Three ETFs Worth Watching Closely Right Now

Not every week in income investing looks like the crypto bear market I documented in Issues #9 and #10. Some weeks, the portfolio does something that makes you sit up and pay attention for all the right reasons.

The second and third weeks of July have been those weeks.

Three ETFs in my 37-ETF portfolio are telling particularly interesting stories right now — MSTY, GDXW, and GOOW. Each one is performing strongly for different reasons. Each one carries different risks. And each one is being shaped by macro forces that most income investing coverage isn’t connecting clearly enough to actual distribution dollars.

That is what this issue is about.

I want to be clear upfront about the tone I am bringing to this deep dive. I am not declaring victory. I am not telling you these three ETFs are guaranteed to keep performing at current levels. What I am doing is showing you the data, explaining the mechanisms driving the performance, connecting it to what is happening in the world right now, and giving you my honest assessment of what comes next.

That is what The Yield Letter is built on. Real data. Real analysis. No cheerleading.

Here is what I am seeing.

Before I dive into the three ETFs I want to set the stage with two macro developments that are directly affecting covered call premiums across my portfolio right now. Understanding the macro context is not just interesting background — it explains why these ETFs are performing the way they are.

The news cycle this week has been dominated by reports that Chinese AI development is closing the gap with — and in some measures overtaking — US AI companies. Whether that narrative is fully accurate is a separate debate. What matters for this portfolio is what it is doing to implied volatility in US technology stocks.

When investors perceive a genuine competitive threat to dominant US technology companies, the market reprices risk. Alphabet, NVIDIA, Amazon, Microsoft, and the broader Magnificent Seven complex all face questions about their AI moats. That uncertainty — the genuine not-knowing of how this competitive dynamic plays out — gets priced into options markets immediately.

And options market pricing is exactly what funds covered call distributions.

This connects directly to three positions in my portfolio. GOOW is built on Alphabet — directly in the crosshairs of China's AI competition in search and AI products. NVDY is built on NVIDIA — the most exposed US company to any shift in AI chip dominance. MAGY and AMZY hold broad exposure to US tech giants facing the same questions.

Here is the counterintuitive truth that covered call income investors need to understand. A China AI threat is bad news for long-term growth investors holding these stocks. It is potentially good news for covered call income investors in the short to medium term. Why? Because the threat creates uncertainty. Uncertainty creates volatility. Volatility creates richer option premiums. Richer premiums create higher distributions.

I am not rooting for US AI companies to lose their competitive edge. The long-term implications of that would be far more significant than any distribution bump. But in the current environment, the China AI narrative is one of the forces keeping implied volatility elevated across my tech-exposed covered call positions — and that is showing up in my distributions right now.

I covered both of these in Issue #11, and the situation has not materially changed. The Iran conflict resolution continues its pattern of appearing close, then reversing. The new Fed chairman continues to signal that he will not be telegraphing rate decisions in advance.

Both of these conditions — unresolved geopolitical tension and Fed opacity — are contributing to a sustained elevated volatility environment across risk assets. For gold, specifically, the Iran uncertainty is driving safe-haven demand, keeping gold prices elevated and gold mining stocks active. That activity directly feeds GDXW distributions.

For the broader portfolio, the Fed’s new communication posture means options markets cannot price in rate certainty the way they could under previous Fed leadership. That uncertainty premium stays in the options market and flows through to covered call income.

The macro environment right now — China AI competition, Middle East instability, Fed opacity — is genuinely uncomfortable for most investors. For a covered call income portfolio, it is generating real dollars every week.