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The 7,000 Rally and Your 2026 Playbook · The SPY Trader

• 0:00
  Welcome back to Spy Trader .
• 0:02
  I'm your host , Barry Bullish , and it's 5 am on Monday , December 29th , 2025 ( Pacific ) .
• 0:09
  We are wrapping up a spectacular year for the markets .
• 0:12
  The S&P 500 is trading near a new alltime high , hovering around the 7,000 mark .
• 0:18
  It seems the Santa Claus Rally is in full swing , even as we climb a major ' Wall of Worry .
• 0:24
  ' Let's dive into the drivers , the deals , and what moves you should make today .
• 0:29
  The headline news is pure resilience .
• 0:32
  The S&P 500 is up nearly 17.8% YTD , and the techheavy Nasdaq Composite is leading the charge with gains of 22.2% , buoyed by significant gains in the AI trade .
• 0:48
  This optimism is fundamentally driven by a Federal Reserve that has clearly pivoted : they have cut the benchmark rate by 75 basis points over three meetings this year , bringing the target range to 3.50%–3.75% .
• 1:04
  This easing policy , alongside expectations of solid corporate earnings , is keeping the indices flying high .
• 1:12
  However , the economic backdrop is one of caution .
• 1:16
  While CPI inflation has moderated to 3.0% , it's still sticky , and GDP growth forecasts for Q4 are tracking closer to 1% .
• 1:26
  The market momentum is currently characterized by internal rotation .
• 1:30
  While Technology ( XLK ) has performed best over the last 12 months , other sectors have recently taken the lead .
• 1:37
  Health Care ( XLV ) was the clear outperformer in November , rising over 9% as investors sought defensive , noncyclical growth .
• 1:48
  Communication Services ( XLC ) , which houses giants like Alphabet and Meta Platforms , also shows strong momentum .
• 1:56
  In terms of specific news , the AI narrative is firmly back in focus .
• 2:01
  Nvidia ( NVDA ) shares gained ground on news of a licensing deal with AI startup Groq , suggesting investors are willing to push valuations higher for key players .
• 2:11
  Elsewhere , Oracle Corp.
• 2:13
  ( ORCL ) saw its stock climb following news of a joint venture to acquire TikTok's U.S.
• 2:19
  operations .
• 2:21
  Finally , Gold and Silver futures have hit alltime highs , signaling global macrouncertainty , which has benefited mining stocks like FreeportMcMoRan ( FCX).Given this environment of high valuations and macroeconomic deceleration , we need to balance growth with defense and diversification .
• 2:42
  Our first recommendation is to Diversify Away from Megacap Concentration .
• 2:48
  Largecap tech is expensive , and smallcap and value stocks are trading at an attractive discount and recently outperformed .
• 2:55
  Consider allocating funds to the VTI ( Vanguard Total Stock Market ETF ) to get exposure to the full market , mitigating the risk concentrated in the S&P 500's top holdings .
• 3:07
  You might also look at Industrials or Financials ( XLI or XLF).Second , Seek Defensive and Stable Growth .
• 3:16
  With the labor market softening and the economy slowing , defensive sectors offer more stable earnings .
• 3:23
  We recommend overweighting the XLV ( Health Care Select Sector SPDR Fund ) .
• 3:29
  This sector showed strong outperformance in November and offers inelastic demand .
• 3:34
  Third , Maintain Core Exposure to Tech , but Focus on Quality .
• 3:39
  While holding core ETFs like QQQ is necessary to catch the dominant AI themes , focus new investments selectively .
• 3:48
  Concentrate on companies with durable competitive advantages , or ' wide moats , ' like Microsoft ( MSFT ) and Amazon ( AMZN ) , which are cited as trading at significant discounts to fair value .
• 4:01
  Finally , as the Fed has cut rates and is projected to cut again in 2026 , we suggest you Add Fixed Income for Portfolio Stability .
• 4:11
  Bonds are having their best returns in years .
• 4:15
  Buy the BND ( Vanguard Total Bond Market ETF ) for broad stability and income , or the TLT for a more aggressive play if you expect deeper rate cuts next year .
• 4:27
  That's all for this morning's Spy Trader .
• 4:29
  Stay disciplined , stay diversified , and keep those eyes on the charts !