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The Great Rotation: Navigating AI Infrastructure and Sticky Inflation · The SPY Trader

• 0:00
  Good morning and welcome to Spy Trader !
• 0:03
  I am your host , Sunny SideUp , and it is 5 am on Thursday , February 26th , 2026 , out here in the Pacific time zone .
• 0:13
  It is great to have you with us for our early morning checkin .
• 0:17
  The market is feeling a bit like a tugofwar right now between some amazing corporate earnings and inflation that just refuses to quit .
• 0:26
  The S&P 500 is hovering around the 6,950 level , currently trading near 6,948 .
• 0:34
  While we saw it jump over 7,000 back in January , it seems to be taking a bit of a breather .
• 0:41
  The big story this morning is what we are calling the Great Rotation .
• 0:45
  Investors are moving away from those highpriced tech stocks and moving into the real economy .
• 0:52
  For example , energy is the massive standout leader , up over 22% this year thanks to rising oil prices .
• 0:59
  Industrials are also having a moment because all those new AI data centers need physical equipment .
• 1:06
  Take Caterpillar , ticker CAT , which has surged 32% this year because their power generators are now essential for AI infrastructure .
• 1:15
  On the flip side , legacy software is feeling the heat .
• 1:20
  The S&P 500 software index is down nearly 21% this year .
• 1:25
  We saw Salesforce , or CRM , fall about 5% in late trading after they gave a softer revenue forecast for 2027 .
• 1:33
  Even Nvidia , the AI darling , saw a mixed reaction despite reporting a record 68.1 billion dollars in revenue .
• 1:42
  It goes to show that even a 73% yearoveryear jump in revenue isn't always enough when expectations are skyhigh .
• 1:51
  In other news , Axon Enterprise surged 17.5% today on a strong Q4 beat , while First Solar dropped over 13% due to soft guidance .
• 2:01
  Now , why is this happening ?
• 2:03
  It comes down to the macro picture .
• 2:06
  The Fed’s favorite inflation gauge , Core PCE , is sitting at 3.0% , which is well above their 2% target .
• 2:15
  While the Fed held rates steady between 3.5% and 3.75% in January , the minutes from their February 18th meeting gave us a shocking twist : some officials are actually talking about raising rates again .
• 2:30
  This has pushed the 10year Treasury yield to 4.06% , which is putting a lot of pressure on bonds .
• 2:37
  So , what is the game plan for your portfolio ?
• 2:41
  For your core holdings , I recommend staying diversified with the Vanguard Total Stock Market ETF , ticker VTI , or the S&P 500 tracker , VOO .
• 2:53
  These give you a safety net if the market dips below that 6,800 level .
• 2:58
  For sector plays , it is time to look at the picks and shovels of AI .
• 3:02
  Consider shifting some of your tech exposure from the QQQ into Industrials via XLI or looking for pullbacks in hardware names like Dell or Nvidia .
• 3:13
  Because inflation is being sticky , a defensive tilt is smart .
• 3:17
  I like the Health Care Select Sector SPDR , ticker XLV , as a hedge .
• 3:22
  I also suggest looking at Financials , like ticker XLF , because banks generally benefit from these higher interest rates .
• 3:29
  JPMorgan Chase , or JPM , is a great anchor there .
• 3:33
  Finally , for fixed income , please be careful with longterm bonds like TLT right now .
• 3:39
  Instead , look at the iShares Core U.S.
• 3:41
  Aggregate Bond ETF , ticker AGG .
• 3:45
  It is less vulnerable to those rising yields we are seeing .
• 3:49
  That is all for this morning's update on Spy Trader .
• 3:53
  Stay smart , stay diversified , and I will see you in a few hours !