Fresh news and strategies for traders. SPY Trader episode #1295. Good morning, Spy Traders! It's your favorite financial guru, Market Maverick Mike, here to break down the latest market moves. It's 6 am on Wednesday, July 9th, 2025, Pacific Time, and boy, do we have a lot to unpack from the last few hours. Let's dive right in and see what's shaping the markets. Looking at the overall US stock market, it's been a bit of a seesaw act. On July 8th, largecap equities were mostly down, with the S&P 500 slipping 0.1% and the Dow Jones falling 0.4%. NASDAQ stayed pretty flat. But then, on July 9th, we saw a nice rebound, with the Dow, Nasdaq, and S&P 500 all posting solid gains of 0.77%, 1.02%, and 0.83% respectively. Over the past month, the S&P 500, or US500 index, has climbed 3.39%, and it's up over 10% compared to this time last year. When we peek at sector performance, it's a mixed bag. On July 9th, Energy, Materials, and Healthcare stocks were leading the charge. Energy had a strong run on July 8th, up 3%. On the flip side, sectors like Consumer Discretionary, Communication, and Technology have been lagging recently. Clean energy stocks were among the weakest performers on July 8th, following a new executive order aimed at limiting green energy tax credits. Financials also saw some declines. Now for the big news drivers: The renewed focus on trade policy is absolutely dominating the headlines. President Trump announced new reciprocal tariff rates and issued a stern warning that these would be strictly enforced by an August 1st deadline if trade agreements aren't reached. A major announcement included the intention to impose a whopping 50% duty on copper imports, which sent copper futures soaring nearly 10%. We also heard warnings of potential pharmaceutical tariffs as high as 200%. This aggressive stance is expected to crank up market volatility throughout the summer. Some domestic companies, like Byrna Technologies, are actually pretty happy about these tariffs, as they incentivize bringing manufacturing back home. In companyspecific news from July 8th, Fair Isaac, or FICO, shares plunged 8.9% after a federal housing official said lenders would be allowed to use the competing VantageScore credit scoring system. Conversely, Moderna, MRNA, shares surged 8.8% due to a lawsuit challenging COVID vaccine policies, and Intel, INTC, shares added 7.2% as the company announced further layoffs as part of its turnaround plan. Moving on to the broader economic picture: Inflation is still on our radar. The annual inflation rate in the US ticked up slightly to 2.4% in May 2025, from 2.3% in April, though it was still a bit below market expectations. Core inflation, which excludes volatile food and energy prices, held steady at 2.8% in May, a low not seen since 2021. However, here's the kicker: higher tariffs are widely expected to lead to a fresh wave of inflation, with core Personal Consumption Expenditures, or PCE, inflation potentially rising towards 3.1% by yearend. Keep an eye out for the next inflation update on July 15th. The US labor market remains surprisingly stable. The unemployment rate actually edged down to 4.1% in June 2025 from 4.2% in May, defying expectations of a slight increase. It's consistently stayed in a narrow range of 4.0% to 4.2% since May 2024. Total nonfarm payroll employment increased by 147,000 in June. As for interest rates, the Federal Reserve held its benchmark interest rate steady in the range of 4.25% to 4.50% at its June 2025 meeting. They've kept rates here since cutting them by a total of 1% in the second half of 2024. While investors generally anticipate two quarterpoint rate cuts in 2025, the Fed's current 'wait and see' approach is largely due to the uncertainty around the inflationary impact of these new tariffs. We expect rates to remain stable at the next Federal Open Market Committee, or FOMC, meeting in midJuly 2025. Finally, on GDP, Real Gross Domestic Product in the US actually decreased at an annual rate of 0.5% in the first quarter of 2025. This was mainly due to an increase in imports and a decrease in government spending, marking the first quarterly decline in two years. Despite this, expectations for Q2 2025 anticipate a rebound in GDP growth, though the overall pace for 2025 is projected to slow to around 1.5% from 2.8% in 2024. Consumer spending continues to be a crucial component driving economic growth. There's also a noted risk of a 'stagflation' scenario, which is rising inflation combined with higher unemployment, if these tariffs really hit the economy hard. So, what does all this mean for your portfolio, Spy Traders? Well, the current market environment is a delicate balancing act. We've got resilient labor market data, but persistent inflation concerns are always lurking, and it's all overshadowed by the unpredictable nature of trade policy. The renewed and aggressive push for tariffs is the most significant immediate influence. President Trump's threats create substantial uncertainty for businesses, especially those with global supply chains. This directly impacts input costs, potential profit margins, and consumer prices. While some domestic industries might get a boost, the overall sentiment is cautious due to the risk of retaliatory measures and trade disruptions, leading to increased market volatility. Even though current inflation figures are relatively moderate, those announced tariffs are expected to push prices up. This puts the Federal Reserve in a tough spot. Normally, an economic slowdown might lead to rate cuts to stimulate growth, but if tariffs simultaneously fuel inflation, the Fed faces a dilemma. They might delay further rate reductions to avoid fanning inflationary fires. This 'Fed on pause' dynamic removes a traditional market stimulant, making the market more sensitive to any negative news. The economy itself is showing mixed signals. A robust labor market typically supports consumer spending, which is a major driver of GDP. However, that firstquarter GDP contraction and the anticipated slowdown in consumer activity later this year, partly due to tariff effects, suggest some underlying fragility. The potential for 'stagflation,' a scenario of rising inflation alongside slowing economic growth and potentially higher unemployment, is a significant concern that could definitely be made worse by these tariffs. The divergence in sector performance also highlights that a broad market approach might not be the best strategy right now. Sectors benefiting from rising commodity prices, like Energy and Materials, especially copper, are doing well due to direct or indirect effects of trade policy and global demand. On the flip side, sectors sensitive to consumer discretionary spending or those negatively impacted by specific policy changes, like clean energy due to executive orders, are facing some headwinds. So, what's a savvy Spy Trader to do? In this dynamic and potentially volatile environment, I recommend prioritizing a defensive posture while selectively identifying opportunities. First, lean towards defensive sectors. Overweight sectors traditionally considered defensive, such as Consumer Staples and Utilities. Also, consider a steady allocation to Healthcare. These sectors typically offer more stable earnings and dividends, as demand for their products and services is less cyclical and less sensitive to economic downturns or inflationary pressures. They tend to perform relatively well during periods of uncertainty and volatility. Second, be cautious and selective with commodityrelated sectors. Consider Energy stocks, particularly if oil prices remain elevated. For Materials, focus on companies that could genuinely benefit from domestic production or specific tariff policies, such as those related to copper. The tariff announcements have directly benefited certain commodities. However, remember these sectors can be highly volatile and are subject to global supply and demand dynamics and political developments. A selective approach, rather than broad exposure, is definitely advisable. Third, reduce exposure to cyclical and growth sectors in the short to medium term. Exercise caution or underweight sectors like Consumer Discretionary and Technology, especially companies highly dependent on global supply chains or strong consumer spending growth. These sectors are more vulnerable to inflationary pressures, potential slowdowns in consumer demand, and trade disruptions. The current macroeconomic outlook suggests a more challenging environment for highgrowth, cyclical businesses in the near term. Fourth, stay hypervigilant on trade policy developments. Closely monitor news related to tariff negotiations, new announcements, and especially that August 1st deadline. Understand the specific implications for industries and companies in your portfolio. Trade policy is the most significant external shock currently impacting the market. Rapid changes in this area can lead to swift market reactions, requiring you to be agile in your investment decisions. Fifth, monitor Federal Reserve communications and economic data. Pay close attention to upcoming inflation reports, with the next update on July 15th, and any statements or minutes from Federal Reserve meetings. Understand the Fed's stance on inflation and its implications for future interest rate policy. The Fed's actions on interest rates directly influence borrowing costs, corporate profitability, and asset valuations. Any deviation from anticipated rate cuts or a more hawkish stance due to persistent inflation could negatively impact market sentiment. And finally, sixth, reevaluate your portfolio diversification and risk tolerance. Ensure your portfolio is welldiversified across various asset classes and geographies to mitigate USspecific risks. Reassess your personal risk tolerance in light of the increased market volatility and adjust your investment strategy accordingly. Diversification helps cushion against adverse movements in specific sectors or regions. In uncertain times, maintaining a portfolio aligned with your longterm financial goals and comfort with risk is paramount to avoid emotional reactions to market swings. That's all for this edition of Spy Trader! Stay smart, stay safe, and happy trading, everyone!