How ETF investors should view the ‘great expectations’ of earnings season
Speakers
Cinthia Murphy
— Investment Strategist, TMX
Jon Maier
— Chief ETF Strategist, JPMorgan Asset Management
Summary
CNBC's ETF Edge discusses earnings season expectations with JPMorgan's Jon Maier and VettaFi's Cinthia Murphy. They see a broadening market beyond mega-cap tech, with strong consumer spending and persistent AI hardware demand driving ETF flows. The guests highlight specific ETFs for consumer (IBUY, VFLO), memory (DRAM), active tech (JTEK), industrials (XLI), and low-volatility income (JPI). They also cover bond market trends and the Fed's outlook.
- Earnings season is solid with beats rewarded, but expectations remain elevated.
- Market is broadening beyond the top mega-cap tech names.
- Consumer spending remains robust despite low sentiment, favoring online retail (IBUY) and high-quality cash flow ETFs (VFLO).
- The AI memory bottleneck theme continues to draw massive flows into the DRAM ETF.
- Active tech ETF JTEK reduces concentration risk via bottom-up research.
- Industrials (XLI) benefit from AI infrastructure buildout and defense spending.
- The derivative income ETF JPI offers lower volatility and an 8% distribution.
- Bond investors are using a barbell approach, avoiding Treasury duration for short-term and securitized debt.
Ideas
Consumer strength supports IBUY and VFLO.
Despite low consumer sentiment readings, actual consumer spending remains strong, particularly in travel and online retail. ETFs like IBUY (online retail) and VFLO (high free cash flow, quality companies) capture this strength and are performing well.
AI memory bottleneck drives DRAM ETF.
The AI hardware bottleneck, especially in memory/semiconductors, remains a strong driver of asset flows and performance. The DRAM ETF offers concentrated growth exposure to this persistent theme, though best used as a satellite holding rather than core portfolio.
JTEK offers broad active tech exposure.
To avoid FOMO-driven narrow bets and manage risk in tech, investors can use the actively managed J-Tech ETF (JTEK). It uses bottom-up research to find earnings and valuation opportunities across the tech sector, rather than being exposed to very narrow segments like memory.
JPI provides income with lower volatility.
For investors seeking lower volatility than the S&P 500 and attractive income, JPI offers a derivative income overlay that results in about 60-65% of S&P 500 volatility and approximately an 8% distribution, suitable for moderately aggressive clients.
Industrials benefit from AI infrastructure, XLI.
Industrials are benefiting from AI infrastructure buildout (data centers, energy grid) and from geopolitics/defense spending. The sector has had a strong year with high valuations relative to the S&P 500, but tailwinds continue to support XLI and attract heavy flows.
