Under the shadow of tariffs, the US stock market is turbulent and unstable. Low volatility stocks become the new favorite for safe haven.

Due to investor concerns about the impact of US tariffs on the economy, the S&P 500 index has recently plummeted significantly, but low volatility stocks have stood out. Low volatility stocks have outperformed the market. After two years of underperformance, low volatility stocks have become the best-performing investment theme in 2025, ranking first among the 13 themes tracked by Bloomberg Intelligence. Joe Gilbert, portfolio manager at Integrity Asset Management, said, "Investors will have to endure volatility at least for the remainder of the year. Low volatility stocks are investors' safe haven." As traders expect higher tariffs and a slowdown in economic growth to eventually erode corporate profits, they are withdrawing funds from the stock market, favoring those stocks that are often more resilient in volatile markets. The S&P 500 index has dropped 4.9% from its historic highs, almost wiping out the $3 trillion market value gain since the US election. Meanwhile, the two largest low volatility exchange-traded funds (ETFs) - Invesco S&P Low Volatility ETF (SPLV) and iShares Minimum Volatility ETF (USMV) - are achieving their best relative performance in years. Low volatility stocks have outperformed the market so far this year. SPLV tracks the performance of the 100 least volatile stocks in the S&P 500 index. The index outperformed the benchmark index by 5.9 percentage points in February, the largest margin since April 2022, and saw monthly inflows for the first time since August last year. During this period, USMV has outperformed the market by the largest margin since 2019. The excellent performance of these low volatility ETFs has given them a breathing room, as they have been lagging behind the S&P 500 index for the past two years. Last year, their performance was at least 9.5 percentage points lower than the benchmark index. Purchasing low volatility American stocks for the 22V Research low market correlation investment portfolio has been a successful strategy this year. So far in 2025, the portfolio has gained 6.5%, while the S&P 500 index has dropped 0.7%. Its low volatility stocks include engineering products provider Howmet Aerospace (HWM.US), food service provider US Foods Holding Corp. (USFD.US), and energy producer Ovintiv (OVV.US). Dennis DeBusschere, president and chief market strategist of 22V Research, said, "Uncertainty is rising, and with market aversion leaning towards the market, this portfolio suits the trend of 2025." After months of relative calm, investors were rattled this week by the uncertainty surrounding a full-blown trade war. The S&P 500 index rebounded on Wednesday after falling by at least 1.2% on Monday and Tuesday, following US President Donald Trump granting a one-month tariff exemption to automakers and official economic data showing mixed prospects for US economic growth. Stefano Pascale, head of Barclays' US equities derivatives strategy, said, "Although de-risking actions in the US market up to now have mainly focused on tech stocks, disappointing data could expand the selling scope." Is this a buying opportunity at a low? For some investors, the recent decline in the US stock market is starting to present a buying opportunity at a low. Strategists at HSBC earlier this week stated that some sentiment and position indicators suggest that the US stock market is oversold. Bloomberg Intelligence stated that currently, US telecoms, tech, and materials stocks are considered to be the most vulnerable to the impact of the trade war, as these companies have the highest percentage of overseas sales costs. Bloomberg Intelligence analysts Gina Martin Adams and Nathaniel Welnhofer said that the healthcare and consumer goods industries, which have low volatility features, are expected to be least affected by tariffs since they have smaller exposures to overseas markets. The US employment report, to be released this Friday, may be the next key test for the US stock market. Economists expect the US nonfarm payrolls to increase by 160,000 in February, with the unemployment rate expected to remain at 4%, and average hourly earnings expected to grow by 4.1% year-on-year.