The S&P 500 has increased by 28 points, or 0.4%, reaching 6660, a new record high. This marks a tenfold rise since the financial crisis low, underscoring the market’s remarkable growth over this period.
Currently, the rally faces minimal resistance, with bulls displaying strong momentum. This strength in the market persists despite some concerns about the economy and the Federal Reserve.
Short Term Opportunity
With the market hitting new highs, we see an opportunity in the short term. Selling out-of-the-money puts on the SPX or major tech ETFs seems like a solid strategy to collect premium. The CBOE Volatility Index, or VIX, is currently hovering near a low of 13, making the cost of insurance cheap and the premiums received for selling it attractive.
For those wanting a more defined-risk approach, we are considering bull call spreads. This allows us to participate in the upside while capping potential losses if the sentiment turns. The strong August 2025 jobs report, which saw the addition of 210,000 jobs, provides fundamental support for this continued upward momentum.
However, complacency is a major risk when the market feels this strong. We remember the run-up in late 2021 before the significant correction in 2022, and the current low VIX makes buying protective puts unusually affordable. This could be a cheap way to hedge long portfolios against a sudden reversal.
Federal Reserve Concerns
The key headwind remains the Federal Reserve, which signaled last week it might hike rates again before year-end. Even though the August CPI report from earlier this month cooled slightly to 3.1%, it is not enough to declare victory over inflation. We should watch for increased volatility around the next FOMC meeting announcement in November.
