Relief Rally: Decoding Today’s Market

The SPY Trader

Fresh news and strategies for traders. SPY Trader episode #1262. Welcome to Spy Trader! I'm your host, Baron von Bulls. It's 6 pm on Tuesday, June 24th, 2025, Pacific time. What a day it's been in the markets, and we're here to break it all down for you, making sense of the dollars and cents. Let's start with a quick market recap. The US stock market is definitely riding a wave of positive momentum. We've seen major indices like the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all posting gains, with the S&P and Nasdaq either hitting or approaching those sweet record highs. The big news driving all this? An easing of geopolitical tensions in the Middle East. Yes, folks, a ceasefire agreement between Israel and Iran has calmed nerves, and oil prices have taken a significant slide as a result. Now, looking at our sectors, it's a bit of a mixed bag but mostly green. Technology and Communication Services are leading the charge, with semiconductors being a real standout – think companies like Broadcom, hitting record highs, and Nvidia, also gaining, though their CEO recently sold some shares as part of a planned sale. Financials are also looking strong. On the flip side, the Energy sector is the lone wolf in decline, thanks to those falling oil and natural gas prices. Elsewhere, Industrials, Materials, Real Estate, Utilities, and Consumer Discretionary are all in positive territory. On the macroeconomic front, the Federal Reserve decided to hold interest rates steady at 4.25% to 4.5% for the fourth meeting in a row. Fed Chair Jerome Powell is taking a 'waitandsee' approach, keeping a close eye on the economic impact of tariffs. While some Fed officials don't see any rate cuts this year, others are eyeing two, and the market is still hopeful for a July cut. Inflation is a concern, with tariffrelated pressures expected to build in the second half of 2025. The Consumer Price Index rose 2.4% yearoveryear in May, and Core CPI, without volatile food and energy, was up 2.8%. On GDP, after a slight contraction in the first quarter, we're looking at a strong rebound for Q2. However, the Conference Board projects slower growth for 2025 and 2026 due to tariffs. Consumer spending shows mixed signals, with overall retail sales down slightly in May, but core retail sales, which are key for GDP, actually rose. But consumer confidence, well, that's dipped a bit in June, largely due to concerns about future business conditions and those very same tariffs. The labor market is holding steady, with 177,000 jobs added in April and unemployment at 4.2%, though we have seen a second consecutive month of rising unemployment claims in May. And for those keeping an eye on the big picture, the yield curve remains inverted, which often signals slower growth ahead. As for individual companies, beyond our tech giants, we saw Carnival Corp jump almost 7% today. Ford had a recall for over 130,000 Lincoln Aviator SUVs, and we're watching for earnings from General Mills, Micron, and Paychex. Alright, let's peel back the layers and understand what's really happening. This current market surge, my friends, is largely a 'relief rally.' The Middle East ceasefire is the primary catalyst. When you take the fear of supply disruptions and rising oil prices off the table, it’s like a breath of fresh air for businesses and consumers alike. Lower oil prices mean lower input costs for companies and more money in our pockets at the pump, which generally cools down inflationary worries. The Fed's steady hand on interest rates, even with internal debates, is also providing a sense of stability. While tariffs are a looming cloud, the Fed isn't hiking rates right now, and the chatter of potential future cuts is music to the market's ears. The sector performance makes perfect sense in this context. Technology and Communication Services, being growthoriented, thrive on optimism and innovation, especially with the AI boom driving chipmakers. Financials typically do well when there's underlying economic resilience. And Energy? Well, that's a direct casualty of falling oil prices, which is a good thing for most of the economy, but not so much for oil companies. Now, the broader economic picture is resilient but mixed. We had that Q1 GDP dip, but Q2 is expected to bounce back. The job market is holding its own, but rising jobless claims and dipping consumer confidence are definitely yellow flags. They suggest consumers are feeling some jitters, especially with those tariff effects starting to loom larger. The inverted yield curve is also flashing a warning sign about potential future slowdowns. So, while the immediate sentiment is positive, we can't ignore these underlying currents. So, what does this mean for your portfolio? Here are Baron von Bulls' top recommendations: First, Maintain Diversification with a Focus on Quality. The market's hot right now, but those macroeconomic uncertainties, especially tariffs and consumer sentiment, are still out there. Keep your portfolio diversified, perhaps including some international stocks, and stick with highquality companies that have strong fundamentals. Second, Consider Exposure to Technology and Communication Services. These sectors are leading the charge and are fueled by continuous innovation, especially in AI. Strong companies here, particularly in semiconductors, could continue to offer great growth potential. Third, Be Cautious with Energy Sector Exposure. With oil prices falling and tensions deescalating, the energy sector faces headwinds. It might see shortterm bounces, but its nearterm outlook is challenging. If you're heavily weighted here, consider rebalancing. Fourth, Monitor Inflation and Tariff Impacts Closely. While the Fed sees tariffrelated inflation as temporary, a big, longterm jump in goods prices could really squeeze corporate profits and our wallets. Keep an eye on inflation data and trade policy news. Fifth, Rebalance Portfolios to Manage Risk. In times of market rallies, some of your holdings might become overweighted. Rebalancing helps keep your portfolio aligned with your risk tolerance and longterm goals. Sixth, Stay Informed on Fed Commentary and Economic Data. The Fed's next moves will be huge. Pay close attention to their statements, meeting minutes, and key economic reports like inflation, GDP, and employment. These are your crystal ball into the Fed's thinking and the economy's health. And finally, and perhaps most importantly, Maintain a LongTerm Perspective. Don't let the daily headlines push you into impulsive decisions. Stick to your wellthoughtout investment strategy. Remember, market pullbacks can often be opportunities to snag quality companies at a better price. That's it for this edition of Spy Trader! Until next time, happy trading, and may your portfolios be ever green!