By Paul R. La Monica

A tough first quarter on Wall Street is mercifully about to come to an end. But it hasn't been all doom and gloom.

Investors in low-volatility stocks and funds have weathered the storm just fine, thank you very much. And these safe haven stocks may continue to do well in light of all the worries about tariffs and potential stagflation, the combination of stagnant economic growth and higher inflation.

The Vanguard U.S. Minimum Volatility ETF and Invesco S&P 500 Low Volatility ETF are up 4% and 6% respectively so far this year while the S&P 500 and Nasdaq have tumbled 5% and 11%.

"While uncertainty and volatility will continue in the near term, this isn't a market falling apart; it's a market fighting through uncertainty." said Mark Hackett, chief market strategist at Nationwide, in a report Monday.

Investors are fleeing momentum stocks -- including the tech giants of the Magnificent Seven -- in favor of more stable companies that pay higher dividends. The fear of risk is also a key reason why gold has rallied to a record high.

Quantitative strategists at J.P. Morgan Securities suggested in a report Monday this shift may have only just begun, mainly due to concerns about a slowing economy and questions about when the Federal Reserve will begin cutting interest rates again.

"Current late-cycle dynamics and policy uncertainty continue to drive herding into Low Vol, which is still in its early stages," the J.P. Morgan strategists wrote.

Still, investors need to be careful. Low-volatility stocks are no longer bargains given their recent rally. Invesco's low vol S&P 500 ETF now trades at 20 times earnings estimates for this year, only a slight discount to the S&P 500 writ large.

"An economic slowdown appears to be priced into low volatility and defensive sector stock charts in consumer staples, utilities, and low volatility health care, among others," said Larry Tentarelli, chief technical strategist for Blue Chip Daily Trend Report, in a recent market outlook.

That is one reason why the J.P. Morgan strategists screened for companies that are so-called low vol aristocrats -- stocks with both low price and earnings volatility, high profit margins, and quality dividends that yield at least 1%.

"If investors continue to seek safety, equity outflows from Secular Growth and Mag-7 stocks could significantly drive up the prices of Safe Havens in Low Vol sectors," the J.P. Morgan strategists wrote.

Coca-Cola topped the list. The soft drink giant is one of the bright spots in the Dow this year as well, rising 15% even as the broader market slid. Verizon and electric utility Evergy were also in the top 10. Verizon is another Dow leader, gaining 13% in 2025. And both companies are known for big dividends, with Verizon yielding nearly 6% while Evergy's yield is just under 4%.

Also on the list? Several financial services firms, including exchange owners and operators, such as NYSE parent company Intercontinental Exchange, CME Group, and CBOE Global Markets. Volatility tends to be good for exchanges since it often leads to higher trading volumes -- and hence more fee income for these companies.

Building security firm Allegion, financial adviser Ameriprise, Waste Management and pest control company Rollins rounded out the top 10 on J.P. Morgan's list of low vol aristocrats.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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March 31, 2025 13:27 ET (17:27 GMT)

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