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Low-volatility stocks have recently been outperforming the S&P 500 (^GSPC) — up nearly 4% since the beginning of 2025 — after a lackluster past few years. Yahoo Finance's Madison Mills takes a closer look at this trend in several low-volatility ETFs in today's Chart of the Day.
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This post was written by Sydney Strauss
Time now for our chart of the day after two underwhelming years. Low volatility stocks have actually become one of Wall Street's top performers. Madison Mills has a closer look. Maddie.
That's right, Shauna. Taking a look at a little bit of recession recession risk coming into the market here in one example of that potentially is the huge success we've seen in low volatility stocks having their best out performance versus the S&P 500 that we've seen in years. So at this chart behind me, you can see the underperformance of the S&P 500 down about 5% from its last all-time high. And then you've got the outperformance of these low volatility ETFs that are up nearly 4% since the start of the year here and experiencing record-breaking inflows to the upside leading to these gains that you are seeing. Now, as I mentioned, this is part of a little bit of a momentum unwind that we are seeing and perhaps a recession risk trade that is developing on Wall Street because it's not just low volatility stocks that we're seeing inflows into. We're also seeing outflows from the likes of bank stocks, inflows into consumer staples that are seen as potentially recession proof because you need some of those consumer staples, they're not necessarily wants. At the same time, you have the Russell 2000 small cap stocks still underperforming off the idea that the Fed may be unclear on interest rate moves moving forward and investors are still, of course, sussing out where the market is heading. Is there a fundamental shift in the market that needs to be digested even more, which would push the S&P 500 down potentially even more than it is right now, or is this just a moment of economic slowdown, a little bit of slowing before slowdown rather, and confusion as the market digests the impact of all that policy from the White House, Shauna?
All right, Maddie. Thanks so much.