Latest / The SPY Trader / Defense First: Trade War Erupts as Earnings Begin

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Defense First: Trade War Erupts as Earnings Begin · The SPY Trader

• 0:00
  Welcome to Spy Trader .
• 0:02
  I’m your host , Chip M.
• 0:03
  Dip , and I am here to help you navigate the tricky waters of the S&P 500 .
• 0:09
  It's 6 am on Sunday , October 12th , 2025 , Pacific time , and we are kicking off a highstakes trading week .
• 0:17
  The theme for the next five days is defense and high volatility , as macroeconomic fears related to trade collide directly with the start of the Q3 corporate earnings season .
• 0:29
  The overall outlook for broad market instruments like the SPDR S&P 500 ETF Trust , SPY , is Cautiously Bearish to RangeBound , meaning we need to prioritize defense .
• 0:41
  The primary headwind causing this volatility is the sharp reescalation of the USChina trade conflict .
• 0:48
  On Friday , President Trump’s threat of a “ massive increase in tariffs ” was met swiftly by China's imposition of new export controls on rare earth minerals .
• 0:59
  These minerals are critical inputs for hightech manufacturing , and this friction is poised to weigh heavily on technology and global supply chain stocks .
• 1:08
  Further increasing uncertainty is the ongoing US government shutdown , which delays the release of crucial official economic data like the Consumer Price Index , CPI , and Retail Sales .
• 1:21
  With this data vacuum , investors must rely on regional surveys and less frequent releases , forcing us to trade in the dark .
• 1:30
  Now , let’s talk about the big event : Q3 earnings season .
• 1:34
  It officially kicks off this week , setting the tone for the entire market .
• 1:39
  The spotlight is squarely on the Financials sector , with all the money center banks reporting Monday through Wednesday , including JPMorgan Chase ( JPM ) , Citigroup ( C ) , The Goldman Sachs Group ( GS ) , and Bank of America ( BAC ) .
• 1:55
  While analysts are anticipating a yearoveryear earnings growth rate of 7.9 percent for the S&P 500 , analysts anticipate that tariffs will weigh on revenue .
• 2:06
  We’ll use JPM’s results as the key benchmark to gauge the health of the broader Financial Select Sector SPDR Fund ( XLF).Elsewhere in tech , we must pay close attention to Taiwan Semiconductor Manufacturing Co ( TSM ) reporting later in the week .
• 2:24
  While TSM is key to the AI theme , it is directly exposed to both the tariff threats and China’s rare earth export controls .
• 2:32
  Any weakness in TSM could quickly translate into selling pressure for USlisted peers like NVIDIA ( NVDA ) and the broader Invesco QQQ Trust ( QQQ).Given the volatile outlook , here are the recommendations for your portfolio .
• 2:49
  We are maintaining a Neutral to Lightly Defensive stance on broad funds .
• 2:54
  Hold your core positions in something like the Vanguard S&P 500 ETF ( VOO ) , but please , consider setting tight stoploss orders .
• 3:03
  For a tactical hedge against the trade war , consider adding a small position in the iShares 20 Year Treasury Bond ETF ( TLT ) , as bonds tend to rally on riskoff sentiment .
• 3:15
  Sectorwise , we are moving to OVERWEIGHT on defensive Utilities .
• 3:19
  The sector outperformed last week , clearly indicating a rotation to safety .
• 3:25
  Utilities are less sensitive to economic cycles and trade tensions .
• 3:30
  Increase your exposure to the Utilities Select Sector SPDR Fund ( XLU ) , or look at stable regulated utilities like NextEra Energy ( NEE).Conversely , we must be UNDERWEIGHT on Technology and Growth .
• 3:45
  They are highly vulnerable to the trade tensions and the rare earth news .
• 3:50
  Reduce exposure to the QQQ and specific semiconductor stocks like AMD and Nvidia ( NVDA).Finally , as a hedge against geopolitical risk , we recommend OVERWEIGHT on Gold .
• 4:02
  SPDR Gold Shares ( GLD ) is the instrument of choice here .
• 4:06
  Additionally , the China rare earth export controls are a direct positive catalyst for domestic producers ; keep a close eye on MP Materials ( MP ) , a pureplay US rare earth stock .
• 4:19
  That’s all for this edition of Spy Trader .
• 4:22
  Stay safe out there , set those stops , and we’ll catch you next time .