ETF Edge on setting up for earnings season with ETFs
Speakers
Jon Maier
— Chief ETF Strategist, JPMorgan Asset Management
Cinthia Murphy
— Investment Strategist, TMX
Summary
JPMorgan's Jon Maier and VettaFi's Cinthia Murphy discuss ETF strategies for earnings season on CNBC's ETF Edge. They see earnings broadening beyond mega-cap tech, with consumer resilience supporting online retail and quality ETFs. AI infrastructure fuels industrials and memory semiconductors; they propose active tech (JTEK), low-volatility income (JEPI), and international Europe exposure.
- Earnings season expected to be robust with broadening beyond mega-cap tech names.
- Consumer spending stays strong despite weak sentiment, supporting online retail (IBUY) and quality ETFs (Vflow).
- AI infrastructure buildout lifts industrial sector via XLI and memory/semiconductor play via DRAM ETF.
- Active management can mitigate concentration risk in technology through JPMorgan's JTEK.
- JEPI offers lower volatility equity income with about 8% distribution.
- International flows surge; Europe seen improving due to defense spending and bank recovery.
- Fixed-income investors shift to short duration and securitized credit, avoiding long Treasury duration.
Ideas
Online retail ETF plays resilient consumer
Consumer spending remains resilient despite weak consumer sentiment data, creating an opportunity in online retail. The IBUY ETF captures online retail spending and is an interesting play on this dichotomy.
Quality ETF Vflow benefits from cash flow
High-quality companies with strong free cash flow and high growth prospects are performing well and offer a way to play consumer strength and the broader market with a quality tilt. The Vflow ETF holds such names, including Walt Disney, and is a high-quality portfolio benefiting in this environment.
Active tech ETF reduces concentration risk
Active management in technology can benefit investors by selecting undervalued names and avoiding narrow concentration. JPMorgan's JTEK ETF uses bottoms-up research to capture tech earnings while mitigating risk, as excitement around memory and AI drives FOMO and high volatility in narrow segments.
AI memory bottleneck drives DRAM ETF
The memory/semiconductor bottleneck theme persists as a strong driver of asset flows and performance. The new DRAM ETF offers targeted exposure to the AI memory opportunity, though it is a high-risk thematic play best used as a growth component on top of a core portfolio.
JEPI offers income, lower volatility
JEPI ETF provides equity income with lower volatility (60-65% of S&P 500) and a current distribution of about 8%, making it suitable for investors seeking reduced volatility and income while still participating in equities, especially when individual stock volatility is high.
Industrials XLI lifted by AI infrastructure
The AI infrastructure buildout (data centers, energy grid) has pushed up industrials. XLI (Industrial Select Sector SPDR) now trades at valuations as high as tech, supported by AI capex and defense tailwinds, and has seen strong flows and attention.
Europe improves: defense spending, bank recovery
International equities, particularly Europe, are seeing record flows and improving fundamentals. NATO allies are increasing defense spending, European banks are improving, and the region is becoming increasingly attractive as an investment destination.
