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Riding the AI Wave to Record Highs · The SPY Trader

• 0:00
  Welcome back to Spy Trader .
• 0:02
  I'm your host , Chip Stonkwell , and it is 5 am on Wednesday , January 7th , 2026 , Pacific Time .
• 0:10
  The market is buzzing before the opening bell , and the vibe is definitely electric .
• 0:14
  We are cruising at historic highs , baby , firmly in a riskon mode , supported by strong economic data and the sweet promise of lower rates .
• 0:23
  Yesterday was fantastic , with all major indices hitting fresh records .
• 0:29
  The Dow Jones Industrial Average popped 1.1% , the S&P 500 gained 0.8% , and the techheavy Nasdaq 100 jumped 1.1% .
• 0:41
  What is underpinning this incredible resilience ?
• 0:43
  It is a Goldilocks scenario : strong growth — Real GDP hit 4.3% in Q3 2025 — but crucially , inflation is cooling and the labor market is softening .
• 0:56
  Perfect setup for risk assets .
• 0:59
  Market leadership is clearly defined : AI reigns supreme .
• 1:03
  We are seeing massive rotation back into semiconductor stocks , suggesting a rebound in chip suppliers .
• 1:10
  For example , Micron Technology is seeing doubledigit advances , reflecting that insatiable demand for AI infrastructure that the CEO of AMD recently noted is going through the roof .
• 1:22
  This AI momentum is fueling instruments like the Invesco QQQ Trust .
• 1:26
  Beyond pure technology , we saw strong cyclical leadership .
• 1:31
  Materials and Industrials , alongside Healthcare — led by large caps like Eli Lilly and UnitedHealth — all outperformed .
• 1:40
  This points to investor confidence in a stable , expanding economy .
• 1:45
  Crucially , the core tailwind for all of this is the expectation of multiple Federal Reserve rate cuts in the near future , potentially driving the policy rate down to the three to three and a half percent range next year , which significantly lowers the cost of capital for corporations .
• 2:03
  On the company front , while megacap growth stocks like Amazon and Salesforce continue to perform strongly , recent trading showed a major contrast in sentiment : Netflix and Nvidia were popular netbought stocks , but Tesla was the top netsold stock in December , indicating ongoing concerns over its valuation and growth trajectory .
• 2:23
  So , how do we trade this highflying environment ?
• 2:27
  First , on Growth Exposure , ride the AI wave .
• 2:32
  The expectation of lower rates disproportionately benefits growth sectors with high future earnings potential .
• 2:39
  Stick with the Invesco QQQ Trust for concentrated exposure to the megacap tech leaders .
• 2:45
  For those betting on the broadening cyclical recovery beyond just megacaps , the Vanguard Total Stock Market ETF , or VTI , is a great way to capture small and midcap strength .
• 2:58
  Second , for your Core Holding , remember that after three consecutive years of strong S&P 500 gains , historical data suggests the fourth year can be modest .
• 3:09
  Maintain stability with a welldiversified core holding like the Vanguard S&P 500 ETF , or VOO , and make sure you hold the Vanguard Total International Stock ETF , VXUS , to capture growth and mitigate U.S.specific risk .
• 3:27
  Finally , in Fixed Income , cash yields are expected to drop as the Fed cuts rates .
• 3:32
  Use a diversified fund like the iShares Core U.S.
• 3:35
  Aggregate Bond ETF , AGG , as your primary fixedincome core for stability and income .
• 3:42
  If you are highly confident in aggressive rate cuts in the first half of the year , the longduration iShares 20 Year Treasury Bond ETF , TLT , offers more capital appreciation potential as longterm rates decline .
• 3:57
  That’s all the time we have for this edition of Spy Trader .
• 4:01
  Happy trading , and may your gains be large .