About this Video

• Video Title: Market Volatility: The Stock Strategies That Are Paying Off in 2025
• Channel: Morningstar, Inc.
• Speakers: Ivana Hampton, Dan Levitz
• Duration: 00:11:35

Introduction

This Morningstar Investing Insights podcast episode discusses US stock market performance in 2025, focusing on factor investing strategies. The hosts explore which stock types and investment factors performed better or worse than the broader market and what investors can learn from this year's performance for long-term success.

Key Takeaways

• Low Volatility Factor: This factor performed exceptionally well during market downturns in March and April 2025, significantly outperforming the overall market. Stocks with stable prices, like Berkshire Hathaway and Coca-Cola, exemplified this. However, it underperforms in bull markets.
• Quality and Momentum Factors: These factors underperformed during the March/April 2025 market downturn. Quality stocks, like those in the tech sector (Nvidia, Arista Networks, Alphabet), had high expectations and valuations, leading to a sell-off. Momentum, often tracking recent high performers, also suffered due to shifting market leadership.
• Long-Term Factor Investing: Success in factor investing requires patience and a long-term perspective, as performance fluctuates significantly year to year. Diversification across factors is recommended to mitigate risk.
• Factor Diversification: A diversified approach, either through pairing factors (e.g., value and momentum) or using a multi-factor index, is suggested for mitigating risk and weathering fluctuations.
• Valuation Considerations: While valuation is not a perfect timing signal, it's essential to consider. Overvalued stocks, particularly those that were high-flyers, are susceptible to larger drops during market corrections. Contrarian investors might look at historically underperforming factors (like value and size) for potential future gains.

The transcript doesn't provide the specific ratios and metrics used to define each of the six factors in Morningstar's factor indexes. While it mentions examples like price-to-earnings, price-to-sales, and price-to-book ratios for the value factor, it does not offer a complete list for all six factors. To obtain this information, you would need to consult additional Morningstar resources or the referenced article.

The transcript only names Berkshire Hathaway, Coca-Cola, Mastercard, and Marsh & McLennan as examples of companies that performed well within the low volatility factor index during the 2025 market downturn. It does not provide an exhaustive list of all the companies included in the index. To get a complete list, you would need to refer to Morningstar's data or the relevant index documentation.