September 1, 2025 • 9 mins
Fresh news and strategies for traders. SPY Trader episode #1355.
As September begins, the market faces historical headwinds and mixed economic signals despite a strong August rally. While Q2 GDP grew robustly, persistent inflation and a softening labor market create uncertainty. The Fed is anticipated to cut rates, but high valuations, especially in tech, and geopolitical risks add volatility. The episode advises a balanced, defensive approach with selective growth exposure, highlighting specific ETFs for broad market, growth, defensive, fixed income, and commodity plays to navigate these complex conditions.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hey everyone , it's 6 am on Monday , September 1st , 2025 , Pacific Time , and you're tuned into Spy Trader with your host , Market Maverick Mike !
I hope you all had a fantastic Labor Day weekend .
We're kicking off September with a deep dive into the markets , fresh off a robust August rally but now facing some classic historical headwinds and a real mix of economic signals .
(00:24):
Let's get right into it , shall we ?
First up , a quick summary of what's been happening .
Last Friday , August 29th , the US equity indices closed lower , with the Dow down 0.20% , the S&P 500 easing 0.64% , and the Nasdaq Composite dropping 1.15% .
(00:46):
This came after a truly stellar August where the S&P 500 actually broke above 6,500 to hit new record highs , boasting a yeartodate gain of nearly 10% and a 30% rally since its April lows .
But now , we're entering September , which , historically , is the weakest month for US stocks .
(01:07):
Over the last five years , the S&P 500 has , on average , declined by 4.2% in September .
So , that's something to keep in mind .
On the macroeconomic front , the US economy showed a strong rebound in Q2 2025 , growing at an annualized rate of 3.3% , which sounds great , but some economists are calling it a bit of a ' mirage , ' attributing it more to a sharp decline in imports rather than roaring consumer demand .
(01:41):
Inflation remains a sticky wicket , staying above the Federal Reserve's 2% target , with the annual rate at 2.7% through July and August nowcasts hovering closer to 2.86% and 3.02% for headline and core CPI .
The Fed has kept rates steady since December , but there's a strong anticipation of a 25basispoint rate cut at the September 17th meeting , with probabilities as high as 88% .
(02:11):
This is largely due to weak July jobs data and a more dovish tone from Fed Chair Jerome Powell .
However , some , like Morgan Stanley , are skeptical given that persistent inflation and betterthanexpected GDP growth .
Our labor market , while stable at 4.2% unemployment in August , is showing signs of softening , with monthly job gains slowing considerably .
(02:38):
Consumer sentiment also took a hit in August , down 5.7% from July , with high prices being the main culprit eroding living standards .
Moving to specific sectors , the third quarter has seen some diverse action .
Financial Services , Energy , Consumer Discretionary , Technology software and cloud services , and Healthcare biotechnology and medical devices were identified as having compelling investment opportunities .
(03:07):
Energy was the strongest performer in late August , while Utilities lagged .
Aerospace & Defense has also flown high , outperforming the broad market by 17% yeartodate .
In the news , the ' AI boom ' continues to drive tech , but with increasing volatility .
Alibaba surged on AI product revenue , but Nvidia saw its stock dip after tempering guidance on China due to US export curbs .
(03:35):
Companies like Marvell and Dell warned about rising AI hardware costs , sending their shares lower .
Palantir also plunged nearly 10% in late August , showing that AI growth is heavily priced in .
Political and trade uncertainties are also adding to market jitters , with President Trump's attempt to remove Federal Reserve Governor Lisa Cook and ongoing USChina trade disputes creating some headwinds .
(04:03):
Broadcom and Salesforce are on deck to report earnings this week , with investors closely watching their AI offerings .
So , what does all this mean for us , the savvy Spy Traders ?
Well , the US stock market is at a crossroads , balancing that strong Q2 economic growth and potential Fed rate cuts against persistent inflation , a softening labor market , high valuations , and geopolitical uncertainties .
(04:31):
The robust Q2 GDP growth , as I mentioned , is tempered by concerns about its true drivers , and we expect a slowdown in the second half of 2025 .
Inflation remains stubborn , yet the Fed is eyeing a rate cut due to labor market softening .
This creates a really volatile environment where sentiment can swing rapidly .
(04:54):
The AI narrative has driven significant gains , especially in tech , but recent earnings and guidance from Nvidia , Marvell , and Dell show that those skyhigh expectations are leading to considerable volatility .
Future growth needs to be substantial to justify current valuations , folks .
And let's not forget that ' September Effect ' and elevated valuations , with the S&P 500's cyclically adjusted pricetoearnings ratio at 37.9 .
(05:25):
This suggests a period of potential correction or increased caution .
In an environment of economic uncertainty , persistent inflation , and geopolitical risks , sectors with stable earnings , pricing power , and less economic sensitivity tend to perform well .
And with the Fed potentially initiating rate cuts , bond yields could decline , increasing bond prices .
(05:48):
Given all this , a balanced approach with a defensive tilt and selective exposure to growth , while managing risk , seems prudent .
So , here are my concrete recommendations for you .
For broad market exposure with a cautious eye , consider core holdings like the SPDR S&P 500 ETF Trust , ticker SPY , the iShares CORE S&P 500 ETF , ticker IVV , or the Vanguard S&P 500 ETF , ticker VOO .
(06:17):
These offer diversified exposure , but remember those high valuations and the ' September Effect .
' Dollarcost averaging can help mitigate risk during potential volatility .
For even wider exposure across large , mid , and smallcap stocks , the Vanguard Total Stock Market ETF , VTI , is a great option .
(06:38):
For targeted growth , but with caution , the Invesco QQQ Trust , ticker QQQ , tracks the Nasdaq100 , heavily focused on technology .
While August saw strong tech performance , that recent ' AI stock whiplash ' suggests increased volatility .
If you're keen on tech , be highly selective or use QQQ for diversified exposure to the sector's longterm growth potential .
(07:05):
The Technology Select Sector SPDR Fund , XLK , also provides concentrated exposure to S&P 500 technology companies , but again , exercise caution regarding AI valuations .
Now , for defensive and value plays , the Health Care Select Sector SPDR Fund , XLV , is traditionally a defensive sector with stable demand and earnings , often performing well during slowdowns .
(07:33):
It's recently moved into undervalued territory .
The Utilities Select Sector SPDR Fund , XLU , offers strong growth prospects , defensive characteristics , and stable earnings , making it attractive for managing downside risks .
The SPDR S&P Insurance ETF , KIE , provides strong pricing power and stable earnings , hedging against slowdowns and inflation .
(08:00):
And the SPDR S&P Aerospace & Defense ETF , XAR , benefits from increased defense spending and has outperformed the market .
While there's a risk of pullback after recent gains , its relative valuations still suggest potential .
For fixed income exposure and stability , consider the iShares Core U.S.
(08:22):
Aggregate Bond ETF , AGG , or the Vanguard Total Bond Market ETF , BND .
With the Fed signaling potential rate cuts , bond yields may decline , and bond prices could appreciate , offering stability and income .
If the Fed makes more aggressive cuts due to a significant economic slowdown , the iShares 20 Year Treasury Bond ETF , TLT , which holds longerduration bonds , could see greater price appreciation , but this is a more aggressive bond play .
(08:55):
And finally , for commodity diversification and an inflation hedge , SPDR Gold Shares , GLD .
Gold acts as a safehaven asset during market uncertainty and a hedge against persistent inflation , which is still above the Fed's target .
A weaker US dollar , driven by rate cut expectations , could also give gold an additional boost .
(09:18):
In conclusion , while August was a good time for equity markets , September historically presents challenges , and current market valuations are elevated .
So , proceed with caution , consider defensive sectors , and maintain diversification .
The upcoming Fed meeting and jobs report will be absolutely crucial in shaping shortterm market direction .
(09:40):
That's all for today , folks .
Thanks for tuning into Spy Trader .
I'm Market Maverick Mike , and I'll catch you next time !
Hey everyone , it's 6 am on Monday , September 1st , 2025 , Pacific Time , and you're tuned into Spy Trader with your host , Market Maverick Mike !
I hope you all had a fantastic Labor Day weekend .
We're kicking off September with a deep dive into the markets , fresh off a robust August rally but now facing some classic historical headwinds and a real mix of economic signals .
(00:24):
Let's get right into it , shall we ?
First up , a quick summary of what's been happening .
Last Friday , August 29th , the US equity indices closed lower , with the Dow down 0.20% , the S&P 500 easing 0.64% , and the Nasdaq Composite dropping 1.15% .
(00:46):
This came after a truly stellar August where the S&P 500 actually broke above 6,500 to hit new record highs , boasting a yeartodate gain of nearly 10% and a 30% rally since its April lows .
But now , we're entering September , which , historically , is the weakest month for US stocks .
(01:07):
Over the last five years , the S&P 500 has , on average , declined by 4.2% in September .
So , that's something to keep in mind .
On the macroeconomic front , the US economy showed a strong rebound in Q2 2025 , growing at an annualized rate of 3.3% , which sounds great , but some economists are calling it a bit of a ' mirage , ' attributing it more to a sharp decline in imports rather than roaring consumer demand .
(01:41):
Inflation remains a sticky wicket , staying above the Federal Reserve's 2% target , with the annual rate at 2.7% through July and August nowcasts hovering closer to 2.86% and 3.02% for headline and core CPI .
The Fed has kept rates steady since December , but there's a strong anticipation of a 25basispoint rate cut at the September 17th meeting , with probabilities as high as 88% .
(02:11):
This is largely due to weak July jobs data and a more dovish tone from Fed Chair Jerome Powell .
However , some , like Morgan Stanley , are skeptical given that persistent inflation and betterthanexpected GDP growth .
Our labor market , while stable at 4.2% unemployment in August , is showing signs of softening , with monthly job gains slowing considerably .
(02:38):
Consumer sentiment also took a hit in August , down 5.7% from July , with high prices being the main culprit eroding living standards .
Moving to specific sectors , the third quarter has seen some diverse action .
Financial Services , Energy , Consumer Discretionary , Technology software and cloud services , and Healthcare biotechnology and medical devices were identified as having compelling investment opportunities .
(03:07):
Energy was the strongest performer in late August , while Utilities lagged .
Aerospace & Defense has also flown high , outperforming the broad market by 17% yeartodate .
In the news , the ' AI boom ' continues to drive tech , but with increasing volatility .
Alibaba surged on AI product revenue , but Nvidia saw its stock dip after tempering guidance on China due to US export curbs .
(03:35):
Companies like Marvell and Dell warned about rising AI hardware costs , sending their shares lower .
Palantir also plunged nearly 10% in late August , showing that AI growth is heavily priced in .
Political and trade uncertainties are also adding to market jitters , with President Trump's attempt to remove Federal Reserve Governor Lisa Cook and ongoing USChina trade disputes creating some headwinds .
(04:03):
Broadcom and Salesforce are on deck to report earnings this week , with investors closely watching their AI offerings .
So , what does all this mean for us , the savvy Spy Traders ?
Well , the US stock market is at a crossroads , balancing that strong Q2 economic growth and potential Fed rate cuts against persistent inflation , a softening labor market , high valuations , and geopolitical uncertainties .
(04:31):
The robust Q2 GDP growth , as I mentioned , is tempered by concerns about its true drivers , and we expect a slowdown in the second half of 2025 .
Inflation remains stubborn , yet the Fed is eyeing a rate cut due to labor market softening .
This creates a really volatile environment where sentiment can swing rapidly .
(04:54):
The AI narrative has driven significant gains , especially in tech , but recent earnings and guidance from Nvidia , Marvell , and Dell show that those skyhigh expectations are leading to considerable volatility .
Future growth needs to be substantial to justify current valuations , folks .
And let's not forget that ' September Effect ' and elevated valuations , with the S&P 500's cyclically adjusted pricetoearnings ratio at 37.9 .
(05:25):
This suggests a period of potential correction or increased caution .
In an environment of economic uncertainty , persistent inflation , and geopolitical risks , sectors with stable earnings , pricing power , and less economic sensitivity tend to perform well .
And with the Fed potentially initiating rate cuts , bond yields could decline , increasing bond prices .
(05:48):
Given all this , a balanced approach with a defensive tilt and selective exposure to growth , while managing risk , seems prudent .
So , here are my concrete recommendations for you .
For broad market exposure with a cautious eye , consider core holdings like the SPDR S&P 500 ETF Trust , ticker SPY , the iShares CORE S&P 500 ETF , ticker IVV , or the Vanguard S&P 500 ETF , ticker VOO .
(06:17):
These offer diversified exposure , but remember those high valuations and the ' September Effect .
' Dollarcost averaging can help mitigate risk during potential volatility .
For even wider exposure across large , mid , and smallcap stocks , the Vanguard Total Stock Market ETF , VTI , is a great option .
(06:38):
For targeted growth , but with caution , the Invesco QQQ Trust , ticker QQQ , tracks the Nasdaq100 , heavily focused on technology .
While August saw strong tech performance , that recent ' AI stock whiplash ' suggests increased volatility .
If you're keen on tech , be highly selective or use QQQ for diversified exposure to the sector's longterm growth potential .
(07:05):
The Technology Select Sector SPDR Fund , XLK , also provides concentrated exposure to S&P 500 technology companies , but again , exercise caution regarding AI valuations .
Now , for defensive and value plays , the Health Care Select Sector SPDR Fund , XLV , is traditionally a defensive sector with stable demand and earnings , often performing well during slowdowns .
(07:33):
It's recently moved into undervalued territory .
The Utilities Select Sector SPDR Fund , XLU , offers strong growth prospects , defensive characteristics , and stable earnings , making it attractive for managing downside risks .
The SPDR S&P Insurance ETF , KIE , provides strong pricing power and stable earnings , hedging against slowdowns and inflation .
(08:00):
And the SPDR S&P Aerospace & Defense ETF , XAR , benefits from increased defense spending and has outperformed the market .
While there's a risk of pullback after recent gains , its relative valuations still suggest potential .
For fixed income exposure and stability , consider the iShares Core U.S.
(08:22):
Aggregate Bond ETF , AGG , or the Vanguard Total Bond Market ETF , BND .
With the Fed signaling potential rate cuts , bond yields may decline , and bond prices could appreciate , offering stability and income .
If the Fed makes more aggressive cuts due to a significant economic slowdown , the iShares 20 Year Treasury Bond ETF , TLT , which holds longerduration bonds , could see greater price appreciation , but this is a more aggressive bond play .
(08:55):
And finally , for commodity diversification and an inflation hedge , SPDR Gold Shares , GLD .
Gold acts as a safehaven asset during market uncertainty and a hedge against persistent inflation , which is still above the Fed's target .
A weaker US dollar , driven by rate cut expectations , could also give gold an additional boost .
(09:18):
In conclusion , while August was a good time for equity markets , September historically presents challenges , and current market valuations are elevated .
So , proceed with caution , consider defensive sectors , and maintain diversification .
The upcoming Fed meeting and jobs report will be absolutely crucial in shaping shortterm market direction .
(09:40):
That's all for today , folks .
Thanks for tuning into Spy Trader .
I'm Market Maverick Mike , and I'll catch you next time !
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