The Great Sector Swap: Capital Shifts to Value

Fresh news and strategies for traders. SPY Trader episode #1425. The end of the federal shutdown and Fed rate cuts fuel a rotation rally, driving the Dow higher while the Nasdaq dips. We break down the massive shift from highflying tech into Financials and Health Care, and outline a strategy using SPY, XLF, and targeted growth (AMD) to capitalize on the divergence.

Episode Transcript

(00:00):
Welcome back to Spy Trader , the podcast where we cut through the noise and figure out exactly how to position our portfolios for the day ahead .
It's 5 am on Thursday , November 13th , 2025 , Pacific time , and I'm your host , Penny Stockman .
We've got a tricky market this morning , folks .

(00:20):
While the macro news is overwhelmingly positive , we are seeing a major rotation under the hood .
The market is mixed but moving , with the Dow hitting an alltime high , but the techheavy Nasdaq is looking a little wobbly .
We need a targeted strategy today , so let's jump into the headlines .

First , the good news driving overall optimism (00:40):
the U.S.
federal government shutdown , which lasted a painful 43 days , is finally resolved .
This massive uncertainty overhang is gone , fueling the bullish sentiment we see in industrial and value stocks .
Further supporting this optimism , the Federal Reserve recently cut interest rates by 25 basis points , placing the benchmark rate between 3.75% and 4.0% .

(01:10):
This confirms we are in an easing cycle , which is generally fantastic news for both stocks and bonds .
However , the indices tell a story of divergence .
The Dow Jones Industrial Average is up a healthy 0.68% , showing strength in those blue chips .
But look at the Nasdaq Composite , which is down 0.26% .

(01:33):
The S&P 500 is caught in the middle , barely flat at plus 0.06% .
This tells us that investors are actively shifting capital .
On the earnings front , we saw huge disparity .
Advanced Micro Devices , AMD , was the major winner , surging 9.00% after projecting a stunning 80% annual growth rate for its AI data center business over the next three to five years .

(02:01):
Cisco Systems , CSCO , also raised its profit and revenue forecasts , sending its premarket trading up nearly 7% .
But not everyone is happy .
The Walt Disney Co.
, DIS , shares fell 3% after reporting worsethanexpected revenue , suggesting persistent concerns about consumer spending , especially after the recent shutdown .

(02:27):
So , what's driving the market's behavior ?
It's all about rotation and valuation .
Investors are taking profits in the highflying tech sector , where valuations are stretched , and moving into cyclical and defensive value stocks .
We see this clearly in sector performance .
Financials , tracked by the XLF ETF , are strong , up 0.91% .

(02:49):
Health Care , XLV , is even stronger , up 1.40% .
These sectors benefit immediately from the return of economic certainty and reduced geopolitical uncertainty , such as the new temporary trade truce with China .
Technology , despite the strong YTD gains , is dealing with volatility due to those valuation concerns , hence the Nasdaq's dip .

(03:16):
We also see weakness in Energy , down 1.42% , and Consumer Discretionary , down 0.70% , confirming caution on consumer health .
In terms of bonds , with the Fed easing , fixed income looks attractive as a diversifier .
The iShares Core U.S.
Aggregate Bond ETF , AGG , currently boasts a competitive 30day SEC Yield of 4.14% .

(03:45):
This is a crucial hedge .
Now , let's talk strategy .
Given the simultaneous relief rally in cyclicals and profittaking in tech , our approach must be balanced .
First , for your core exposure , we recommend overweighting the broader market .
Stick with the SPDR S&P 500 ETF Trust , SPY .

(04:07):
SPY captures the rotation into value and benefits most directly from the end of the shutdown and the Fed easing cycle .
Hedge funds have been increasing their holdings , signaling institutional confidence .
Second , tactically overweight cyclical sectors .
The clear winner here is Financials .
Initiate or increase your position in the Financial Select Sector SPDR Fund , XLF .

(04:33):
Financials are leading the Dow's surge , have strong fundamentals from Q3 earnings , and have moderate valuations compared to Big Tech .
Third , be highly selective in growth .
Skip the broad tech index for now .
Instead , focus on highconviction names like Advanced Micro Devices , AMD .

(04:54):
Its projected 80% growth rate in AI data centers provides the specific , concrete catalyst you want when the broader tech sector is selling off .
Keep a position in QQQ , but don't add new capital just yet .
Finally , for risk management , maintain a core allocation to investmentgrade bonds .

(05:14):
Use the iShares Core U.S.
Aggregate Bond ETF , AGG .
With the Fed easing , its 4.14% yield offers excellent income and stability as a critical portfolio hedge .
That’s all the time we have for this edition of Spy Trader .
Stay selective , stay disciplined , and happy trading .