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Market Surge, Economic Caution · The SPY Trader

• 0:00
  Welcome , Spy Trader listeners !
• 0:02
  I'm your host , Moneybags Mike , and it's 12 pm on Tuesday , June 24th , 2025 , Pacific time .
• 0:10
  We've got a lot to unpack today as the market continues its upward march .
• 0:14
  The major US stock indices , including the Dow , S&P 500 , and Nasdaq , are all up around 1% or more , building on yesterday's gains and pulling us out of a recent threeday losing streak for the S&P 500 .
• 0:29
  Looking back , the S&P 500 has climbed a healthy 2.64% to 3.00% over the last month and is up over 11% compared to this time last year .
• 0:42
  A big reason for the market's recent surge is the growing optimism surrounding a potential ceasefire between Iran and Israel .
• 0:51
  This deescalation has sent oil prices tumbling , with West Texas Intermediate crude futures falling significantly to around 65.45 a barrel after hitting nearly 77 earlier in the week due to the conflict .
• 1:06
  On the domestic front , President Trump's new tariff policies , which started on April 2nd , initially caused a global stock market wobble .
• 1:15
  However , his announcement on April 9th to pause further increases sparked a historic rally .
• 1:22
  Still , these ongoing trade policies remain a point of uncertainty , with concerns that they could fuel inflation and slow economic growth .
• 1:31
  Now , let's dive deeper into the economic landscape and what it means for your portfolio .
• 1:37
  Our economy saw a slight contraction in the first quarter of 2025 , with real GDP shrinking by about 0.2% to 0.3% .
• 1:48
  That's the first quarterly decline in three years , mainly due to increased imports and reduced government spending .
• 1:55
  However , the Federal Reserve Bank of Atlanta's GDPNow model is forecasting a rebound , estimating real GDP growth of 3.4% for the second quarter .
• 2:07
  But overall , forecasts for 2025 suggest economic growth will moderate compared to last year .
• 2:14
  Inflation is also a factor .
• 2:17
  The annual inflation rate , measured by the Consumer Price Index , edged up to 2.4% in May , up from 2.3% in April , marking its first acceleration in four months .
• 2:30
  Core inflation , which excludes food and energy , stayed at 2.8% .
• 2:35
  There are some thoughts that President Trump's new tariffs are contributing to this rise .
• 2:41
  Looking ahead , inflation could continue to climb , possibly peaking at 4% in the second quarter of next year , driven by those tariff effects .
• 2:50
  On the employment front , the labor market remained stable in May , with the unemployment rate holding steady at 4.2% .
• 2:59
  Nonfarm payrolls increased by 139,000 jobs , a bit less than April's 147,000 .
• 3:08
  Despite overall resilience , we've seen nearly 160 companies across various sectors , including federal agencies , announce significant job cuts for June .
• 3:19
  Regarding interest rates , the Federal Reserve kept its benchmark rate at 4.25% to 4.50% at its June meeting , the fourth meeting in a row without a change .
• 3:32
  Fed Chair Jerome Powell indicated that the central bank needs more time to assess the economic impact of the tariffs before making any policy adjustments .
• 3:43
  Despite holding steady , the Fed's projections still anticipate two rate cuts in 2025 , with many market participants expecting the first cut in September or October .
• 3:55
  Shifting to sector performance , over the past month ending June 20th , Energy has been the top performer , gaining over 5.5% , followed by Information Technology and Communication Services .
• 4:08
  However , on June 20th alone , Consumer Discretionary and Real Estate led the gains , while Energy was the only sector to decline .
• 4:18
  Yeartodate , Industrials have performed strongly , along with Utilities and Consumer Staples .
• 4:25
  In contrast , Health Care and Consumer Discretionary have seen declines yeartodate , with Information Technology , despite recent daily gains , up just under 2% yeartodate as of June 20th .
• 4:37
  When we look at individual companies , megacap tech stocks , particularly chipmakers like Broadcom and Nvidia , have been driving recent rallies .
• 4:47
  Nvidia , in particular , reported stellar firstquarter fiscal 2026 results with significant revenue and free cash flow growth .
• 4:56
  Starbucks also saw gains after clarifying it doesn't plan to sell its China division .
• 5:01
  On the flip side , FedEx shares are down significantly yeartodate , largely due to concerns that shipping demand is being impacted by tariffs .
• 5:11
  They're set to release their fourthquarter fiscal 2025 earnings today , so traders are bracing for a potentially volatile reaction .
• 5:20
  Trump Media & Technology Group , the parent company of Truth Social , has seen its stock gain recently , but it's still down nearly half its value since the start of 2025 .
• 5:31
  And J.M.
• 5:32
  Smucker experienced a nearly 16% drop after reporting lowerthanexpected sales and profit guidance .
• 5:39
  So , what's our takeaway here ?
• 5:42
  The current positive sentiment in the stock market seems to be a reaction to the deescalation of the IsraelIran conflict .
• 5:50
  This reduces geopolitical risk , especially in the oil market , which can ease inflation concerns and support economic stability .
• 5:58
  The sharp drop in crude oil prices reinforces this ' riskon ' environment , making investors more eager to buy stocks .
• 6:06
  However , this shortterm optimism is happening alongside some real economic complexities .
• 6:12
  The first quarter GDP contraction is a clear concern , signaling a slowdown in economic activity .
• 6:20
  While the Atlanta Fed suggests a bounce back in Q2 , overall forecasts for 2025 still point to more moderate growth .
• 6:29
  The rising inflation rate in May , likely influenced by tariffs , creates a challenge for the Federal Reserve .
• 6:37
  The Fed's decision to hold interest rates steady reflects a cautious approach , as they want to fully assess the impact of new tariff policies before adjusting .
• 6:47
  Their projections for two rate cuts later this year indicate a bias towards easing , but this is contingent on economic data aligning with their expectations for inflation and employment .
• 6:58
  The labor market , while still resilient , is showing signs of softening , with slower monthly job gains and significant layoff announcements this month .
• 7:08
  This could indicate a cooling economy , which , alongside inflation , puts the Fed in a tricky balancing act .
• 7:15
  Sector performance reflects these mixed signals .
• 7:19
  The recent strength in technology , especially AIrelated stocks like Nvidia , suggests continued investor confidence in growth areas despite broader economic uncertainties .
• 7:31
  The rebound in consumer discretionary and real estate on June 20th could indicate renewed confidence after the geopolitical news .
• 7:39
  However , their yeartodate underperformance , along with healthcare , suggests investors have been cautious in sectors sensitive to economic downturns .
• 7:50
  The yeartodate strength in industrials and utilities might point to a flight to quality earlier in the year .
• 7:56
  So , what should you be doing as an investor in this environment ?
• 7:59
  First , maintain diversification and quality .
• 8:03
  While the market is rallying , the macroeconomic picture is still uncertain with tariffs , inflation , and a moderating labor market .
• 8:12
  Spreading your investments across different sectors and asset classes is key to managing risk .
• 8:18
  Focus on strong companies with healthy balance sheets , consistent earnings , and competitive advantages , as these tend to be more resilient during uncertain times .
• 8:29
  Second , monitor geopolitical developments closely .
• 8:32
  The current market strength is heavily tied to the deescalation in the Middle East .
• 8:37
  Any renewed conflict could quickly reverse sentiment and trigger market volatility , especially impacting energy prices and global supply chains .
• 8:47
  Third , watch Federal Reserve communications and economic data .
• 8:51
  The Fed's stance on interest rates is a major market driver .
• 8:55
  Pay close attention to Chair Powell's statements , upcoming inflation reports like the CPI and PCE , and employment data , such as the jobs report , to gauge the likelihood and timing of potential rate cuts .
• 9:08
  If inflation proves more persistent due to tariffs , the Fed might delay cuts further , which could be a headwind for the market .
• 9:16
  Fourth , evaluate tariff impacts .
• 9:19
  The full implications of President Trump's tariff policies are still unfolding and could continue to affect corporate earnings , consumer spending , and inflation .
• 9:29
  Companies heavily reliant on international trade or those with complex supply chains might face increased costs and reduced demand .
• 9:38
  Assess individual company exposures to these policies .
• 9:41
  Fifth , consider sector rotation .
• 9:44
  Continue to monitor leading technology and AI companies like Nvidia , but always consider their valuations carefully In light of a potential economic slowdown and persistent inflation , defensive sectors such as Utilities and Consumer Staples might offer more stability .
• 10:02
  However , if the secondquarter GDP rebound proves strong and there's clearer evidence of an economic ' soft landing ' rather than a sharp slowdown , cyclical sectors like Consumer Discretionary and Industrials could see sustained improvement .
• 10:17
  But given the firstquarter GDP contraction and ongoing layoff announcements , caution is advised .
• 10:24
  Sixth , review your bond allocations .
• 10:27
  With the Fed potentially cutting rates later in the year , fixedincome investments may become more attractive .
• 10:34
  If bond yields fall , existing bonds with higher yields could appreciate in value .
• 10:39
  Consider laddering bond maturities to capture potential future rate changes .
• 10:44
  Finally , engage in taxaware planning .
• 10:48
  Given legislative activities around taxandspending bills and a presidential election year , it's prudent to implement taxsmart planning and investing strategies .
• 10:58
  That's all for today's Spy Trader .
• 11:01
  Stay sharp , and happy trading !