Latest / The SPY Trader / Fed’s Big Week: September Trading Guide

Transcript

Fed’s Big Week: September Trading Guide · The SPY Trader

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  Welcome back , market mavens and curious investors , to Spy Trader !
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  I'm your host , Midas Mike , ready to help you navigate the week ahead .
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  It's 6 am on Sunday , September 14th , 2025 , Pacific time , and we've got a lot to unpack before the opening bell .
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  Grab your coffee , because the financial world is buzzing with anticipation .
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  First up , let's get you caught up on the headlines shaping our trading week .
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  The absolute biggest news item on everyone's radar is the Federal Reserve's Federal Open Market Committee , or FOMC , meeting this Tuesday and Wednesday , September 16th and 17th .
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  The market is overwhelmingly expecting a 25basispoint interest rate cut .
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  This move comes amidst a pretty mixed bag of economic data .
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  Inflation , while moderating slightly , is still above the Fed's target .
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  The Consumer Price Index , or CPI , rose 2.9% yearonyear in August , up from 2.7% in July , with core CPI at 3.1% .
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  Monthly CPI was up 0.4% in August , largely due to higher costs in gasoline , housing , and food .
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  On the flip side , the labor market is clearly softening .
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  August saw a rather meager 22,000 jobs added , following a modest 73,000 in July .
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  Plus , there was a massive downward revision of 911,000 fewer jobs created between April 2024 and March 2025 .
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  The unemployment rate actually ticked up to a fouryear high of 4.3% in August , and weekly unemployment claims surged to 263,000 , the highest in nearly four years .
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  Job growth this year has been almost entirely concentrated in healthcare , with other sectors stalling or even losing jobs .
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  Now for the analysis and insights .
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  The market has fully priced in that 25basispoint rate cut , which would move the federal funds rate target range from 4.25%4.50% down to 4.00%4.25% .
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  There's even some talk of a 50basispoint cut , though that's a longer shot .
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  The general sentiment is a classic ' don't fight the Fed' mentality , where signs of economic weakness are now being viewed as green lights for more monetary support , which is often a boon for stocks .
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  And let's not forget the persistent artificial intelligence , or AI , investment cycle , which continues to be a major driver , especially in tech .
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  Just look at Oracle , or ORCL , which recently reported strong earnings thanks to cloud demand .
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  However , we can't ignore those sticky inflation numbers .
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  They might put a cap on how dovish the Fed can sound in its forward guidance .
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  And here's a fun historical fact for you : September has historically been the worst month for U.S.
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  stocks , with a 50/50 chance of losses .
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  Plus , the S&P 500 and Nasdaq 100 are currently showing ' overbought' readings on daily charts , suggesting that after a strong rally , future gains might be a bit harder to come by .
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  So , while we're anticipating a ' melt up ' into the Fed announcement , be ready for some potential volatility or consolidation afterward , depending on what Chair Powell says .
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  Now for the moment you've been waiting for : my trading recommendations and the reasoning behind them .
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  For next week , I'm thinking about a few key areas .
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  First , Technology Sector , especially growthoriented companies .
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  Lower rates generally reduce the discount rate on future earnings , which is great for growth stocks .
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  The continued robust demand in AIrelated cloud services , as shown by Oracle's strong earnings , also supports this .
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  So , maintaining exposure to tech is a good idea .
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  Consider the Invesco QQQ Trust ( QQQ ) for concentrated exposure to the Nasdaq's top nonfinancial companies , or the Technology Select Sector SPDR Fund ( XLK ) for broader S&P 500 tech exposure .
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  Just watch out for a potential ' buy the rumor , sell the news' reaction postFed .
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  Next , the Real Estate Sector .
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  This sector is highly sensitive to interest rates .
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  Lower mortgage rates should boost the housing market , making homes more affordable and potentially increasing construction .
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  So , consider or maintain positions in the Vanguard Real Estate ETF ( VNQ ) , which focuses on Real Estate Investment Trusts , or REITs .
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  Third , let's talk about SmallCap and Value Stocks .
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  Morningstar noted in late August that smallcap stocks were trading at a 15% discount to fair value , and value stocks at a 3% discount .
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  A shift to monetary easing often helps smaller , more domestically focused companies .
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  For broader exposure that includes small and midcap companies , the Vanguard Total Stock Market ETF ( VTI ) is a solid choice .
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  Fourth , let's add some Commodities , specifically gold .
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  Historically , September has been a strong month for gold , and it can act as a hedge against persistent inflation concerns and potential market volatility .
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  Given the historical weakness of U.S.
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  stocks in September , a small , tactical allocation to SPDR Gold Shares ( GLD ) could offer some portfolio diversification .
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  And finally , Fixed Income , meaning bonds .
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  While much of the rate cut is priced in , if yields continue to decline , bond ETFs could offer stability and some capital appreciation .
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  J.P.
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  Morgan Research even anticipates lower Treasury yields as the Fed eases .
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  For broad fixedincome exposure , the iShares Core U.S.
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  Aggregate Bond ETF ( AGG ) or Vanguard Total Bond Market ETF ( BND ) can be great core holdings .
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  To sum up , the market is likely to ride this ' melt up ' wave into the Fed meeting , powered by rate cut hopes and the AI boom .
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  However , be ready for some choppiness right after the FOMC announcement .
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  While a 25basispoint cut is priced in , any hint of fewer future cuts or a stronger focus on stubborn inflation could temper that enthusiasm .
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  Given September's historical track record and those ' overbought ' indicators , a brief period of consolidation or a slight pullback after the initial Fed reaction wouldn't surprise me .
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  Stay nimble out there , folks !
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  That's all for this episode of Spy Trader .
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  I'm Midas Mike , and I'll catch you next time !