Income-focused investing often leaves too much on the table, says Kathmere CIO
Speakers
Christian — Portfolio Manager at Amplify ETFs
— Chopping Block co-host
Summary
- Investors are rotating out of Mega Cap Tech and into Value, International, and Real Assets due to valuation concerns and AI Capex uncertainty.
- The "Yield Smart" approach (High-quality dividends + tactical covered calls) is outperforming pure "Yield Chasing" strategies in a flat/volatile market.
- Midterm election years historically see the largest drawdowns followed by the largest 12-month capital appreciation, suggesting current volatility is a buying opportunity for the longer term.
- Consumer stress is becoming visible even in defensive sectors like staples (e.g., General Mills), highlighting a "K-shaped" economy where the bottom half is struggling.
Trade Ideas
"We've definitely seen more people rotate out... take some chips off the table when it comes to technology and rotate into some of the sectors like energy, materials, precious metals." As investors fear valuations in Tech, capital is flowing into "Real Assets" and value-oriented sectors. Specifically, Junior Silver Miners and Natural Resources are highlighted as beneficiaries of this rotation and inflation/value dynamics. Long Real Assets and Cyclical Value. A recession or deflationary bust would hurt commodity prices and cyclical sectors.
Christian states that "DVO has gained a little bit over 5% this year... and our IDBO [IDVO] ETF the international version has gained a little over 12%." He contrasts this with a "yield trap" approach, advocating for "yield smart" which leaves room for capital appreciation. In a flat or volatile market (S&P flat year-to-date at time of speaking), strategies that combine high-quality dividend equities with tactical covered calls (written 5-10% out of the money) generate income without capping all upside potential. This offers a superior risk-adjusted return compared to pure high-yield instruments that sacrifice growth. Long "Yield Smart" Dividend/Option Strategies. A massive, rapid market rally would see these strategies underperform pure long delta due to the covered calls capping some upside.
"Some of the leaders of the last couple of years really in the mega cap tech space the hyperscalers have given way now and pulled back some." These companies are transitioning from "asset light" to "capital intensive" (heavy AI Capex). Investors are growing concerned about the timing of the ROI on this spend, prompting a rotation out of these crowded trades into cheaper areas of the market. Neutral/Trim exposure to Mega Cap Tech. AI productivity gains could materialize faster than expected, reigniting the rally in these specific names.
"We saw one of the biggest consumer products names out there and General Mills see a dramatic slide after its CEO told a conference... that they're seeing consumer stresses." Even traditionally "safe" defensive stocks are not immune to volatility if the underlying consumer is weakening. The "K-shaped" recovery means the lower-end consumer is tapped out, making it difficult for staples companies to pass on pricing, leading to margin compression. Watch/Avoid Staples dependent on pricing power. If the economy enters a hard recession, capital may rotate back into Staples purely for safety, regardless of earnings growth.
Christian Magoon
Portfolio Manager at Amplify ETFs
"Right now I would say international is leading and you know it's due to lower valuations and certainly all the spending that's happening overseas on infrastructure and defense." US markets are expensive relative to global peers. The combination of lower multiples abroad and specific fiscal catalysts (defense/infrastructure spending) creates a favorable environment for non-US allocation, particularly while the US dollar dynamics shift. Long International Developed Markets. A strengthening US Dollar would negatively impact returns for US-based investors in international markets.
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This CNBC video, published February 19, 2026, features Christian Magoon, Nick Ryder discussing XLE, XLB, SILVER, DVO, IDVO, SKYY, FNGS, GIS, XLP, EFA. 5 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Christian Magoon, Nick Ryder · Tickers: XLE, XLB, SILVER, DVO, IDVO, SKYY, FNGS, GIS, XLP, EFA