Pricing In The Cut: How To Trade A Fed Pivot

Fresh news and strategies for traders. SPY Trader episode #1450. Markets begin the week with massive optimism, pricing in an 88% chance of a 25 basis point Federal Reserve rate cut, supported by soft inflation and a cooling labor market. This 'cheaper money' anticipation continues to fuel a Kshaped rally, led by Tech and Communication Services. We detail key earnings movers like Salesforce and Meta, and discuss regulatory headwinds facing Netflix/WBD. Strategy focuses on tactical growth, overweighting Communication Services (XLC) and selective Industrials, while employing a barbell approach (Growth/Bonds) to manage risk. Avoid interestrate sensitive laggards like Real Estate (VNQ) and Utilities (XLU).

Episode Transcript

(00:00):
Welcome back to Spy Trader , the podcast that decodes the market before your first cup of coffee .
I'm your host , Barry Bullish , and it's 5 am on Monday , December 8th , 2025 , Pacific .
We are starting the week in a state of elevated optimism , fueled almost entirely by the prospect of cheaper money .

(00:23):
All major indices wrapped up the previous week with strong gains , with the S&P 500 now up approximately seventeen percent yeartodate and the Nasdaq Composite leading the charge , up about twentytwo percent .
The big story driving this buoyancy is the Federal Reserve .
The market is pricing in an approximately eightyeight percent chance that the Fed will cut interest rates by twentyfive basis points in its meeting this week .

(00:51):
This is largely supported by recent data showing the Core PCE , the Fed’s preferred inflation gauge , coming in soft at point two percent monthovermonth , and a visibly cooling labor market , which saw the largest monthly drop in private payrolls since March 2023 .
These weakening signs are paradoxically great news for equity investors hoping for monetary easing .

(01:15):
On the company front , the AI theme remains dominant .
Analysts are still crowning NVIDIA the ' AI hardware king , ' raising price targets on sustained bullishness .
We also saw Salesforce jump over five percent on strong earnings results , signaling continued strength in enterprise software spending .

(01:36):
Meanwhile , Meta Platforms gained ground after reporting cost cuts in its capitalintensive metaverse division , suggesting a focus on operational efficiency .

However , there was a hiccup (01:48):
Netflix fell nearly three percent following reports of heavy skepticism from the Trump administration regarding regulatory approval for its massive seventytwo billion dollar deal for Warner Bros Discovery .
Now , let’s talk strategy .
This rally has been incredibly concentrated , following a Kshaped pattern .

(02:09):
The leaders are Information Technology , up twentysix point four percent , and Communication Services , up twenty point four percent .
Industrials are also performing well , rated Outperform as they benefit from government infrastructure spending .
On the other end of the Kshape , we have the laggards .
Real Estate is highly interestrate sensitive and rated Underperform , barely up one point seven percent yeartodate .

(02:36):
Consumer Staples are also lagging , rated Marketperform , facing sticky inflation and limited growth upside in this riskon environment .
Given the heavy anticipation of a Fed cut , our trading recommendations lean toward tactical growth and selective cyclicals .
First , capitalize on those rate cut hopes .

(02:56):
We recommend maintaining a core position in broad market funds like Vanguard S&P 500 ETF , VOO , but tactically overweighting the Communication Services Select Sector SPDR Fund , XLC , which is rated Outperform , featuring giants like Meta .
Also look for highquality industrials like Caterpillar or Deere .

(03:19):
Second , employ a barbell strategy .
Keep your exposure to the primary growth engine of the market through the Invesco QQQ Trust , which is heavily tech focused , and specifically maintain a position in NVIDIA .
To balance the high valuation risk , use the expected rate cuts to enter the bond market for diversification .

(03:41):
Initiate or increase positions in broad bond ETFs like the iShares Core U.S.
Aggregate Bond ETF , AGG .
Finally , know what to avoid .
We recommend underweighting sectors facing structural and interest rate headwinds , specifically the Vanguard Real Estate ETF , VNQ , and the Utilities Select Sector SPDR ETF , XLU , both of which are rated Underperform .

(04:06):
That's your fiveminute market briefing .
Stay sharp and trade smart .