Why low-volatility strategies make sense right now

Continued economic uncertainty around tariffs make low-volatility investments particularly prudent in the current moment, says Leslie Alba, head of portfolio solutions, Total Investment Solutions at CIBC Asset Management. 

In a recent interview, Alba said the nascent trade war triggered by U.S. tariffs could result in extreme volatility — a possibility that should weigh into investor considerations.

“It’s prudent to prepare for a period of heightened volatility for the foreseeable future,” she advised.

Listen to the full conversation on the Advisor to Go podcast, powered by CIBC Asset Management.

Alba said low-volatility strategies can help mitigate risk, including the impact of market swings on investor portfolios. She offered three key reasons why low-volatility strategies make sense in the current market.  

1. Low-volatility equity strategies help investors maintain exposure to long-term capital appreciation.

“Despite our view around heightened volatility over the near term, we remain positive on equities over the long term,” she said, adding that these types of strategies “have the potential to smooth out investor returns over that time period.”

2. Combining low volatility with dividend strategies could be a win for some investors. 

Those with lower risk tolerance or ongoing income requirements may want to target securities that pay dividends, she said. “These strategies are expected to provide a steady stream of regular income that has the potential to grow. And this is especially useful as interest rates decline.

Alba added that with policy rates lower now compared to the peak reached in 2023, investors may be looking for alternatives to short-term assets, such as GICs, guaranteed investments or high-interest savings accounts.

“Currently, there’s over $200 billion in excess savings in GICs and high-interest savings accounts,” she said. “As these short-term investments come due or reflect lower interest rates, the income-seeking investors can look to reallocate to dividend-paying securities to achieve those income needs.”

3. Low-volatility strategies continue to perform well. 

As of March 20, 2025, “low-volatility, high-dividend stocks in sectors like utilities, telecoms and consumer staples have outperformed lower dividend stocks in growth sectors like those in technology and consumer discretionary,” said Alba. “Because low-volatility, dividend-paying stocks tend to provide some level of smoother returns and some downside protection, we expect these types of strategies … to continue to do well in an environment of high uncertainty and high volatility.”

ETFs are one way to invest in low-volatility strategies. Alba noted that ETFs provide diversification because investors gain access to a pool of securities that are less exposed to market volatility or individual security risk. Also, ETFs can be bought or sold on the stock exchange, which allows for more flexibility compared to mutual funds. Finally, ETFs tend to have lower fees compared to mutual funds.

“These strategies are a really valuable tool for advisors to discuss with clients because it can help provide comfort, especially in times like these, where economic uncertainty looms large and emotions can run really high,” she said.

This article is part of the Advisor to Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.