VettaFi’s Murphy Discusses Q2 Earnings & Sector Trends on CNBC’s ETF Edge

VettaFi Director of Research Cinthia Murphy appeared on CNBC’s ETF Edge to discuss second-quarter earnings, thematic ETFs, and sector trendsKey Takeaways Increased capital expenditures into AI infrastructure is lifting the broader market, with the earnings gap between the Magnificent Seven and the rest of the S&P 500 narrowing as growth spreads beyond the tech sector. Industrials are seeing increased profitability and valuation growth by providing the essential physical infrastructure required to support data centers and other AI projects. In anticipation of potential future interest rate hikes, investors are adopting a barbell approach to bond ETFs. That involves balancing short-term defensive positions with allocations to longer duration fixed-income sources. AI Capex Boosting the Broader MarketAs we approach the busiest week of Q2 earnings, the broader market continues to outperform expectations. Approximately 88% of S&P 500 companies’ earnings announcements so far have beaten analyst expectations, according to FactSet analysis.  Murphy explained that the increased capital expenditures into AI infrastructure seen throughout 2026 are lifting the broader market. The gap in earnings growth between the Magnificent Seven companies and the remaining S&P 500 constituents is beginning to narrow as the earnings benefit from investment in AI infrastructure shows signs of growth in other parts of the market.  “I’m really amazed by the persistence of the semiconductor and memory play. As much as we like to say this is really overrun and it needs a correction — you know we’ve seen headlines about chips being in a bear market now — we see a ton of money flowing into this part of the hardware infrastructure of the AI story that’s still running,” said Murphy. “The concept of the bottleneck remains a big strong driver of asset flows and performance,” she added. Benefiting Beyond the Tech SectorMurphy discussed how the industrial sector in particular is benefiting significantly from the AI infrastructure buildout. Despite AI being a play on technology, the physical infrastructure to support data centers and other AI projects requires industrials. This has lifted overall profitability for the sector. “If you look at (XLI A) from State Street Sector SPDR, the valuations are really high relative to the S&P 500. It’s as high as tech. It really is a sector that has had its moment in the sun and picked up a lot of attention and flows. Nothing is going to happen without a lot of focus on infrastructure and the buildout that comes with it,” Murphy noted. While many sectors are already benefiting from the AI infrastructure buildout, Murphy emphasized that forward guidance will be an important area to watch for throughout second quarter earnings. She expected that, if rate expectations remain the same, investors will likely see a push toward more defensive sectors and value as the overall market growth broadens across sectors. Gauging Consumer Sentiment With ETFsWhen asked about what ETFs serve as indicators of trends in consumer spending, Murphy explained that investors have seen a dichotomy between consumer sentiment data showing low readings and consumer spending remaining strong. She pointed to the Amplify Online Retail ETF (IBUY C+) as a way to gauge consumer sentiment based on online spending, while also noting the VictoryShares Free Cash Flow ETF (VFLO B+) as an example of a fund composed of high quality companies that is also affected by changing consumer sentiment. Preparing for Potential Rate HikesLooking ahead to future interest rate decisions from the Federal Reserve, Murphy noted that during a Federal Reserve testimony to Congress this past week, Kevin Warsh emphasized the goal of delivering price stability. She elaborated that the general sentiment is that rates will go up in the near future, whether it’s in the upcoming months or next year. In response to expectations of a future rate hike, investors are increasingly allocating capital towards bond ETFs. “Over 35% of flows year-to-date have gone into bond ETFs. But we’re seeing that money…allocated either in the very short end, your cash-like defensive positioning, or on the other end,” Murphy noted. “So we’re seeing a kind of barbell approach that is looking for the short end and then securitizing debt and alternative fixed income sources on the other end.” For more news, information, and analysis, visit the Thematic Investing Content Hub. VettaFi LLC (“VettaFi”) is the index provider for VFLO and IBUY, for which it receives an index licensing fee. However, VFLO and IBUY are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of VFLO and IBUY.