown on what's moving the markets .
Grab your coffee , because we've got a lot to cover as we navigate this exciting , yet complex , financial landscape .
First up , let's dive into the headlines .
(00:22):
The U.S.
stock market is absolutely buzzing , riding a wave of bullish momentum .
We saw the S&P 500 , Nasdaq Composite , and Dow Jones Industrial Average all hit fresh alltime closing highs yesterday , Thursday , September 18th .
The S&P 500 , for instance , closed at an impressive 6,631.96 points , marking its 25th record high this year , and it's up 12% yeartodate !
(00:54):
Even smaller capitalization stocks are joining the party , with the Russell 2000 index gaining 2.5% to reach an alltime high , its first since 2021 .
So , a broad market rally across the board , folks !
Diving into sector performance , technology continues to be the star player , driving much of this growth .
(01:15):
We're seeing strong contributions from semiconductor firms , both in the broader market and within small caps .
Companies like NVIDIA , NVDA , are still dominating the AI chip market , with demand from data centers and AI startups fueling record sales .
Earnings expectations for Q3 are particularly strong for tech , with anticipated growth of nearly 12% in both earnings and revenues .
(01:43):
The Financial sector is also showing some promising momentum , with projected Q3 growth of over 7% , beating initial expectations .
This week's big news came from the Federal Reserve , which on September 17th , decided to lower its benchmark interest rate by 0.25 percentage points .
(02:05):
This is the first cut of the year , bringing the federal funds rate to a target range of 4% to 4.25% .
The Fed's dot plot suggests we might see at least another halfpoint of cuts by yearend , meaning two more quarterpoint reductions .
On the corporate side , Q3 earnings season is just around the corner , and we're eagerly awaiting results from tech giants like Apple , AAPL , Microsoft , MSFT , and NVIDIA , NVDA , which are all expected to deliver strong quarters .
(02:38):
Financial heavyweights like JPMorgan Chase , JPM , and Goldman Sachs , GS , will also give us key insights .
In a significant company event , Intel's stock surged by 22.8% yesterday after Nvidia announced a huge 5 billion dollar investment in the chipmaker for data centers and personal computers .
(02:59):
That's a partnership to watch !
And good news for Ionis Pharmaceuticals , IONS , which received EU approval for its drug TRYNGOLZA for a rare genetic condition .
Now , let's put on our analyst hats and dig into what all this means for you , our savvy traders .
The macroeconomic picture right now is a bit of a mixed bag , which calls for careful consideration .
(03:23):
While the stock market is celebrating record highs and a Fed rate cut , we're seeing some underlying currents that suggest cautious optimism is key .
Inflation , for instance , is still a bit sticky .
The Consumer Price Index rose 0.4% in August , bringing the 12month increase to 2.9% , with core inflation steady at 3.1% .
(03:47):
That's still above the Fed's 2% target , even with their preferred PCE inflation gauge forecast around 3% for 2025 .
And then there's the labor market .
It's showing signs of cooling down , with only 22,000 jobs added in August , and the unemployment rate rising to 4.3% , its highest since 2021 .
(04:10):
Longterm unemployment has also surged .
This is all happening while real GDP growth for 2025 is projected at a moderate 1.6% .
RBC Chief Economist Frances Donald describes the U.S.
economy as being in a ' stagflation lite ' phase , meaning growth is a bit below , and inflation a bit above , comfortable levels .
(04:32):
We also see a deepening ' Kshaped ' economic segmentation , where highincome households are doing great , but lowerincome households are feeling the squeeze .
Plus , those tariffs from the previous administration are still slowly pushing prices up .
All this means we're in a market characterized by a powerful equity rally , especially in tech , fueled by AI optimism and the Fed's recent dovish pivot .
(04:58):
But , high valuations and a weakening labor market suggest we need a strategic and diversified approach .
So , let's get to the good stuff (05:04):
concrete recommendations for your portfolio !
First , capitalize on growth and innovation , but keep an eye on valuation .
The technology sector , especially anything related to Artificial Intelligence , remains a powerhouse and is expected to drive earnings growth .
(05:24):
While valuations are indeed high — the S&P 500 is trading at 22.5 times forward earnings compared to its 10year average of 18.5 times — the underlying trends of innovation are incredibly strong .
My recommendation (05:40):
Maintain exposure to growth and technology .
Consider ETFs like the Invesco QQQ Trust ( QQQ ) for concentrated exposure to the Nasdaq100 , which is packed with tech .
For broader tech exposure , the Technology Select Sector SPDR Fund ( XLK ) is a great choice .
(06:02):
As a specific stock example , NVIDIA ( NVDA ) continues its strong run due to its dominance in AI chips .
Keep its longterm growth potential in mind , but also be aware of its current high valuation .
Microsoft ( MSFT ) is another strong contender with consistent cloud growth and AI integration .
(06:23):
Next , explore opportunities in smallcap stocks .
Smallcap stocks have recently outperformed larger companies in Q3 , particularly smallgrowth stocks .
This segment can really benefit from falling interest rates and a potentially reaccelerating economy .
For diversified exposure , consider a smallcap ETF .
(06:46):
The iShares Russell 2000 Growth ETF ( IWO ) could be a suitable option for smallgrowth companies , or for broader smallcap exposure , the iShares Russell 2000 ETF ( IWM ) is appropriate .
For specific stock examples , keep an eye on companies like Astera Labs ( ALAB ) and Credo Technology ( CRDO ) in the semiconductor space , which have been big contributors to smallcap gains .
(07:13):
Third , position for potential financial sector strength .
The Financial sector is showing positive earnings momentum and could benefit from further rate cuts , especially if they lead to a steeper yield curve , which is generally good for bank profitability .
Consider the Financial Select Sector SPDR Fund ( XLF ) for targeted exposure to large U.S.
(07:37):
financial companies .
For specific stock examples , JPMorgan Chase ( JPM ) and Goldman Sachs ( GS ) are bellwethers .
Their earnings reports provide crucial insights into the health of the U.S.
economy .
Fourth , exercise caution and diversify with fixed income .
Even with recent rate cuts , inflation remains a bit elevated , and the labor market is softening .
(08:02):
This ' stagflation lite' scenario , coupled with high equity valuations , means a degree of caution is warranted .
Maintain a diversified portfolio .
For stability and income , fixedincome ETFs are valuable .
Given the current interest rate environment , bond yields may gradually trend lower , but they are still attractive historically .
(08:26):
The iShares Core U.S.
Aggregate Bond ETF ( AGG ) or Vanguard Total Bond Market ETF ( BND ) offer broad exposure to investmentgrade bonds , providing a hedge against equity volatility and a source of income .
Consider allocating a portion to AGG to help dampen overall portfolio volatility .
(08:47):
Finally , consider international diversification .
While the U.S.
economy has outperformed , global diversification can help mitigate risks associated with domestic economic shifts and political factors , like those ongoing tariff discussions .
Incorporate international equity ETFs for geographic diversification .
(09:12):
The Vanguard FTSE Developed Markets ETF ( VEA ) for developed markets and the Vanguard FTSE Emerging Markets ETF ( VWO ) for highergrowth potential in emerging economies are solid choices .
For comprehensive international exposure , the Vanguard Total International Stock ETF ( VXUS ) is an option .
(09:35):
A specific ETF example that has reportedly outperformed is the VictoryShares International Value Momentum ETF ( UIVM ) , suggesting potential if emerging economies continue to grow faster .
To sum it all up , the U.S.
stock market is showing robust performance , mainly thanks to the technology sector and a more dovish Fed .
(09:57):
However , smart investors will stay vigilant regarding those elevated valuations , persistent inflation , and a cooling labor market .
A diversified approach , focusing on quality growth , selective smallcap exposure , and core fixedincome holdings , is your best bet in this dynamic environment .
(10:17):
That's all for this episode of Spy Trader !
I'm Penny Stocker , wishing you smart trades and prosperous investing .
We'll catch you again soon !
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