Factor timing is no easier than market timing. With that in mind, market participants shouldn’t outright ignore low volatility stocks and ETFs this year.
In fact, there are likely to be plenty of occasions when funds such as the Invesco QQQ Low Volatility ETF (QQLV ) earn their keep. With a launch date of Dec. 4, 2024, QQLV is one of the more youthful low volatility ETFs on the market. However, it already has a track record of delivering the “low vol” goods. That’s pertinent; if there is one guarantee this year, it’s that there will be bouts of volatility.
“As we enter 2026, we anticipate further volatility. Artificial intelligence stocks require even stronger growth to support lofty valuations. Yet, our base-case forecast for AI growth over the next five years is below that of many AI market prognosticators and participants,” noted Morningstar’s Dave Sekera.
Speaking of AI, QQLV offers the added perk of being a diversifier for tech-heavy portfolios. Its weight to that sector is light, particularly when measured its standard Nasdaq-100 Index ETF brethren.
More Reasons to Consider QQLV
There are additional reasons to examine QQLV, including the White House’s increasing efforts to prompt Federal Reserve Chair Jerome Powell to resign. An unprecedented criminal investigation into his congressional testimony and the central bank’s spending on a new headquarters confirm as much.
“In addition, a new chair will take the reins at the Fed in May, and trade and tariff negotiations will likely resume this spring,” adds Sekera. “Our economics team foresees economic growth slowing over the first half and higher-than-expected inflation as the impact from tariffs continues to push prices higher. Political rhetoric will ramp up as we approach midterm elections, and geopolitical risk will test investors’ resolve.”
Regarding macroeconomic themes that could highlight QQLV benefits, barring significant surprises, the labor is seen as weak. Some economists view it as borderline recessionary. With no improvement on that front, market participants could look to dial back risk. QQLV’s value exposure could also benefit investors in the event of a broader market correction.
“If the market sells off, we’d expect value stocks to hold their value better and could be sold. The proceeds could be used to increase positions in those technology and AI stocks that will have sold off into undervalued territory,” concludes Sekera.
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