Latest / The SPY Trader / Fed Week: Will Rates Bring Cash or Coal?

Transcript

Fed Week: Will Rates Bring Cash or Coal? · The SPY Trader

• 0:00
  Welcome to Spy Trader .
• 0:02
  I'm your host , Chuck " The Chart " Norris , waking up with you here on the West Coast .
• 0:06
  It's 5 am on Sunday , December 7th , 2025 , Pacific time , and we are kicking off the most critical week of the quarter .
• 0:14
  The entire market is holding its breath for one event : the Federal Reserve's final rate decision of the year .
• 0:21
  This week , we determine if Santa is bringing coal or cash .
• 0:25
  Let's dive right into the key drivers .
• 0:28
  Everything revolves around the FOMC meeting wrapping up this Wednesday .
• 0:33
  Markets are currently pricing in an 87% chance that the Fed will cut rates by 25 basis points , lowering the target rate to 3.50% to 3.75% .
• 0:45
  That is the big hope for a " Santa Claus Rally .
• 0:48
  " If they surprise us with a pause , citing sticky inflation or strong jobs data , expect significant volatility and a likely selloff .
• 0:57
  Supporting this decision , we have crucial employment data coming out early this week : the key JOLTS report on Tuesday and the Employment Cost Index , or ECI , on Wednesday .
• 1:10
  A weak reading in either of these is actually seen as bullish for the market because it increases the odds of that desired Fed rate cut .
• 1:17
  Finally , we get the Producer Price Index , PPI , on Thursday .
• 1:22
  We need that inflation indicator to stay cool to keep those disinflationary trends alive .
• 1:29
  While the Fed takes center stage , don't ignore the corporate drivers .
• 1:33
  This week is a crucial AI checkup .
• 1:35
  We get earnings from three major technology bellwethers .
• 1:39
  On Tuesday , we watch Adobe , ADBE , and Oracle , ORCL .
• 1:44
  Oracle's performance , especially regarding its cloud computing demand and partnership with Nvidia , is key .
• 1:50
  On Wednesday , the semiconductor heavyweight Broadcom , AVGO , reports .
• 1:56
  A beat or a strong forecast from AVGO would provide a strong tailwind for the entire semiconductor complex and the Invesco QQQ Trust .
• 2:06
  Outside of tech , Costco , COST , reports on Wednesday , giving us a vital snapshot of the midtohigh income US consumer's health .
• 2:15
  The prevailing market sentiment is cautious optimism , assuming the Fed delivers that cut , which will keep Technology and Communication Services , like Microsoft and Amazon , in the driver's seat .
• 2:27
  Time for the trade plan .
• 2:29
  Given the high volatility leading into Wednesday , we are maintaining a slightly Overweight stance in equities , but keep 10 to 15% cash ready for potential dips .
• 2:40
  Our core portfolio uses broad market ETFs like the SPDR S&P 500 ETF Trust , SPY , for stability .
• 2:49
  For tactical opportunities this week , we have three concrete plays .
• 2:54
  First , a Conditional Buy : Focus on the AI growth engine via the Invesco QQQ Trust , QQQ .
• 3:01
  If the Fed cuts , QQQ will get a disproportionate boost as their discounted future earnings look better .
• 3:08
  Second , a Tactical Buy : Smallcaps via the iShares Russell 2000 ETF , IWM .
• 3:15
  Smallcaps are historically strong in December and fundamentally benefit most from lower borrowing costs .
• 3:22
  Third , a Defensive Position : Hedge the Fed risk with fixed income using the Vanguard Total Bond Market ETF , BND .
• 3:31
  If the Fed surprises the market with a pause , BND is a great place to hide , as volatility causes a flight to safety in treasuries .
• 3:39
  Also , keep Broadcom , AVGO , on your watchlist for a postearnings breakout on Wednesday .
• 3:45
  That’s all the time we have for Spy Trader .
• 3:48
  Have a profitable and smart trading week !