ETF Allocation Strategy: Positioning for the Next 6–12 Months

Executive Summary
(NOT FINANCIAL ADVICE - ENTERTAINMENT ONLY)

Our current market assessment calls for a bullish but increasingly volatile environment. The U.S. economy continues to expand, inflation is moderating, corporate earnings remain supportive, and the AI investment cycle remains powerful. However, weakening employment, expensive equity valuations, narrow market breadth, and significant rotation beneath the surface argue against an aggressively concentrated growth portfolio.

For that reason, we favor a portfolio designed not simply to outperform in a rising market, but to generate returns across multiple market environments.

Our recommended allocation is:

Why We Are Increasing the Role of DIVO

The largest allocation is DIVO at 30%, and this is deliberate.

We believe the next several months could produce a market characterized by large swings without necessarily generating a sustained directional trend. In such an environment, simply owning more beta is not necessarily the optimal strategy.

DIVO provides exposure to dividend-paying equities while utilizing an opportunistic covered-call strategy to generate additional income and potentially reduce portfolio volatility. Amplify DIVO information

This makes DIVO particularly attractive in a market where investors may experience:

• Elevated volatility

• Periods of sideways trading

• Sharp but temporary corrections

• Continued sector rotation

• High equity valuations

DIVO should not be mistaken for cash or a bond substitute. It remains an equity investment and can decline materially during a major bear market. Its purpose is instead to produce cash flow and potentially dampen volatility while remaining invested in equities.

SPY Remains the Foundation

At 25%, SPY remains the portfolio's core holding.

We do not want to abandon the secular U.S. equity bull market simply because valuations are elevated. SPY provides broad exposure to the U.S. large-cap economy and allows the portfolio to participate if earnings growth continues and the soft-landing scenario develops.

Importantly, SPY already provides substantial exposure to technology and the largest AI beneficiaries. Therefore, we do not need an oversized QQQ position to participate in the technology cycle.

SCHD Provides the Quality Counterweight

We allocate 15% to SCHD.

SCHD is fundamentally different from DIVO. While DIVO emphasizes income generation through dividends and option premiums, SCHD provides exposure to companies selected for strong dividend characteristics and underlying business quality. Schwab SCHD information

Together, DIVO and SCHD represent 45% of the portfolio.

This is not an attempt to turn the portfolio into an income portfolio. It is an attempt to create a substantial quality and cash-flow component capable of performing reasonably well when pure growth stocks are struggling.

QQQ and SMH Remain Important—but Controlled

We maintain:

• 10% QQQ

• 10% SMH

We remain bullish on artificial intelligence, semiconductors, data-center investment, and technology-driven productivity.

However, the recent market action demonstrates why we don't want excessive concentration.

AMD has risen sharply while AVGO and AMAT have experienced significant declines. NVDA has traded enormous volume while remaining essentially flat.

The message is clear:

The AI trade remains intact, but investors are becoming much more selective.

SMH gives us diversified semiconductor exposure rather than requiring us to identify the individual semiconductor winner.

QQQ provides additional exposure to the broader technology and growth complex.

Combined with SPY, these positions provide substantial participation in an AI-driven continuation of the bull market without allowing the entire portfolio to become dependent on mega-cap technology.

IWM Is Our Economic Expansion Bet

We allocate 10% to IWM.

Small-cap equities are more economically sensitive and therefore provide a useful way to participate if the current soft-landing thesis develops into broader economic expansion.

If:

• inflation continues to moderate,

• the Federal Reserve becomes less restrictive,

• credit conditions improve,

• employment stabilizes, and

• economic growth broadens,

small-cap stocks could experience significant relative strength.

Conversely, IWM is one of the positions most vulnerable if the economy enters recession.

That makes IWM less of a defensive holding and more of a high-conviction macro option on economic broadening.

Why DIA Receives a 0% Allocation

DIA is not a bad ETF.

We simply don't believe it adds enough to this particular portfolio.

SPY already provides broad large-cap exposure. SCHD provides quality and dividend exposure. IWM provides cyclical/small-cap exposure. DIVO provides income and volatility management.

DIA would therefore introduce substantial overlap without providing a sufficiently differentiated portfolio function.

We would rather concentrate capital in the six ETFs that serve distinct purposes.

The Portfolio's Four Engines

The allocation can be viewed as four separate return engines:

1. Core Equity Growth — 25%

SPY

The foundation of the portfolio.

2. Income and Quality — 45%

DIVO + SCHD

The portfolio's volatility and cash-flow ballast.

3. Technology and AI — 20%

QQQ + SMH

The portfolio's secular-growth engine.

4. Economic Reacceleration — 10%

IWM

The portfolio's bet on broader economic participation.

This creates a portfolio that does not require one specific market outcome to succeed.

How We Expect the Portfolio to Behave

If the AI bull market accelerates

QQQ, SMH and SPY should lead.

The portfolio participates meaningfully, although DIVO may lag a pure-growth portfolio during a runaway rally.

If the economy experiences a soft landing

SPY, SCHD and IWM should benefit, while DIVO continues generating income.

This is arguably the most favorable scenario for the overall portfolio.

If the market moves sideways

This is where the 45% DIVO/SCHD allocation becomes particularly important.

Rather than relying entirely on capital appreciation, the portfolio continues generating dividends and option income while waiting for the next directional move.

If the market experiences a moderate correction

DIVO and SCHD should provide some relative resilience, while the accumulated income can be redeployed into SPY, QQQ, SMH or IWM at lower valuations.

If the U.S. enters a recession

No equity allocation is immune.

DIVO and SCHD should not be treated as substitutes for cash or Treasury securities. A severe recessionary bear market could still produce substantial losses across the portfolio.

Our Preferred Strategy: Use Volatility Rather Than Fear It

We would not necessarily deploy all capital at once.

The strategic allocation is more important than attempting to identify the precise market top or bottom.

A preferred approach would be to establish the target positions progressively and maintain some deployable capital outside the equity allocation until the market provides better opportunities.

This is particularly important because the current environment combines strong earnings and AI investment with weakening employment, elevated valuations and uncertain monetary policy.

Bottom Line

Our preferred allocation is:

30% DIVO

25% SPY

15% SCHD

10% QQQ

10% IWM

10% SMH

0% DIA

This is not a portfolio designed to win a single market scenario.

It is designed to compound capital through an uncertain market regime.

We remain bullish on U.S. equities and the long-term AI investment cycle, but we do not believe investors should assume that the next phase of the bull market will resemble the last one.

The next phase is likely to be characterized by greater dispersion, greater rotation and greater volatility.

Our strategy is therefore straightforward:

Own the broad market. Participate in AI. Maintain exposure to an economic recovery. Emphasize quality and cash flow. And use volatility as an opportunity rather than a reason to abandon equities.

The objective is not to predict every market move.

The objective is to build a portfolio that remains investable regardless of which market regime comes next.

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