JEPI - JEPI Doesn't Fare Well In Rising Markets
2024-01-27 23:05:01 ET
Summary
- Earlier last year, I thought JEPI was a good ETF option compared to SCHD. This view mostly played out, but the relative alpha made here got neutralized in December 2023.
- Now, I have a more bearish outlook on JEPI as I do not like its underexposure to key names in the Information Technology sector, which I think will do well.
- JEPI has 13% of its portfolio allocated to a covered call strategy. Such a strategy does not fare well in rising markets.
- I believe we are in a rising market, as my technical analysis suggests that the SPY's breakout of all-time highs is a genuine one.
- Overall, I note that JEPI has the same valuation as SPY but with more unfavorable portfolio exposures. Hence, I anticipate it to underperform. I prefer VOO, and for yield-focused investors, I think private equity plays are a better option.
Performance Assessment
Last year, I was bullish on the JPMorgan Equity Premium Income ETF ( JEPI ) relative to the Schwab U.S. Dividend Equity ETF ( SCHD ). This view played out for the most part, however in December 2023, the alpha created by JEPI relative to SCHD was nullified to close to 0 as there was a reversal in the pair trade. I have discussed more details on this performance in my latest article on SCHD ....
JEPI Doesn't Fare Well In Rising Markets