MW 10 stocks for a high-tariff world

By Mark Hulbert

Low-volatility stocks may be your best bet for the next several years

Low-volatility stocks may be your best bet for the next several years.

That's for two reasons, both tracing to the market turmoil created by the global trade war that appears to be just beginning and shows no signs of abating anytime soon - notwithstanding the 90-day reduction in China-U.S. tariffs announced over this past weekend.

The first is based on how stocks typically react during periods of heightened volatility. During such times, like now, the most volatile stocks need to provide higher expected returns to entice investors to incur their greater risk. In order for them to do that, they first must fall.

The second reason traces to new research on how stocks in the past have reacted to heightened tariffs. The study, "Trade Tariffs: Unprecedented but not uncharted: An Analysis of one and a half centuries of investment returns," was conducted by a research team from Northern Trust Asset Management, led by Guido Baltussen, a finance professor at Erasmus University in the Netherlands and Northern Trust's Head of Quantitative Strategies, International. The researchers found that stocks in the "low volatility" category were "especially effective" when tariffs were high.

The researchers were able to reach this conclusion because of a comprehensive database constructed by Baltussen and fellow researchers, which contained individual stock returns back to 1875. That enabled them to analyze not only how the market as a whole responds to heightened tariffs, but also how individual stocks perform.

The tendency for low-volatility stocks to shine during high-tariff periods has been very much the case this year, as illustrated by the performance of the iShares MSCI USA Minimum Volatility Factor ETF USMV. This ETF invests in U.S. stocks that "have lower volatility characteristics relative to the broader U.S. equity market." Though this ETF lagged behind the S&P 500 SPX over the five- and 10-year periods through the end of last year, it has shot ahead this year. Through May 9, its year-to-date return is ahead of the S&P 500's by 7.5 percentage points.

With this research in mind, I sorted the list of stocks recommended by top-performing newsletters for those with the least volatility over the last 24 months. The table below lists the 10 with the least volatility, in ascending order of the standard deviation of their weekly returns over the last two years.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com.

-Mark Hulbert

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May 12, 2025 14:39 ET (18:39 GMT)

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