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The JP Morgan Equity Premium Income Fund (JEPI) is doing modestly well this year as the stocks rally gains steam. JEPI was trading at $55.57 on Wednesday, a few points below the year-to-date high of $55.85. The fund has jumped by more than 11% from the lowest point this year.
A good fund for income investors
Regular readers know that I am a long champion of investing in normal exchange traded funds (ETFs) like Invesco QQQ and SPDR S&P 500 Trust (SPY). These passively managed funds have done well over the past decades and I suspect that they will thrive in the future.
At the same time, I have championed adding a few actively managed funds to portfolios. JP Morgan Equity Premium Income (JEPI) and JP Morgan Nasdaq Equity Premium Income (JEPQ) are two of the best of actively managed funds.
JEPI is a unique fund that aims to benefit when American stocks are rising and provide adequate monthly returns to investors. In just a few years, the fund has attracted over $29 billion in inflows, with most investors loving its 10% yield.
JEPI works in a relatively unique manner. It invests 80% of its funds to equities, mostly those in the S&P 500 index. Its biggest constituents are companies like Amazon, Adobe, Microsoft, and Mastercard.
The remaining 20% are allocated towards exchange-linked notes (ELN). ELNs are financial derivatives issued by counterparties like banks and broker-dealers. It also uses the covered call approach, which I wrote about here. This model makes it possible for the fund to generate regular income.
The main catalyst for JEPI going forward will be the actions by the Fed. While Jerome Powell has hinted that the bank will continue hiking rates, data suggests otherwise.
For example, consumer confidence has started moving downwards while the labor market is showing signs of easing. Data by ADP showed that the private sector added 177k jobs in August, down from the previous 320k. Therefore, the futures market expects that the bank will start cutting rates in 2024.
JEPI ETF stock price forecast
The daily chart shows that the JEPI fund has been in a strong bullish trend in the past few months. Along the way, the fund has formed an ascending channel shown in black. It is now attempting to retest its upper side.
JEPI has also moved above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has risen above the neutral level. The Awesome Oscillator has moved above zero. Therefore, I suspect that the JEPI ETF will likely continue rising as buyers target the key resistance level at $60. This view is in line with my recent JEPI forecast.
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