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After the Cut: Inflation, Spending, and Smart Plays · The SPY Trader

• 0:00
  Hey there , traders and investors !
• 0:02
  Welcome back to Spy Trader , your goto podcast for navigating the markets .
• 0:07
  This is your host , Charts Charlie , coming to you bright and early .
• 0:11
  It's 6 am on Sunday , September 21st , 2025 , Pacific time , and we're getting you geared up for what promises to be another fascinating week in the financial world .
• 0:23
  We've got a lot to unpack from last week's major economic news , and we'll be looking ahead to some crucial data coming up .
• 0:30
  Let's dive right in .
• 0:32
  Starting with the big news , the Federal Reserve cut interest rates by 0.25 percentage points on September 17th .
• 0:41
  This brings their benchmark rate to a target range of 4.00% to 4.25% , marking the first cut since December 2024 .
• 0:51
  This move was largely in response to a softening labor market , with the August unemployment rate ticking up to 4.3% from 4.2% in July , and job growth slowing to an average of just 27,000 new payrolls per month over the last four months .
• 1:08
  The Fed's projections hint at two more quarterpoint cuts likely by the end of 2025.Now , on the flip side , inflation is still sticking around like a stubborn stain .
• 1:20
  The Consumer Price Index , or CPI , accelerated to 2.9% yearoveryear in August , up from 2.7% in July , and slightly above what economists were expecting .
• 1:32
  Core CPI , which strips out those volatile food and energy prices , remained elevated at 3.1% yearoveryear .
• 1:40
  Rising shelter costs , along with some goods impacted by new tariffs , were significant contributors to that monthly increase .
• 1:49
  Despite these inflationary pressures , US retail and food services sales showed surprising resilience in August .
• 1:57
  They increased by a betterthanexpected 0.6% monthovermonth and a solid 5.0% yearoveryear .
• 2:05
  This indicates that consumers are still spending , with ecommerce and food services sectors showing particularly strong gains .
• 2:13
  Manufacturing signals are a bit of a mixed bag .
• 2:17
  The S&P Global US Manufacturing PMI rose to 53.0 in August , indicating expansion , and new orders increased for the eighth consecutive month .
• 2:28
  However , the ISM Manufacturing PMI for August registered 48.7 , marking its eleventh consecutive month of contraction , which suggests some underlying weakness in certain parts of the manufacturing sector .
• 2:41
  So , what does all this mean for your portfolio ?
• 2:45
  The market's reaction to the Fed's rate cut was nuanced .
• 2:49
  We saw some profittaking in highgrowth technology stocks and a bit of a rotation into more valueoriented sectors , like industrials and financials .
• 2:58
  This shift reflects the Fed's cautious guidance on future rate cuts , which could dampen enthusiasm for growth stocks that are super sensitive to discounted future earnings .
• 3:09
  The most critical economic release coming up next week will be the US PCE Price Index for August , due out on Friday , September 26th .
• 3:19
  This is the Federal Reserve's preferred measure of inflation , so it will be closely scrutinized for clues about future monetary policy .
• 3:27
  We'll also get preliminary S&P Global US Manufacturing and Services PMI data for September on Tuesday , September 23rd , giving us an early read on business activity .
• 3:39
  Historically , September can be a weaker month for US stocks , often bringing increased volatility , so let's talk about some strategies .
• 3:49
  For technology , given the recent Fed action and forward guidance , we're seeing potential for continued sector rotation .
• 3:57
  Tech stocks are sensitive to interest rates , and a slower pace of future cuts could lead to some shortterm choppiness .
• 4:04
  For the immediate week , investors might consider a neutral to slightly underweight position in broad technology ETFs like the Invesco QQQ Trust ( QQQ ) .
• 4:16
  If you have a higher risk tolerance , selective exposure to established tech giants with strong cash flows or clear leadership in AI , such as NVIDIA ( NVDA ) , could be considered , but be ready for potential volatility .
• 4:30
  On the flip side , consumer discretionary looks promising .
• 4:34
  Strong August retail sales data really underscore continued consumer resilience , which is great for this sector .
• 4:41
  Lower interest rates typically stimulate spending , so that's a nice tailwind .
• 4:47
  We recommend a slightly overweight position in the Vanguard Consumer Discretionary ETF ( VCR ) or the Consumer Discretionary Select Sector SPDR Fund ( XLY ) to capitalize on these robust spending trends .
• 5:02
  Financials also saw some upside potential from the valueoriented rotation after the Fed cut .
• 5:08
  While prolonged low rates can squeeze net interest margins , a stable , albeit slower , ratecutting cycle could support this sector .
• 5:17
  Consider a neutral to slightly overweight allocation to the Financial Select Sector SPDR Fund ( XLF ) , focusing on diversified financial institutions .
• 5:27
  Healthcare , despite lagging recently , has a favorable outlook for 2025 , driven by innovation , strategic growth , and anticipated mergers and acquisitions , especially in biotechnology and healthcare services .
• 5:43
  An aging population also provides consistent demand .
• 5:48
  A neutral to slightly overweight position in the Health Care Select Sector SPDR Fund ( XLV ) is advisable .
• 5:55
  You might also research individual biotech companies or medical technology firms aligned with these growth drivers .
• 6:02
  Finally , for fixed income , with the Fed having started rate cuts and signaling more to come , bond yields are expected to gradually decline .
• 6:12
  Fixed income can offer stability and income in a potentially volatile equity market .
• 6:18
  For conservative investors or those seeking portfolio stability , core holdings in diversified bond ETFs like the iShares Core U.S.
• 6:27
  Aggregate Bond ETF ( AGG ) or the Vanguard Total Bond Market ETF ( BND ) remain appropriate .
• 6:36
  Overall , the market is currently in a phase of digestion and reevaluation following the Fed's rate cut .
• 6:44
  The balancing act between sticky inflation and a softening labor market will heavily influence market direction , with the upcoming PCE data being a critical determinant .
• 6:54
  While broader market ETFs like the SPDR S&P 500 ETF Trust ( SPY ) remain core holdings , a cautious approach , perhaps utilizing dollarcost averaging for new investments , is prudent given potential September volatility and mixed economic signals .
• 7:14
  Investors should prioritize sectors demonstrating resilience , like Consumer Discretionary , or those benefiting from longterm trends and potential value rotation , such as Financials and Healthcare , while exercising selective caution in highgrowth areas of tech .
• 7:31
  That's all for this episode of Spy Trader !
• 7:34
  Thanks for tuning in , and remember to keep an eye on that PCE data this week .
• 7:39
  Happy trading , and I'll catch you next time !