This 10% Dividend Will Be The First To Fall In The Next Pullback

Group 1: Market Overview - The S&P 500 index has already increased by nearly 10% in 2025, with four months remaining in the year, which is atypical as the average annual return is around 10% [3][4] - The current market sentiment, as indicated by CNN's Fear and Greed Index, shows a shift from "extreme greed" to "greed," suggesting potential market cooling [4][5] Group 2: Earnings Performance - Strong earnings growth has been observed, with 81% of companies beating their Q2 estimates, resulting in an overall earnings growth of 11.8% [6][5] - The rise in earnings is attributed to AI-driven productivity gains and the resilience of the US economy [5] Group 3: Valuation Concerns - The S&P 500's price-to-earnings (P/E) ratio has increased to 25.9, significantly higher than the historical average and reminiscent of the dot-com era when the P/E reached 30 before a market decline [7][8] Group 4: Closed-End Funds (CEFs) Analysis - The Gabelli Equity Trust (GAB) offers a high dividend yield of 10.1% but is currently trading at a 6.6% premium to its net asset value (NAV), indicating it may be overpriced [9][10] - In contrast, the Adams Diversified Equity Fund (ADX) is trading at an 8% discount to NAV and has demonstrated superior long-term performance, with a 323% market-price-based return over the last decade compared to GAB's 176% [11][12] Group 5: Investment Strategy - The recommended strategy involves selling overpriced assets like GAB and purchasing undervalued options like ADX, which aligns with the classic investment principle of buying low and selling high [12][13]