September 7, 2025 • 11 mins
Fresh news and strategies for traders. SPY Trader episode #1360.
This week's market will be highly sensitive to inflation data (PPI & CPI) as investors weigh strong expectations for a Fed rate cut against elevated S&P 500 valuations and potential correction warnings. We recommend a cautious, defensive posture, favoring value and resilient sectors like healthcare and real estate, while selectively engaging with eventdriven opportunities in tech. Fixed income is advised for stability, given forecast lower longterm yields, though all positions are sensitive to inflation surprises.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hello , fellow market navigators and welcome to Spy Trader , your goto podcast for actionable insights in the world of finance !
I'm your host , Cashflow Kevin , and it's 6 am on Sunday , September 7th , 2025 , Pacific time .
We're gearing up for what promises to be an incredibly dynamic week ahead , as the market balances high hopes for a Fed rate cut against some cautionary signals and crucial economic data .
(00:28):
Let's kick things off with a quick rundown of what's been making headlines and what we're looking at for the week ahead .
The big story , of course , is the overwhelming expectation that the Federal Reserve will cut interest rates by 25 basis points at their FOMC meeting on September 16th and 17th .
(00:49):
This sentiment is fueled by recent weakerthanexpected labor market data , including a paltry 22,000 jobs added in August , significantly below the 75,000 forecast , and an uptick in the unemployment rate to 4.3% .
The CME Group FedWatch tool is practically screaming ' rate cut ' with over a 90% probability for this month .
(01:14):
This dovish outlook has also sent the 10year Treasury yield to its lowest point since early April , hovering around 4.08% as of September 5th .
While Q2 2025 GDP growth clocked in at a robust 3.3% , financial experts at Morningstar suggest this number was somewhat inflated by companies rushing imports due to tariffs .
(01:39):
They see underlying economic growth actually slowing through early 2026 .
This mixed economic picture , combined with an S&P 500 pricetoearnings ratio north of 27 – far above the historical average of 16 – has many institutional investors sounding alarms about a potential 515% market correction .
(02:01):
So , what's on the economic calendar for the week of September 8th to 12th ?
It starts a bit light but quickly ramps up .
On Monday , September 8th , we get July Consumer Credit data .
Tuesday , September 9th , brings the July NFIB SmallBusiness Optimism Index and the S&P Global Investment Manager Index for US equity sentiment .
(02:26):
The real fireworks begin Wednesday , September 10th , with the August Producer Price Index , or PPI , which will be critical after July saw a notable monthovermonth increase , especially in services .
Then , mark your calendars for Thursday , September 11th – that's when the August Consumer Price Index , or CPI , drops .
(02:49):
This is arguably the most impactful report of the week , giving us the latest read on inflation .
July's CPI held at 2.7% annually , with core CPI at 3.1% .
The European Central Bank also has an interest rate decision that day .
Finally , Friday , September 12th , wraps up with preliminary Michigan consumer survey data for September , including consumer sentiment and inflation expectations .
(03:18):
Shifting gears to sector performance and company news , the tech sector remains a hotbed of activity .
Broadcom , or AVGO , recently surged over 9% on strong quarterly results , reportedly driven by AI demand and a new multibilliondollar customer , rumored to be OpenAI .
Tesla , ticker TSLA , saw gains after its CEO Elon Musk's pay package plan was unveiled .
(03:45):
And Alphabet , GOOG , is steadily nearing that impressive 3 trillion dollar market cap .
However , not all tech is soaring .
Salesforce , CRM , shares were significantly down , and Adobe , ADBE , is down nearly 23% yeartodate , facing increasing AI competition , though analysts see no additional downside risk from its upcoming earnings .
(04:10):
Keep an eye out for Nvidia , NVDA , and AMD , AMD , as they're set to present at the Goldman Sachs Communacopia Technology Conference on Monday , September 8th .
Apple , AAPL , is holding an ' awedropping AppleEvent ' on Tuesday , September 9th , which is always a big deal .
Meta Platforms , META , and Broadcom , AVGO , will also participate in the Goldman Sachs conference .
(04:37):
In consumer discretionary , Lululemon , LULU , shares slipped nearly 20% on disappointing earnings guidance , potentially feeling the pinch of tariffs .
On a brighter note , Chewy , CHWY , is expected to report solid Q2 results on Wednesday , September 10th , benefiting from healthy customer additions and low tariff exposure .
(05:01):
Morningstar highlights Communications , Real Estate , Energy , and Healthcare as offering ' best value ' right now , noting that smallcap and value stocks outperformed in August .
Johnson & Johnson , JNJ , is a great example of a defensive healthcare stock , praised for its diversified revenue streams and robust balance sheet .
(05:22):
Alright , let's dive into some analysis and insights .
This week is truly going to be a tightrope walk for investors .
The strong expectation of a Fed rate cut creates a generally supportive backdrop for equities , offering a potential tailwind .
However , this optimism is extremely sensitive to any inflation data that comes in ' hotter ' than expected .
(05:46):
If PPI or CPI numbers surprise to the upside , it could temper those rate cut expectations , leading to volatility and a potential market pullback , especially in ratesensitive growth sectors like technology and consumer discretionary .
Conversely , a significantly weak inflation print could accelerate dovish expectations , giving a big boost to growth assets .
(06:10):
Given the S&P 500's elevated valuations and the growing chorus of correction warnings , prudence is definitely the name of the game .
Now , for the part you've all been waiting for (06:19):
our trading recommendations and the reasoning behind them .
First , we recommend maintaining a cautious overall market posture with a strong emphasis on inflation data .
The S&P 500 is trading at elevated valuations , and we're hearing more calls for a potential market correction .
(06:42):
The Fed's policy , and thus market direction , is highly sensitive to inflation .
Our recommendation is to closely monitor the August PPI report on Wednesday , September 10th , and especially the CPI report on Thursday , September 11th .
If inflation metrics surprise to the upside , it might be prudent to consider temporary hedges or reduce exposure to highbeta growth stocks .
(07:08):
For those looking for shortterm , highrisk hedges against market downturns , the ProShares VIX ShortTerm Futures ETF , VIXY , could be an option , but remember it's highly volatile and best for tactical , very shortterm positions .
For more general portfolio stability , the iShares 20 Year Treasury Bond ETF , TLT , could offer a hedge , particularly if economic slowdown concerns intensify , potentially driving further bond rallies , though its performance is inversely sensitive to interest rates .
(07:44):
Second , we favor value and defensive sectors .
In an environment of potential economic slowing and already high broader market valuations , defensive sectors and value stocks have historically offered more stability and attractive riskadjusted returns .
These sectors are generally less sensitive to interest rate fluctuations and benefit from more resilient demand .
(08:09):
For healthcare , consider the Health Care Select Sector SPDR Fund , XLV , for diversified exposure .
For individual stock exposure , Johnson & Johnson , JNJ , stands out with its diversified revenue streams in medtech and pharmaceuticals and a robust balance sheet , making it resilient to economic shifts .
(08:31):
In real estate , the Vanguard Real Estate ETF , VNQ , offers exposure to REITs , which can provide stable income and may benefit from a declining interest rate environment .
For broad value exposure across sectors , the Vanguard Value ETF , VTV , or the iShares MSCI USA Value Factor ETF , VLUE , could be suitable .
(08:57):
Third , we suggest a selective and eventdriven approach to technology .
While the broader market might face correction risks , specific catalysts within the technology sector , especially around AI and new product launches , can still drive individual stock performance .
However , the sector's high sensitivity to interest rates means caution is warranted if inflation data comes in unfavorably .
(09:23):
Keep a close watch on Apple's , AAPL , product event on Tuesday , September 9th .
Positive product announcements or new strategic directions could provide a shortterm boost .
Also , monitor news and presentations from AI players like Nvidia , NVDA , AMD , AMD , and Meta Platforms , META , at the Goldman Sachs conference .
(09:46):
Broadcom , AVGO , having recently reported strong AIdriven results , could continue its momentum if further positive news emerges regarding AI adoption .
For diversified exposure to largecap technology , the Invesco QQQ Trust , QQQ , remains a key instrument , though its concentration in top tech names means it carries higher risk in a volatile environment .
(10:14):
The Technology Select Sector SPDR Fund , XLK , offers a somewhat broader , but still techheavy , exposure within the S&P 500.Finally , consider fixed income for portfolio stability .
With strong expectations for Fed rate cuts and a forecast for lower longterm yields , fixed income assets can offer stability and potentially capital appreciation .
(10:40):
For broad , investmentgrade bond exposure , the iShares Core U.S.
Aggregate Bond ETF , AGG , or the Vanguard Total Bond Market ETF , BND , are solid core holdings .
Given the forecast for the 10year Treasury yield to drop below 4% in 2026 , longduration Treasury bonds via the iShares 20 Year Treasury Bond ETF , TLT , could see capital gains , but remember this instrument carries higher interest rate risk if inflation proves more stubborn than anticipated .
(11:17):
In summary , next week's market is likely to be characterized by heightened sensitivity to inflation data , which will heavily inform expectations for the Fed's upcoming rate decision .
Investors should consider a defensive posture , favoring value and resilient sectors while selectively engaging with eventdriven opportunities in technology .
Fixed income remains a viable option for portfolio stability .
(11:41):
That's all for this edition of Spy Trader .
I'm Cashflow Kevin , signing off !
Trade smart , everyone .
Hello , fellow market navigators and welcome to Spy Trader , your goto podcast for actionable insights in the world of finance !
I'm your host , Cashflow Kevin , and it's 6 am on Sunday , September 7th , 2025 , Pacific time .
We're gearing up for what promises to be an incredibly dynamic week ahead , as the market balances high hopes for a Fed rate cut against some cautionary signals and crucial economic data .
(00:28):
Let's kick things off with a quick rundown of what's been making headlines and what we're looking at for the week ahead .
The big story , of course , is the overwhelming expectation that the Federal Reserve will cut interest rates by 25 basis points at their FOMC meeting on September 16th and 17th .
(00:49):
This sentiment is fueled by recent weakerthanexpected labor market data , including a paltry 22,000 jobs added in August , significantly below the 75,000 forecast , and an uptick in the unemployment rate to 4.3% .
The CME Group FedWatch tool is practically screaming ' rate cut ' with over a 90% probability for this month .
(01:14):
This dovish outlook has also sent the 10year Treasury yield to its lowest point since early April , hovering around 4.08% as of September 5th .
While Q2 2025 GDP growth clocked in at a robust 3.3% , financial experts at Morningstar suggest this number was somewhat inflated by companies rushing imports due to tariffs .
(01:39):
They see underlying economic growth actually slowing through early 2026 .
This mixed economic picture , combined with an S&P 500 pricetoearnings ratio north of 27 – far above the historical average of 16 – has many institutional investors sounding alarms about a potential 515% market correction .
(02:01):
So , what's on the economic calendar for the week of September 8th to 12th ?
It starts a bit light but quickly ramps up .
On Monday , September 8th , we get July Consumer Credit data .
Tuesday , September 9th , brings the July NFIB SmallBusiness Optimism Index and the S&P Global Investment Manager Index for US equity sentiment .
(02:26):
The real fireworks begin Wednesday , September 10th , with the August Producer Price Index , or PPI , which will be critical after July saw a notable monthovermonth increase , especially in services .
Then , mark your calendars for Thursday , September 11th – that's when the August Consumer Price Index , or CPI , drops .
(02:49):
This is arguably the most impactful report of the week , giving us the latest read on inflation .
July's CPI held at 2.7% annually , with core CPI at 3.1% .
The European Central Bank also has an interest rate decision that day .
Finally , Friday , September 12th , wraps up with preliminary Michigan consumer survey data for September , including consumer sentiment and inflation expectations .
(03:18):
Shifting gears to sector performance and company news , the tech sector remains a hotbed of activity .
Broadcom , or AVGO , recently surged over 9% on strong quarterly results , reportedly driven by AI demand and a new multibilliondollar customer , rumored to be OpenAI .
Tesla , ticker TSLA , saw gains after its CEO Elon Musk's pay package plan was unveiled .
(03:45):
And Alphabet , GOOG , is steadily nearing that impressive 3 trillion dollar market cap .
However , not all tech is soaring .
Salesforce , CRM , shares were significantly down , and Adobe , ADBE , is down nearly 23% yeartodate , facing increasing AI competition , though analysts see no additional downside risk from its upcoming earnings .
(04:10):
Keep an eye out for Nvidia , NVDA , and AMD , AMD , as they're set to present at the Goldman Sachs Communacopia Technology Conference on Monday , September 8th .
Apple , AAPL , is holding an ' awedropping AppleEvent ' on Tuesday , September 9th , which is always a big deal .
Meta Platforms , META , and Broadcom , AVGO , will also participate in the Goldman Sachs conference .
(04:37):
In consumer discretionary , Lululemon , LULU , shares slipped nearly 20% on disappointing earnings guidance , potentially feeling the pinch of tariffs .
On a brighter note , Chewy , CHWY , is expected to report solid Q2 results on Wednesday , September 10th , benefiting from healthy customer additions and low tariff exposure .
(05:01):
Morningstar highlights Communications , Real Estate , Energy , and Healthcare as offering ' best value ' right now , noting that smallcap and value stocks outperformed in August .
Johnson & Johnson , JNJ , is a great example of a defensive healthcare stock , praised for its diversified revenue streams and robust balance sheet .
(05:22):
Alright , let's dive into some analysis and insights .
This week is truly going to be a tightrope walk for investors .
The strong expectation of a Fed rate cut creates a generally supportive backdrop for equities , offering a potential tailwind .
However , this optimism is extremely sensitive to any inflation data that comes in ' hotter ' than expected .
(05:46):
If PPI or CPI numbers surprise to the upside , it could temper those rate cut expectations , leading to volatility and a potential market pullback , especially in ratesensitive growth sectors like technology and consumer discretionary .
Conversely , a significantly weak inflation print could accelerate dovish expectations , giving a big boost to growth assets .
(06:10):
Given the S&P 500's elevated valuations and the growing chorus of correction warnings , prudence is definitely the name of the game .
Now , for the part you've all been waiting for (06:19):
our trading recommendations and the reasoning behind them .
First , we recommend maintaining a cautious overall market posture with a strong emphasis on inflation data .
The S&P 500 is trading at elevated valuations , and we're hearing more calls for a potential market correction .
(06:42):
The Fed's policy , and thus market direction , is highly sensitive to inflation .
Our recommendation is to closely monitor the August PPI report on Wednesday , September 10th , and especially the CPI report on Thursday , September 11th .
If inflation metrics surprise to the upside , it might be prudent to consider temporary hedges or reduce exposure to highbeta growth stocks .
(07:08):
For those looking for shortterm , highrisk hedges against market downturns , the ProShares VIX ShortTerm Futures ETF , VIXY , could be an option , but remember it's highly volatile and best for tactical , very shortterm positions .
For more general portfolio stability , the iShares 20 Year Treasury Bond ETF , TLT , could offer a hedge , particularly if economic slowdown concerns intensify , potentially driving further bond rallies , though its performance is inversely sensitive to interest rates .
(07:44):
Second , we favor value and defensive sectors .
In an environment of potential economic slowing and already high broader market valuations , defensive sectors and value stocks have historically offered more stability and attractive riskadjusted returns .
These sectors are generally less sensitive to interest rate fluctuations and benefit from more resilient demand .
(08:09):
For healthcare , consider the Health Care Select Sector SPDR Fund , XLV , for diversified exposure .
For individual stock exposure , Johnson & Johnson , JNJ , stands out with its diversified revenue streams in medtech and pharmaceuticals and a robust balance sheet , making it resilient to economic shifts .
(08:31):
In real estate , the Vanguard Real Estate ETF , VNQ , offers exposure to REITs , which can provide stable income and may benefit from a declining interest rate environment .
For broad value exposure across sectors , the Vanguard Value ETF , VTV , or the iShares MSCI USA Value Factor ETF , VLUE , could be suitable .
(08:57):
Third , we suggest a selective and eventdriven approach to technology .
While the broader market might face correction risks , specific catalysts within the technology sector , especially around AI and new product launches , can still drive individual stock performance .
However , the sector's high sensitivity to interest rates means caution is warranted if inflation data comes in unfavorably .
(09:23):
Keep a close watch on Apple's , AAPL , product event on Tuesday , September 9th .
Positive product announcements or new strategic directions could provide a shortterm boost .
Also , monitor news and presentations from AI players like Nvidia , NVDA , AMD , AMD , and Meta Platforms , META , at the Goldman Sachs conference .
(09:46):
Broadcom , AVGO , having recently reported strong AIdriven results , could continue its momentum if further positive news emerges regarding AI adoption .
For diversified exposure to largecap technology , the Invesco QQQ Trust , QQQ , remains a key instrument , though its concentration in top tech names means it carries higher risk in a volatile environment .
(10:14):
The Technology Select Sector SPDR Fund , XLK , offers a somewhat broader , but still techheavy , exposure within the S&P 500.Finally , consider fixed income for portfolio stability .
With strong expectations for Fed rate cuts and a forecast for lower longterm yields , fixed income assets can offer stability and potentially capital appreciation .
(10:40):
For broad , investmentgrade bond exposure , the iShares Core U.S.
Aggregate Bond ETF , AGG , or the Vanguard Total Bond Market ETF , BND , are solid core holdings .
Given the forecast for the 10year Treasury yield to drop below 4% in 2026 , longduration Treasury bonds via the iShares 20 Year Treasury Bond ETF , TLT , could see capital gains , but remember this instrument carries higher interest rate risk if inflation proves more stubborn than anticipated .
(11:17):
In summary , next week's market is likely to be characterized by heightened sensitivity to inflation data , which will heavily inform expectations for the Fed's upcoming rate decision .
Investors should consider a defensive posture , favoring value and resilient sectors while selectively engaging with eventdriven opportunities in technology .
Fixed income remains a viable option for portfolio stability .
(11:41):
That's all for this edition of Spy Trader .
I'm Cashflow Kevin , signing off !
Trade smart , everyone .
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