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Transcript

RiskOff, Rotation On · The SPY Trader

• 0:00
  Good morning , market maniacs , and welcome back to Spy Trader .
• 0:04
  I'm your host , Chuck ' The Chart ' Norris , and it is 5 am on Tuesday , January 20th , 2026 , Pacific time .
• 0:12
  We are kicking off the day with a cautious footing .
• 0:15
  Stock futures are down this morning , driven by classic riskoff sentiment .
• 0:19
  But don't let the headlines fool you .
• 0:21
  While the market indexes are struggling , the story underneath is a massive , healthy rotation .
• 0:28
  We’ve got geopolitical noise , mixed earnings , and a 10year yield that just won’t quit .
• 0:33
  Let’s dive into the details .
• 0:35
  The overall feeling this morning is definitely negative , folks .
• 0:39
  This riskoff move is driven primarily by renewed geopolitical tension .
• 0:44
  President Trump’s threats regarding Greenland tariffs are weighing heavily on global markets , pushing safehaven assets sky high — Gold prices are soaring to fresh records .
• 0:56
  Investors are also bracing for the President's speech later at the World Economic Forum , which often brings volatility .
• 1:03
  On the earnings front , it’s been a mixed bag for financials .
• 1:07
  We saw strong beats from heavy hitters like Goldman Sachs and Morgan Stanley , which helped hold the sector up , but weaker results from JPMorgan and persistent political threats to the financial sector have kept the Financials ETF , XLF , hovering near the bottom of the performance list .
• 1:26
  A significant market rotation is the defining feature of early 2026 , and it's putting a real drag on the usual leaders .
• 1:34
  The Nasdaq100 tracker , QQQ , continues to underperform SPY because the megacap tech sector is getting crushed .
• 1:43
  Technology is the worstperforming sector yeartodate , down nearly half a percent .
• 1:49
  Oldguard software companies like Salesforce and ServiceNow are hitting fresh 52week lows , fueled by fear of disruption from newer AI players like OpenAI .
• 2:01
  This is critical .
• 2:02
  While tech is lagging , sectors tied to the real economy are booming .
• 2:07
  Basic Materials are up a whopping 9.05% yeartodate , leading the charge alongside Industrials and Energy .
• 2:16
  This shift is also playing out across market caps : SmallCaps are dominating , up 5.57% yeartodate , easily outpacing LargeCaps ’ meager 0.56% gain .
• 2:29
  Economically , inflation is in check , with December CPI coming in as expected at 2.7% .
• 2:36
  This , coupled with a slightly softer labor market — unemployment is sitting at 5.1%—gives the Fed cover for future rate cuts .
• 2:46
  But here's the kicker : the 10year U.S.
• 2:49
  Treasury yield recently climbed to 4.287% .
• 2:53
  Higher yields make growth stocks less attractive and pressure equity valuations overall .
• 2:59
  So , how do we trade this environment ?
• 3:01
  We need a barbell approach .
• 3:03
  First , you must embrace the rotation .
• 3:06
  Smallcaps and cyclicals are the leaders , and that gap is widening .
• 3:10
  We are OVERWEIGHT here .
• 3:12
  Target the iShares Russell 2000 ETF , IWM , to capture smallcap upside , or look at the Industrial Select Sector SPDR Fund , XLI , to lean into that leading sector strength .
• 3:26
  Second , be extremely selective in Technology .
• 3:30
  The AI theme is alive , but only in hardware .
• 3:34
  We are NEUTRAL on the broader Technology Select Sector SPDR Fund , XLK , and might even trim it , but we are a Hold or even BuyonDips for infrastructure leaders like NVIDIA , whose earnings outlook remains strong .
• 3:48
  Avoid the disrupted software names for now .
• 3:51
  Finally , you have to hedge the geopolitical risk .
• 3:54
  With trade tensions and uncertainty , we are OVERWEIGHT precious metals .
• 3:59
  Grab SPDR Gold Shares , GLD , as a primary safe haven .
• 4:04
  For fixed income , rising 10year yields mean you must AVOID longduration instruments like the iShares 20 Year Treasury Bond ETF , TLT .
• 4:14
  Stick to diversified core instruments like iShares Core U.S.
• 4:18
  Aggregate Bond ETF , AGG .
• 4:21
  That’s all the time we have for this edition of Spy Trader .
• 4:25
  Stay nimble out there , and happy trading !