AI Bubble? January Selloff? These 8% Dividend Stocks Thrive in Chaos

Core Viewpoint - Current market volatility presents a significant opportunity for investors in covered-call closed-end funds (CEFs) that yield over 8% due to the income generated from option strategies [1][6] Market Conditions - Recent calm in the market has made these funds attractive bargains, but historical patterns suggest a potential downturn is likely, with 2026 expected to follow a similar trend as previous years [2][3] - The CNN Fear & Greed Index indicates investor anxiety, which could lead to increased selling on negative news [4] Economic Indicators - Despite investor fears, the economy shows strong growth, with the Atlanta Fed's GDPNow indicator projecting a 3.8% growth rate [5] - The upcoming 2026 election year is anticipated to inject more money into the economy, potentially stabilizing market conditions [5] Fund Analysis - The Nuveen S&P 500 Dynamic Overwrite Fund (SPXX) has a 7.9% yield, which has increased by 38% over the last five years, and it sells options on 35% to 75% of its portfolio [8][12] - SPXX has delivered a total return of 10% over the past year, demonstrating its role as a stabilizing investment during market volatility [9][10] - The BlackRock Enhanced Equity Dividend Trust (BDJ) offers an 8.1% yield, with a diversified portfolio and a history of increasing dividends by 33% over the last decade [11][12] Investment Strategy - Covered-call funds are positioned to benefit from market volatility, providing high current income and additional income when option income spikes [6][12] - Both SPXX and BDJ are expected to perform well in the current market environment, with SPXX trading at a significant discount to NAV and BDJ maintaining a stable discount around its five-year average [10][13]