Momentum may be tested this week
After bottoming out in early April in response to Trump’s first tariff announcement, the S&P 500 has rebounded — with the riskiest stocks driving the rally. That’s a stark turnaround from the start of the year, when equity investors couldn’t get enough of the market’s steadier low-volatility shares.
The chart below shows this surprising shift:
- The index’s high-beta stocks, whose prices fluctuate more than the overall market, as a group have trounced the low-volatility segment of the market by 47% since April 4* (see the chart).
- Until then, however, 2025 had seen the low-vol stocks outperform their riskier cousins by 24%.**
- Not since the pandemic have investors seen such an extreme 180-degree shift in leadership between these two stock categories.
Ratio of S&P 500 High Beta Stocks to Low Volatility Stocks
Source: Bloomberg, calculations by Horizon, data as of 07/25/25. It is not possible to invest directly in an Index.
This hairpin turn-style market movement begs the question: Have high-beta stocks come too far, too fast?
We may have an answer soon. This week sees a meeting of the Federal Reserve Board to determine interest rate policy, new employment data highlighting the state of the job market, and a tariff deadline. It’s also the busiest week of the second-quarter earnings season, with 163 members of the S&P 500 due to report—including bellwethers Microsoft, Meta, Amazon and Apple.
With overall market prices and valuations trading at their highest levels in years due to investors’ seemingly voracious appetite for risk, it will take a healthy dose of good news to sustain this trend. In addition, investors will need to remain optimistic about future earnings to maintain the recent momentum we’ve seen in high-beta stocks.
