Hey there, Garret Baldwin here. 

The fastest rate hike cycle since the 1980s should have killed tech stocks. Instead, the Mag 7 went to the moon while everything else got crushed.

Here's why - and how to position for what comes next.

The Great Divergence

Since March 2022, the Fed rocketed rates from zero to 4.25%. REITs got slammed. Regional banks imploded. Small caps bled out. But Apple, Microsoft, Nvidia, Google, Amazon, Meta and Tesla? 

Different planets.

Strip out the Mag 7, and most investors would be flat or negative for two years. These seven stocks ARE the S&P 500's gains.

Why Cash is King

The reason is simple math. They have hundreds of billions in cash. They don't need to borrow. Higher debt costs are irrelevant when you're sitting on a fortress balance sheet earning 5.5% on cash while your competitors scramble for financing.

The Sorting Mechanism

But here's the deeper game: rates became a sorting mechanism, not a market killer.

The bottom 493 S&P stocks? 

Crushed by borrowing costs and slowing growth. 

Double hit - expenses up, revenues down. Meanwhile, AI growth narratives continue running well above GDP. 

Nvidia's earnings estimates exploded in 18 months while industrial companies fight for survival.

Gravitational Force in Action

This creates what I call gravitational force. 

In volatile times, money crowds into "safe growth." The cash-rich tech giants with AI exposure become the only game in town.

I track this through my FNGD system - it predicted the English guilt crisis, Silicon Valley banking crisis, and every major leverage unwind since 2022. 

Right now, it's telling us the strength remains concentrated in Mag 7 while 40% of Russell 2000 companies are unprofitable.

Your Trading Playbook

Your playbook depends on what happens next.

If rates fall, the rest of the market can finally breathe. Russell 2000 rotation becomes the trade. Small caps, industrials, cyclicals - they get oxygen again.

If rates stay high, this sorting mechanism continues. Mag 7 keeps pulling indices higher while everything else suffocates.

Tomorrow's CPI won't touch the Mag 7 - they're insulated. But it'll move everything else. 

Watch the Russell's reaction. 

That's your tell for whether the great rotation finally begins or if we stay in this bifurcated market for months ahead.

The math is brutal: cash-rich AI companies versus debt-loaded everything else.

Position accordingly.

Stay positive,

Garrett Baldwin

P.S. Make sure to join me live tomorrow at 8:45 AM ET, where I’ll dissect the upcoming CPI data release and help you find real-time trading opportunities. 

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