Investors have grappled with market and economic challenges this year ranging from Federal Reserve (Fed) uncertainty, stubbornly high inflation, the possibility of a recession, a banking crisis, the debt ceiling, ongoing geopolitical tensions, and more. And yet, the stock market has made significant year-to-date gains with the S&P 500 returning 13% and the Nasdaq 29% through June 12. This is further evidence that markets often defy expectations and can rebound when least expected. What factors are driving these returns and how can investors focus instead on long-run trends? Investor sentiment tends to swing from one extreme to the other. At the start of the year, many investors and economists were certain there would be a recession within months that would result in higher unemployment and Fed rate cuts. As we approach the second half of the year, no recession has yet materialized, and many economic trends have surprised to the upside. Headline inflation measures have improved although core inflation remains stubborn. Investors expect a Fed pause and interest rates have stabilized. These factors have helped tech stocks rebound, especially in areas related to artificial intelligence. Markets have made considerable gains over the past few years Despite the strong market gains this year, it is unlikely that investors feel comfortable in the current environment. There is always something new to worry about, a concept often referred to as the “wall of worry.” The wall never shrinks – new building blocks are continually added as investor focus and media coverage shift to the next set of worries. A focus on day-to-day headlines naturally leads investors to have a glass-half-empty view. Current events tend to dwell on unexpected negative events, rather than on the steadier, less noticeable progress that drives stock market returns over years and decades. Today, this short-termism reminds investors that major indices are still in the red when compared to last year’s all-time highs, and that many thorny market and economic issues are still unresolved. This is why it is often important to view the market with a broader perspective. The glass-half-full view, which is much more appropriate for long-term investors, is that many of these issues are slowly improving. As a result, the market has risen 21% from last year’s market bottom, and 73% since the beginning of 2019, despite all the intervening events. These are figures that everyday investors would likely be unaware of if they only followed the day-to-day headlines. Of course, this is not to say that markets only go up or that there is never anything to worry about. Instead, these facts are a reminder for investors to stay disciplined, in both good and bad markets, and to stick with their financial plans. Just as pilots often remind passengers to keep their seatbelts fastened even when the air is calm, periods of positive market performance are the best times for investors to stay balanced and prepare for future uncertainty. The latest data confirm that the economy is doing better than many feared just a few months ago. The recent jobs report showed that 339,000 new positions were created last month, many more than forecasted. Unemployment did tick up to 3.7%, but it has been fluctuating around these levels since last August. What’s more, recent data show an increase in the number of job openings back above ten million across the country. Getting invested is often better than trying to time the market Other issues that have been on investors’ minds have also been resolved, if only temporarily. The latest debt ceiling bill was signed into law after months of posturing and last-minute negotiations. While many of these same issues will re-emerge in the future during budget talks, and again after the next presidential election, the worst-case scenario of a government debt default has been averted. Similarly, the banking crisis has stabilized after the failure and acquisition of First Republic Bank over a month ago. The fact that there are risks for investors to navigate is not only normal but is always the case. The truth is that there are always reasons to be concerned when it comes to the economy and world events. However, this is also why investors are rewarded in the long run. As the accompanying chart shows, getting or staying invested, rather than trying to wait for the next big pullback, is still the best approach.

THE MANDATE The Amplify Transformational Data Sharing ETF (BLOK) is an actively managed fund, seeking to identify the leading companies focused on the transformation and development of the blockchain and cryptocurrency markets. The managers focus on how companies can capture the growth, innovation, and disruption of the blockchain paradigm shift. The evolution of the internet has changed how people communicate. We believe growth companies that embrace blockchain evolution will capture secular growth trends that are accelerating and disrupting core processes in business. We think this is an important secular trend, as Gartner forecasts business value generated by the blockchain could be $176 billion by 2025, and $3.1 trillion by 2030 .

Audio Commentary by Tim Seymour

Audio Commentary by Tim Seymour

Amplify ETFs Declares June (2023) Income Distributions for its ETFs

Amplify ETFs Wins 3 Prestigious ETF Awards from With Intelligence

Audio Commentary by Tim Seymour

RECAP Amplify CWP Enhanced Dividend Income ETF (DIVO) received a 5-star Morningstar RatingTM for the overall period based on risk-adjusted return among 82 funds in the Derivative Income category (as of 06/30/23). DIVO returned 4.70% on a net asset value (NAV) compared to its benchmarks, the S&P 500 TR Index at 6.61% and the CBOE S&P 500 BuyWrite Index at 2.10% for month ending June 30, 2023. The industrials sector (11.23%) contributed most significantly to DIVO’s return for the month of June 2023, followed by energy (10.90%) and financials (16.54%). Positions that contributed most significantly included Deere & Co. (3.16%), Apple Inc. (4.63%), and Visa Inc. (5.42%). Positions that detracted most significantly included General Mills Inc. (2.79%) and Goldman Sachs Group Inc. (4.63%), respectively. The portfolio held nine covered calls1 at the end of June 2023: Deere & Co., Duke Energy Corp., General Mills Inc., Goldman Sachs Group Inc., Johnson & Johnson, Marathon Pete Corp., Schlumberger Ltd., UnitedHealth Group Inc., and United Parcel Service Inc.

RECAP Amplify Natural Resources Dividend Income ETF (NDIV) seeks investment results that generally correspond to the price and yield of the EQM Natural Resources Dividend Income Index. The Index is comprised of dividend-paying U.S. exchange-listed equities operating primarily in the natural resource and commodity-related industries such as: energy, chemicals, agriculture, metals & mining, paper products, and timber. NDIV returned 8.60% on a net asset value (NAV) compared to its benchmark, the EQM Natural Resources Dividend Income Index at 8.72% for the month, as of June 30, 2023. The oil, gas & consumable fuels (76.63%) contributed most significantly to NDIV's return for the month of June 2023, followed by chemicals (13.57%), metals & mining (8.31%) and paper & forest products (1.49%). Positions that contributed most significantly included Petroleo Brasileiro (6.00%), Equinor ASA (3.96%) and Antero Midstream Corp. (3.16%). Positions that detracted most significantly included ICL Group Ltd. (2.45%).

The past few years are proof that market sentiment can turn on a dime. This year’s strong market rally, with the S&P 500 rising 15.9% and the Nasdaq gaining 31.7% in the first half of the year, has been driven by technology stocks, improving inflation, and the absence of a recession. While it may be too early to tell, some investors believe we are in the midst of a new bull market. However, with the Fed and other central banks signaling further rate hikes to return inflation to 2%, others are questioning the sustainability of this year’s rally. For long-term investors, who should be less concerned by day-to-day market swings, what matters more than what we call this market period is the level of valuations and interest rates. What are these factors signaling about achieving financial goals in the coming years? It’s important to start by discussing why valuation measures matter to long-term investors. Simply put, valuations are the best tools that investors have to gauge the attractiveness of the stock market over years and decades. This contrasts with much shorter time frames during which global headlines, industry news, and company-specific events can dominate market movements. These concerns eventually settle and fade, leaving only traces of their impacts on asset prices, underlying fundamentals, or both. Unlike stock prices on their own, valuations don’t just tell you how much something costs, but what you get for your money in terms of earnings, book value, cash flow, dividends, and other measures. After all, holding shares of a company means you are entitled to a portion of its profitability, so paying an appropriate price can improve the odds of future growth. Valuations are correlated with long-term portfolio returns for this reason – i.e., buying when the market is cheap can improve the chances of success, and buying when the market is relatively expensive can reduce future returns. What do valuations tell us today? On the surface, broad stock market valuations are above both their recent lows and historic averages. The price-to-earnings ratio for the S&P 500 (based on next-twelve-month earnings) is 19.1x, well above the average of 15.6x since the mid-1980s. This metric only briefly fell to 15.3x during last year’s bear market crash before rebounding immediately. These numbers are highly dependent on the market and economic cycle and can therefore fluctuate over time. For example, the average over the past decade has been considerably higher at 17.6x, making it more difficult to interpret these valuation metrics. Interest rates also impact stock prices directly through financial markets and investor preferences. When rates are higher, bonds become more attractive relative to stocks since they can generate more income. The resulting headwind on stocks can be interpreted as investors shifting their portfolios toward bonds, or equivalently that stock prices should adjust so that their “yields” rise to new levels. The first chart highlights this relationship by focusing on the earnings yield of the S&P 500, which is just the inverse of the P/E ratio. This measure tells us how much in corporate earnings an investor is “yielding” for every dollar they invest, allowing us to think of stocks in a bond-like way. Specifically, the S&P 500 has an earnings yield of 5.2% compared to 10-year Treasury bonds yielding around 4%. The gap between these two measures – a gauge of the relative attractiveness of stocks over bonds, has fallen as interest rates have risen. On the surface, these measures suggest the market is no longer cheap, which is to be expected after this year’s significant rallies. However, there are big caveats to the preceding discussion. One reason this may be harder to interpret today is that the market’s earnings yield has worsened not only because stock prices have risen, but also because earnings expectations have been flat. However, if the economy does avoid a recession and begins to accelerate, corporate earnings could also recover. This would boost earnings yields, making stocks more attractive again. Given that even the most negative economic forecasts expect only a shallow and short-lived recession, it may be important to not focus too much on near-term earnings outlooks when interpreting valuation measures. Also, longer-term interest rates have been more stable this year despite the possibility of further Fed rate hikes. This could improve the comparison between stocks and bonds over time as well. While valuations are not short-term market timing tools, they are among the most important metrics for constructing long run portfolios that include both stocks and bonds. This is especially true as earnings growth recovers and interest rates stabilize. Investors should focus more on valuations than day-to-day headlines in order to stay focused on their financial goals.