The JPMorgan Equity Premium Income ETF (JEPI) and its smaller peer, JPMorgan NASDAQ Equity Premium Income ETF (JEPQ), have jumped by double digits in the past few months.
JEPI has soared by 16% from its lowest point in April, while the JEPQ ETF has jumped by nearly 27%. This article explains why this week could be notable for these boomer candy ETFs.
AI demand gaining momentum
One of the main catalyst for the JEPI and JEPQ ETFs is the ongoing demand for artificial intelligence (AI).
This demand is notable because of the rising NVIDIA stock price, which surged to a record high last week, pushing its market capitalization to over $4 trillion.
AI stocks may continue doing well amid increased demand from Wall Street investors. For example, Meta Platforms, the parent company of Facebook and Instagram, acquired Play AI, a company that uses AI to generate human-sounding voices.
The buyout came a few weeks after the company bought Scale AI in a $14.3 billion deal. Meanwhile, xAI, the parent company of X (Twitter) and Grok, is raising money at a $200 billion valuation.
Therefore, there is a likelihood that the NVIDIA and Broadcom stock prices will continue rising. JEPI and JEPQ ETFs will rally if this happens since AI stocks are some of the biggest constituents.
Corporate earnings ahead
The other major catalyst for these two leveraged fund ETFs are the upcoming earnings season, which starts officially on Tuesday this week.
Historically, stock indices and ETFs have substantial volatility during the season. This volatility did not happen in the last earnings season since it happened shortly after Donald Trump unveiled his trade war.
As such, the results did not have a major impact on these tariffs, which explains why the earnings growth was strong. This earnings season could be different as it will have some impact of the tariffs on companies.
Analysts expect the earnings growth of the S&P 500 Index will be below 5%. On the positive side, as we wrote here, the weak results could mark a bottom, which explains why the ETFs may keep rising.
US inflation and the Federal Reserve
The other potential catalyst for the JEPI and JEPQ ETFs will be the upcoming US inflation data, which will provide more details about Trump’s tariffs.
Economists expect the data to show that the headline consumer inflation rose for the second straight month as companies adjusted their prices to match the impact of tariffs.
A higher-than-expected inflation figure will likely point to concerns about interest rates. It may prompt analysts to delay their interest rate cut date from September to October.
On the other hand, a weaker inflation report will raise the odds of the Fed cutting interest rates soon. Such a move will lead to higher JEPI and JEPQ ETF stocks.
Trade war
The other catalyst for the JEPI and JEPQ funds is the ongoing trade war between the United States. Trump has sent several letters to some of the top trading partners, including the EU, Canada, and Mexico.
He warned them of incoming tariffs on August 1, while the recipients have also warned of a tit-for-tat. The escalation of the trade war will lead to some volatility in the stock market.
JEPQ and JEPI ETFs analysis
JEPI vs JEPQ ETFs | Source: TradingView
The daily charts show that the JEPI and JEPQ ETFs have had a close correlation in the past few months. They all crashed in April at the onset of the trade war and then bounced back. Also, they are all targeting their highest levels this year.
The most likely scenario is where they continue rising this week and retest their YTD highs. In this case, the JEPI ETF will jump to $55, while the JEPQ will hit $58.
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