This video discusses the potential for a market crash within the next 90 days, contrasting the celebratory mood of many investors with the concerns of institutional investors. The speaker analyzes three key factors ("three horsemen")—tariffs, earnings illusions, and market overvaluation—to support the prediction of an impending pullback. The video concludes by recommending two specific ETFs, XLE and JPQ, as strategic investments to navigate the potential market downturn.
The "three horsemen" identified as contributing factors to a potential market pullback are: a lingering tariff time bomb impacting major trade relationships (primarily between the US, China, and the EU); an earnings illusion due to companies having sold stockpiled goods before tariffs significantly affected pricing; and market overvaluation indicated by a high forward PE ratio.
The two recommended ETFs are: XLE (Energy Select Sector Spider ETF), representing the energy sector; and JPQ (JP Morgan NASDAQ Equity Premium Income ETF), focusing on the NASDAQ 100 and using option strategies.
The video describes the current earnings situation as an "illusion" because many companies' Q1 earnings were better than expected due to sales of goods stockpiled before tariffs significantly impacted costs. The implication is that future earnings will be negatively affected by the higher prices resulting from these tariffs.
Key characteristics of the XLE ETF mentioned include: it is down 7% over the past 12 months (representing a discount opportunity), has an incredibly low expense ratio of 0.08%, holds 26 companies (with the top 10 accounting for nearly 75% of the fund, including major energy companies like Exxon Mobile and Chevron), and offers a juicy dividend yield of 3.5% with a 4.5% 5-year dividend growth rate.
