One possible reason for the outperformance of low-volatility ETFs in the first few months of the year was that income-starved investors were attracted to conservative sectors that tend to pay higher dividend yields, according to Sam Stovall, chief equity strategist at S&P Capital IQ. [High-Beta or Low-Volatility ETFs?]
However, investors over the past month have been favoring riskier, cyclical sectors such as tech, materials and energy.
Stovall notes that high-beta stocks outperformed low-volatility during the go-go 1990s. That trend flipped during the first 13 years of the new millennium when “fortune did not smile as favorably on high-beta as before,” the strategist said.
Now, investors are wondering whether the S&P 500 has yet again entered into a new secular bull market and if high-beta stocks are “poised to pop” and regain their relative outperformance position, Stovall wrote in a note Monday.
S&P Capital IQ said momentum is now on the side of high-beta. “It appears to us that high-beta is bouncing back,” Stovall concluded. “The only question is for how long.”
PowerShares S&P 500 High Beta
