No matter which factor you look at, the S&P 500’s returns this year have been bleak.
The S&P 500 in September posted its worst month since March 2020, declining 9.2% last month, bringing the index’s total return for the first three quarters of the year to a dismal -23.9%, according to S&P Dow Jones Indices.
The market had rallied in the beginning of the month, peaking on September 12 with a 4.0% gain. Following the release of the Consumer Price Index on September 13, which showed unexpectedly strong, and decidedly non-transitory, core inflation, the market subsequently declined by 12.7% through month-end, according to S&P Dow Jones Indices.
Risk-off factors are holding up better than others, however. The S&P 500 Low Volatility High Dividend Index has managed to close out the first nine months of the year declining just 11.0%, substantially mitigating the losses of the S&P 500. Growth and pure growth, on the other hand, closed out the third quarter posting year-to-date declines of 30.4% and 30.9%, respectively.
Investors can add exposure to the S&P 500 Low Volatility High Dividend Index, which is composed of 50 securities traded on the S&P 500 Index that historically have provided high dividend yields and low volatility, with the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD).
In order to achieve its goal, SPHD exhibits sector tilts, overweighting utilities, real estate, consumer staples, and materials, and underweighting IT, consumer discretionary, healthcare, and industrials, compared to the S&P 500.
SPHD imposes guardrails that prevent a single sector from dominating the portfolio, with each sector limited to 10 stocks and 25% of the portfolio at rebalance. Between rebalances, better-performing sectors can become a bigger slice of the pie, according to VettaFi.
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