The Q4 Showdown: Powell vs. The Magnificent Seven

Fresh news and strategies for traders. SPY Trader episode #1407. The market faces its most volatile week of Q4, driven by the Federal Reserve's rate decision and crucial Q3 earnings from tech giants like Microsoft, Alphabet, and Apple. We analyze the highstakes macroeconomic calendar and provide a trade strategy: OVERWEIGHT growth stocks balanced by a defensive bond duration hedge.

Episode Transcript

(00:00):
Welcome back to Spy Trader , the only podcast that gives you the rundown before the big runup .
I'm your host , Barry Bullish , and it's 6 am on Sunday , October 26th , 2025 , Pacific time , meaning we have just hours left before the market opens and the true fireworks begin .
If you're looking for stability , this might not be the week for you .

The upcoming trading period , October 27th through the 31st , is set to be dominated by two major , highimpact events (00:24):
the Federal Reserve’s interest rate decision and the biggest earnings deluge of the year from the ' Magnificent Seven' tech giants .
The overall market outlook is Cautiously Bullish , but we must brace ourselves for extreme volatility , especially in growth sectors , as major indices like the S&P 500 , tracked by SPY , are trading at record highs , meaning expectations are already skyhigh .

(01:00):
The macroeconomic calendar starts midweek .
On Wednesday , October 29th , the spotlight is entirely on the FOMC meeting .
The consensus is that the Fed will announce a 25 basis point rate cut , bringing the target range down to 3.75 to 4.00 percent .
Crucially , the market has already priced this cut in .

(01:22):
What matters is Fed Chair Powell’s press conference .
We will be scrutinizing his language regarding the future path of cuts and his stance on sticky inflation versus the softening labor market .
A surprisingly less dovish tone could trigger a sharp market pullback .
Adding to the macro picture , we get the advance Q3 GDP estimate on Thursday , expected between 1.5 and 1.9 percent growth , and on Friday , the Core PCE Price Index , the Fed's preferred inflation gauge .

(01:55):
Any substantial drop in PCE could spark a large relief rally , strongly supporting growth stocks .
Also this week , we have the highly anticipated USChina Presidential Meeting .
Expectations lean towards a deescalation of trade tensions and perhaps a trade truce .
A positive outcome here would be a significant boon for multinational Industrial and Technology stocks .

(02:20):
Now let's talk earnings , the second great driver .
Five of the ' Magnificent Seven ' report this week , dominating market direction .
The Technology and Communication Services sectors are trading at peak valuation , fueled by the AI monetization narrative and cloud growth .
On Wednesday , we hear from Microsoft , Alphabet , and Meta Platforms .

(02:43):
For Microsoft , the focus is strictly on the Azure cloud platform , where analysts are expecting 38 percent revenue growth , alongside updates on its AI capital expenditure payoff .
For Alphabet , investors want clarity on AI’s impact on search advertising and cloud growth , estimated at 29 percent .
On Thursday , it’s Apple and Amazon’s turn .

(03:07):
The risk is an ' allornothing ' reaction .
Any disappointment in AI guidance or cloud growth for MSFT or GOOGL could easily trigger a sharp selloff that impacts the entire S&P 500.Outside of big tech , Financials like Visa and Mastercard are expected to report strong results driven by high consumer spending .

(03:30):
In Healthcare , which has generally lagged , keep an eye on Eli Lilly , whose commentary on the capacity and guidance for its weightloss drugs will be paramount .
Finally , Industrials like Boeing and Caterpillar are extremely sensitive to the USChina trade outcome ; a positive development could give the Industrial Select Sector ETF , XLI , a significant lift .

(03:54):
So , how do we trade this highrisk , highreward environment ?
First , for your core market exposure , we recommend you HOLD diversified broadmarket ETFs like the iShares Core S&P 500 ETF , IVV .
The overall trend remains bullish , so any minor pullback , say 5 to 10 percent , should be viewed as a buying opportunity .

(04:18):
Second , in Growth and Technology , we recommend an OVERWEIGHT position heading into earnings .
The megacap results are the single biggest driver , and while expectations are high , a positive outlook on AI capital expenditure will continue to propel the index .
Use the Invesco QQQ Trust for concentrated exposure .

(04:40):
Specific stocks like Microsoft and Alphabet have the strongest cloud and AI narratives .
Third , as a defensive hedge against the high volatility , we recommend you OVERWEIGHT bond duration .
The expected Fed cut and a likely dovish tone from Powell will support bond prices .
Look at the iShares 20 Year Treasury Bond ETF , TLT .

(05:03):
This provides a clean hedge against any major equity shock .
Finally , for tactical positioning , consider a small ' catchup ' trade on SmallCap stocks , tracked by the iShares Russell 2000 ETF , IWM .
The lowerrate environment is a massive tailwind for smaller companies that rely more heavily on borrowing .

(05:24):
Alternatively , if you believe the USChina talks will succeed , a tactical buy on the Industrial Select Sector SPDR Fund , XLI , offers quick upside .
That's the playbook for the most volatile week of Q4 .
Stay vigilant , stay tactical , and I'll talk to you soon .
I'm Barry Bullish , and this has been Spy Trader .