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The Great Sector Rotation · The SPY Trader

• 0:00
  Good morning and welcome to the Spy Trader podcast .
• 0:03
  It is exactly 5 am on Saturday , February 21st , 2026 , Pacific time .
• 0:10
  I am your host , Barnaby Bull , and I am so glad you have joined me this morning for a deep dive into what has been a very busy week on Wall Street .
• 0:19
  Whether you are drinking your first cup of coffee or getting a head start on your weekend chores , we are here to help you make sense of the market noise so you can trade with confidence .
• 0:29
  It has been a bit of a rollercoaster lately , and this past week was no exception , characterized by a distinct wait and see approach from the big institutional players .
• 0:39
  While the major indices are still hanging around those alltime highs we hit earlier this month , we have seen a very clear shift .
• 0:47
  Investors are rotating out of those highflying technology names and moving their money into more defensive and valueoriented sectors .
• 0:57
  Looking at the numbers for the week of February 16th through the 20th , the results were definitely mixed .
• 1:03
  The S&P 500 , which we follow through the SPY ETF , declined zeropointfour percent over the last three sessions .
• 1:11
  While largecap stability is still there , the rally seems to have stalled as folks start to worry about valuations .
• 1:18
  The Nasdaq100 , or the QQQ , took a harder hit , finishing down onepointtwo percent for the week .
• 1:26
  This was mostly a sell the news reaction following NVIDIA's earnings report on Wednesday .
• 1:31
  Interestingly , the Dow Jones Industrial Average managed to outperform the broader market , ending up zeropointthree percent thanks to gains in bluechip financials and healthcare .
• 1:43
  Breaking it down by sector , the technology group , ticker XLK , saw a pullback .
• 1:50
  After a massive runup in January fueled by what we are calling GenAI Phase 3 — that is the integration of AI into enterprise workflows — the sector hit a resistance level .
• 2:02
  We saw Microsoft and Apple experience slight declines as investors decided to lock in some of their profits .
• 2:09
  The real winner of the week was the financial sector , with the XLF surging onepointfive percent .
• 2:16
  Banks are currently benefiting from a steepening yield curve because expectations for further Fed rate cuts this year have been pushed back , which improves their net interest margins .
• 2:27
  Healthcare , represented by XLV , also saw defensive inflows .
• 2:33
  As geopolitical tensions resurfaced in the South China Sea in midFebruary , investors moved capital into stable plays like Eli Lilly and UnitedHealth .
• 2:44
  On the downside , Real Estate via the VNQ fell zeropointeight percent as the 10year Treasury yield ticked back toward fourpointtwo percent , putting pressure on REIT valuations .
• 2:55
  The big macro driver this week was the release of the January FOMC Meeting Minutes on Wednesday .
• 3:02
  Those minutes showed that while inflation is stabilizing near twopointthree percent , the Federal Reserve is very wary of cutting rates too aggressively because the labor market is still surprisingly resilient .
• 3:15
  This has sparked a big debate about the neutral rate , and markets are now pricing in a higher for longer environment for 2026 .
• 3:23
  Because of this uncertainty , the bond market has been trading sideways , which we can see in the iShares Core U.S.
• 3:30
  Aggregate Bond ETF , ticker AGG .
• 3:34
  In company news , NVIDIA , the AI bellwether , reported record revenue on February 18th .
• 3:42
  However , they warned about supply chain bottlenecks for their new XSeries chips , causing the stock to drop four percent postearnings .
• 3:50
  Walmart provided some good news on Tuesday , reporting strong earnings that suggest the U.S.
• 3:56
  consumer is still robust despite the inflationary echoes of 2025 .
• 4:02
  This supported the Vanguard Total Stock Market ETF , VTI .
• 4:07
  Meanwhile , Tesla faced pressure from new regulatory hurdles for autonomous driving in Europe , which weighed on both the XLK and QQQ .
• 4:17
  So , what is the game plan moving forward ?
• 4:19
  For your core strategy , I recommend maintaining broad exposure but lowering your costs .
• 4:25
  Consider increasing your weight in the Vanguard S&P 500 ETF , ticker VOO , or the Vanguard Total Stock Market ETF , VTI .
• 4:36
  Since the Nasdaq is showing signs of AI exhaustion , these broader funds offer a safer harbor .
• 4:42
  VOO provides the same exposure as SPY but with a much lower expense ratio of pointzerothree percent .
• 4:50
  For growth , look at this as a tactical reentry opportunity .
• 4:54
  Use this current dip to slowly accumulate the Invesco QQQ Trust or the Technology Select Sector SPDR , XLK .
• 5:04
  The pullback in NVIDIA and Microsoft is a healthy correction , not a fundamental breakdown , and the longterm demand for AI is still intact .
• 5:13
  For income and stability , allocate some funds to the Financial Select Sector SPDR Fund , XLF , and the iShares 20plus Year Treasury Bond ETF , TLT .
• 5:25
  Banks like JPMorgan are showing high credit quality , and while yields rose this week , they are likely nearing a ceiling .
• 5:33
  Finally , for diversification , look at the Vanguard FTSE Developed Markets ETF , VEA .
• 5:40
  U.S.
• 5:40
  valuations are historically high , and VEA offers exposure to companies like ASML and Toyota which are trading at more attractive pricetoearnings ratios right now .
• 5:51
  Keep an eye on the PCE inflation data next week , as that will be the next big catalyst .
• 5:57
  Thanks for listening to Spy Trader .
• 5:59
  I am Barnaby Bull , and I will see you next time .