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The Cboe S&P 500 Dispersion Index has spiked to its highest-ever monthly average through mid-April 2025, suggesting tariffs are creating a new economic regime that will widen the gap between stock winners and losers, according to a new CFRA report released Monday.
This rising dispersion environment signals potential opportunities for both ETF issuers and investors to develop new strategies that can better capture the differentiated impact of tariffs on specific stocks, as many existing sector and factor ETFs may not adequately address these new market dynamics.
The dispersion index, which measures expected differences in returns between S&P 500 stocks over the next 30 days, has jumped to a median value of 41.5 since April 2, according to CFRA research. This marks an increase from the 24.4 median daily value recorded over the previous decade.
Through April 17, this represents the highest monthly average in the 10-year history of the index, though it's still below the single-day record of 58.9 set during the Covid-19 pandemic in March 2020, the report notes.
Tariff Winners and Losers Emerge Across Sectors
According to CFRA, the limitations of traditional ETFs in the current environment are evident when examining discount retailers with different import profiles.
While Dollar General Corp. (DG), Dollar Tree Inc. (DLTR) and Five Below Inc. (FIVE) all had negative returns ranging from -46% to -51% in 2024, their performances have diverged since tariffs were announced in February 2025, with Dollar General gaining 30.2%, Dollar Tree rising 10.5% and Five Below falling 26.9% during that period.
The nature of tariff impacts varies across industries, with Dollar General outperforming its peers after tariffs were announced due to its lower reliance on imports, according to the CFRA analysis. The company imports only about 10%-15% of its products, compared to approximately 50% for Dollar Tree and 50%-60% for Five Below.
Similarly, companies like Coca-Cola Co. (KO) with international sales have benefited from the weaker U.S. dollar, which has declined as a result of the current tariff policies, the report indicates.
New Opportunities for ETF Innovation
Traditional factor ETFs that effectively captured market dynamics in 2024 have shown narrowing performance spreads this year, as they aren't designed to differentiate stocks based on tariff exposure, according to CFRA data.
While growth outperformed value by almost 16.8% last year, that gap has decreased in 2025—to 6.8% following the initial tariff announcement on Feb. 1 and then to 0.1% after the global tariff announcement on April 2.