Low-volatility stocks are gaining while the S&P 500 struggles amid a selloff in artificial-intelligence names and high bond yields. The Invesco S&P 500 Low Volatility ETF has rallied more than 8% over the past month as the index lost almost 4%.
The Invesco S&P 500 Low Volatility ETF has rallied more than 8% over the past month, even as the S&P 500 lost almost 4% over the same period. Stocks that tend to see smaller moves than the broader index are shining while momentum stocks stumble.
Hot inflation data hits stocks
U.S. stocks sold off on Tuesday, with the S&P 500, Dow Jones Industrial Average and Nasdaq Composite all finishing in the red. A hotter-than-expected inflation report revived anxieties about more aggressive Federal Reserve interest-rate hikes, sending bond yields surging higher.
Low-volatility names sidestepped that move. The Invesco S&P 500 Low Volatility ETF, Fidelity Low Volatility Factor ETF and iShares MSCI USA Min Vol Factor ETF all posted modest gains, according to FactSet data.
Low-volatility funds beat the index
The Invesco fund outperformed even as the Cboe Volatility Index, known as the VIX or Wall Street's "fear gauge," recently soared to its highest level since the spring. So far this month, the fund has gained 2% while the S&P 500 lost 0.8%, according to FactSet data through Tuesday.
The Fidelity fund's top two holdings as of Monday were Apple and Microsoft. It is also beating the S&P 500 in November and over the past month.
Inflows pick up
The performance appears to have captured investors' attention, and inflows to some of these funds have been picking up. The Invesco fund saw about $30 million of inflows over the past month through Monday, while the Fidelity fund attracted more than $55 million, FactSet data showed.
The iShares fund saw outflows of almost $263 million over the past month, but took in almost $71 million on Monday, its biggest daily inflow since Sept. 21.
Chris Zaccarelli, chief investment officer for Northlight Asset Management, said low-volatility stocks may be "a little bit more stable when the market gets more jittery".
Source: MarketWatch
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