It’s been almost a year since the COVID-19 pandemic hit the U.S., but despite the disruption it brought to daily life, the U.S. equity market has performed remarkably well—rallying powerfully after a sharp decline in March 2020. Through Feb. 18, 2021, the S&P 500® was up 24% since the end of 2019. In the same period, the S&P 500 Low Volatility Index was flat.
The Low Vol index rebalanced after the market’s close on Feb. 19, 2021; not much changed. With the lowest turnover in the history of the index, six names cycled out, accounting for about 5% of the index.
The biggest change was in Health Care, which gave up 3% of its weight. The slack was mostly offset by Information Technology. Real Estate lost a bit of ground as Industrials added about 1%. All other sectors held steady.
Dynamics in sectors provide us with some insight into what drove the changes in the latest rebalance. While volatility remains elevated, similar to the November 2020 rebalance, it continues to decline. Importantly, volatility declined by a similar proportion across all sectors, which explains the minimal turnover in the latest rebalance.
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