LIVE MARKETS-At the quarter pole, low volatility sets the pace

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AT THE QUARTER POLE, LOW VOLATILITY SETS THE PACE

When it comes to major style factors that have historically driven portfolio returns, low volatility is leading the pack early in 2025.

Major investing style factors include stocks discounted to their fundamentals (value), financially sound companies (quality), size (small caps), stable, lower-risk stocks (low volatility), and stocks exhibiting upward price trends (momentum).

To this, let's add in as separate factors mid- and large-caps, high-growth companies (growth), and those stocks that provide income (dividends).

As of the end of Q1, the SPDR S&P 500 ETF Trust SPY.P is down 4.6% year-to-date (YTD).

Here is a graphic showing the YTD factor percentage changes as well as how they have performed vs the SPY (factor/SPY ratio change):

Not surprisingly, given uncertainties surrounding tariffs and interest rates, low volatility SPLV.K, which is defensive and seen as an attractive alternative for risk adverse investors, is showing a 6.7% YTD advance.

Nearly a third of the SPLV's exposure at the end of February was in utilities and consumer non-cyclicals. Staples .SPLRCS and utilities .SPLRCU, both up more than 4% YTD, are the second and third best performing S&P 500 index .SPX sectors this year.

The only other factor in positive territory this year is dividends NOBL.K, up 2.6%.

Value SPYV.K, down 0.1%, momentum MTUM.K, off 2.4%, and quality QUAL.K, down 4.0%, are all negative but holding up better than the SPY.

Large caps SCHX.K, off 4.7%, are roughly flat vs the SPY.

Mid caps IJH.P, down 6.4%, growth SPYG.K, down 8.6%, and small caps IWM.P, down 9.7%, are much weaker than the SPY.

Of note, momentum, growth, and small caps all dropped off significantly last month.

Momentum and growth both suffered at the hands of Mag 7 and tech weakness. Indeed, the Solactive Mag 7 index .MAG is down about 17% YTD, and in March it saw its biggest monthly slide since December 2022.

Meanwhile, tech .SPLRCT, which is down about 13% YTD, is the second weakest S&P 500 sector so far this year, and last month, the group suffered its biggest monthly drop since September 2022.

Tech accounted for around 26% of the momentum ETF's exposure at the end of February, and nearly 60% of the growth ETF's weight.

It's still early in the 2025 race, but traders will be keeping a close eye on all these factors as they jockey for position throughout the year.

(Terence Gabriel)

FOR TUESDAY'S EARLIER LIVE MARKETS POSTS:

UK TO AVOID RECIPROCAL TARIFFS BUT GROWTH TO FALL ANYWAY - GOLDMAN - CLICK HERE

LIBERATION DAY QUESTIONS: WHO AND WHAT? HOW HIGH? HOW LONG? - CLICK HERE

STOXX REBOUNDS FROM NEAR 2-MONTH LOWS - CLICK HERE

BEFORE THE BELL: EUROPE EYES TENTATIVE BOUNCE AS Q2 STARTS - CLICK HERE

A DEEP BREATH BEFORE 'LIBERATION DAY' - CLICK HERE