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RiskOff Rotation: Geopolitics vs. Rate Cut Hopes · The SPY Trader

• 0:00
  Welcome back to Spy Trader .
• 0:02
  I'm your host , Chet Cashflow , and it's 6 am on Thursday , October 23rd , 2025 , Pacific time .
• 0:11
  The market is feeling a bit moody this morning , characterized by caution and consolidation as we try to digest a mixed earnings season and rising geopolitical risks .
• 0:22
  Stock index futures are indicating a slightly weaker open , particularly for the S&P 500 and the Nasdaq100 , which are down slightly , extending yesterday’s losses .
• 0:34
  The one outlier ?
• 0:36
  Smallcap futures , the Russell 2000 , which are showing a modest gain of 0.37% , suggesting domestic resilience .
• 0:45
  The main drivers of this morning's hesitation are geopolitical .
• 0:50
  We have renewed USChina trade tensions , specifically targeting tech exports and weighing heavily on the broader indices , plus the cloud of the continuing government shutdown .
• 1:01
  Despite these macro headwinds , the Q3 earnings season is actually proving resilient , with 84% of S&P 500 companies reporting so far beating analyst expectations .
• 1:14
  However , disappointing results from key names have soured the mood in growth sectors .
• 1:20
  Technology , for example , underperformed yesterday , falling nearly 1% , primarily hit by IBM plunging over 7% on soft software revenue , and Tesla dropping 3 to 3.5% premarket on mixed Q3 results .
• 1:37
  On the bright side , Energy outperformed significantly , surging 1.34% , benefiting from new U.S.
• 1:45
  sanctions on Russian oil majors that drove crude prices higher .
• 1:50
  Health Care also showed strong defensive characteristics , lifted by Intuitive Surgical , ISRG , which surged almost 14% on strong earnings , despite Moderna falling on disappointing trial news .
• 2:04
  The underlying analysis is that we are in a clear ' riskoff ' rotation .
• 2:09
  Investors are shifting away from multinational , highvaluation momentum stocks and rotating toward defensive and cyclical value areas .
• 2:19
  This rotation is driven by geopolitical friction clashing with the high expectation of Federal Reserve monetary easing — the market is pricing in a 96.7% chance of a rate cut this October .
• 2:32
  Given this environment , the trading strategy needs to be highly selective and riskmanaged .
• 2:38
  First , for defense and yield , focus on sectors that perform well during uncertainty .
• 2:45
  We like Health Care ( XLV ) for its defensive strength and strong companyspecific results , and Real Estate ( VNQ ) , which benefits directly if the Fed cuts rates , making REIT yields more attractive .
• 2:59
  Second , play the geopolitical environment directly .
• 3:02
  The sanctions are boosting crude prices , making the Energy sector ( ENRS ) and related companies like SLB LTD attractive buys .
• 3:12
  Third , exercise caution in broad tech .
• 3:15
  We recommend reducing exposure to the Invesco QQQ Trust ( QQQ ) due to concentration risk in megacaps facing trade pressure .
• 3:24
  However , for a small , highly speculative allocation , watch the quantum computing microcaps like DWave Quantum ( QBTS ) , which are surging on potential federal funding news .
• 3:35
  Finally , for stabilization , capitalize on the expected rate cuts by adding to iShares 20 Year Treasury Bond ETF ( TLT ) or core bond funds like BND .
• 3:48
  These bonds provide both a hedge against stock volatility and potential capital gains if the Fed delivers the expected easing .
• 3:56
  That's it for this morning's Spy Trader .
• 3:58
  Trade smart , stay nimble , and we'll catch you next time .