Latest / The SPY Trader / CPI, Banks, and the SmallCap Surge

Transcript

CPI, Banks, and the SmallCap Surge · The SPY Trader

• 0:00
  Welcome back to Spy Trader !
• 0:02
  I'm your host , Skip " The Spread " Sterling , and it's 5 am on Sunday , January 11th , 2026 , Pacific .
• 0:10
  We are diving straight into a critical week for the market , one that promises increased volatility and will be highly datadependent .
• 0:18
  We have two major themes dictating price action between January 12th and 16th : the inflation test and the start of earnings season .
• 0:28
  The US economy enters 2026 with a strong 80% chance of staying in expansion mode , supported by recent Fed easing .
• 0:37
  However , valuations are high , making the market highly sensitive to surprises .
• 0:43
  The S&P 500 is projected for a neutral to mildly positive week , while the Nasdaq100 is expected to continue its recent positive outperformance , driven by AIthemed growth .
• 0:56
  However , smallcaps , tracked by the Russell 2000 , have the potential to truly outperform as market leadership broadens .
• 1:04
  The main event is the release of the December Consumer Price Index report on Tuesday , January 13th .
• 1:11
  Headline CPI is expected to hold steady at 2.7% yearoveryear .
• 1:17
  A surprise to the downside would be instantly bullish for ratesensitive sectors like Technology and Real Estate , solidifying expectations for future rate cuts .
• 1:27
  Conversely , if CPI comes in hot , especially Core CPI , we will see significant volatility and pressure on growth stocks , particularly given the 10year Treasury yield is currently sitting around 4.18% .
• 1:41
  Beyond inflation , Q4 2025 earnings season kicks off , with the Financial sector taking center stage .
• 1:50
  Major US banks like JPMorgan Chase , Bank of America , and Goldman Sachs are reporting .
• 1:57
  Analyst expectations are strongly positive , driven by high trading revenue , with JPMorgan Chase consensus EPS growth expected to be over 21% yearoveryear .
• 2:10
  Positive reports from the big banks would drive the entire Financial sector higher .
• 2:15
  We also have positive tailwinds in Healthcare , which is rated " Outperform , " supported by the JPM Healthcare Conference running all week .
• 2:25
  Meanwhile , the Energy sector remains Neutral , rated " Marketperform , " due to global oil oversupply pressing US crude prices down near 56.77 a barrel .
• 2:37
  Now , let’s talk trades .
• 2:40
  Given the environment , investors should favor selective diversification .
• 2:45
  First , play the earnings catalyst by tactically overweighting Financials shortterm .
• 2:51
  I recommend taking a position in the Financial Select Sector SPDR Fund ( XLF ) or directly in JPMorgan Chase ( JPM ) .
• 3:00
  Second , we must hedge against the risk of sticky inflation .
• 3:04
  If CPI surprises , we need protection .
• 3:07
  Gold is a robust hedge , so maintaining exposure to instruments like SPDR Gold Shares ( GLD ) makes sense .
• 3:14
  Third , capitalize on the broadening rally by overweighting SmallCaps , which have been outpacing the broader market early this year .
• 3:23
  Look to the iShares Russell 2000 ETF ( IWM ) .
• 3:27
  Finally , for a longterm thematic focus , overweight Healthcare .
• 3:32
  The sector is set to benefit from innovation and is getting positive attention due to the conference .
• 3:37
  The easiest way to gain exposure is through the Health Care Select Sector SPDR Fund ( XLV ) .
• 3:44
  That's it for this update .
• 3:46
  Good luck trading the volatility this week , and we'll catch you next time on Spy Trader .