Top ETFs of the Week
This week, the global disinflationary trend continued to be a dominant theme, driven by cooling CPI data from China and Norway. Central banks, including the Fed and the Reserve Bank of New Zealand, are pivoting toward more dovish stances, with expectations for a Fed rate cut in September at around 70%. Amid this economic backdrop, three ETFs stand out for their unique strategies and performance: SPYI, SVOL, and JEPQ.
1. Neos S&P 500 High Income ETF (SPYI)
The SPYI ETF has rapidly gained attention in the investment community due to its innovative approach to generating income. Unlike traditional covered call strategies that cap upside potential, SPYI's two-phase strategy allows for some participation in market appreciation. This ETF invests in S&P 500 companies and sells covered calls, using a portion of the premiums to buy out-of-the-money call options. This method has allowed SPYI to pay consistent double-digit yields.
AUM: $1.49 billion
Yield: 11.63%
Recent Performance: 1.34% appreciation and 2.06% in monthly dividends since March
AUM: Over $1 billion
Yield: 16%
Volatility: 52-week HV of 7.5
Top Holdings: Microsoft, NVIDIA, Apple, Alphabet, Amazon
Yield: 8.83%
Management Fee: 0.35%
While SPYI does follow the S&P 500, its unique strategy offers a blend of income generation and capital appreciation, making it a compelling choice for income-focused investors. Compared to similar ETFs like JEPI ($JEPI(JEPI)) and XYLD ($XYLD(XYLD)), SPYI has outperformed in total return and yield, despite a lower appreciation rate.
2. Simplify Volatility Premium ETF (SVOL)
SVOL ($SVOL(SVOL)) is designed to capitalize on market volatility through a unique strategy of shorting VIX futures. This ETF has become a significant income generator, boasting a 16% yield with low volatility comparable to bond ETFs like BND.
SVOL's strategy of exploiting the contango pattern in VIX futures allows it to provide stable monthly dividends while mitigating extreme volatility. This ETF is particularly attractive in uncertain macroeconomic conditions, as it offers a robust income stream with manageable risk.
3. JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)
JEPQ ($JEPQ(JEPQ)) offers exposure to high-performing tech stocks while employing a covered call strategy to reduce volatility and generate income. This ETF focuses on out-of-the-money covered calls, providing an attractive balance between income and growth potential.
In the current environment where the NASDAQ-100 trades at high multiples, JEPQ's strategy helps mitigate downside risks while allowing participation in the ongoing tech rally. The fund's use of equity-linked notes (ELNs) introduces some counterparty risk, but its diversified holdings and high yield make it a solid addition for investors looking to hedge their bets on big tech.
Conclusion
In a market characterized by disinflation and dovish central bank policies, SPYI, SVOL, and JEPQ stand out as top ETFs of the week. Each offers unique strategies to generate income and manage risk, making them valuable additions to a diversified investment portfolio. Whether you're looking for high yield, low volatility, or balanced exposure to tech growth, these ETFs provide robust options to navigate the current economic landscape.