Why Low-Volatility Stocks Offer Safe Haven Amid Tariff-Driven Market Volatility

The stock market of 2025 has been a rollercoaster, with tariff announcements and geopolitical tensions fueling unprecedented volatility. As the S&P 500 tumbled 19% from its January peak to April's low, investors scrambled for shelter. Enter low-volatility stocks—defensive stalwarts like Berkshire Hathaway (BRK.A), Johnson & Johnson (JNJ), and Coca-Cola (KO)—which proved their mettle as havens of stability. This article dissects why these stocks thrive in turbulent times, leveraging factor-based investing principles to build resilient portfolios.

The Case for Low-Volatility Stocks: A Volatility Premium in Action

Low-volatility stocks historically outperform during market downturns, a phenomenon supported by decades of academic research. Studies by Fama and French (2015) and Ang et al. (2009) show that low-volatility portfolios generate higher risk-adjusted returns over time. This “volatility premium” arises because investors demand compensation for holding riskier assets, making low-volatility stocks a prudent hedge against uncertainty.

2025's Tariff-Driven Volatility: Proof of Concept

In early 2025, tariff disputes—particularly the “Liberation Day” tariffs on Chinese imports—ignited a 19% selloff in the S&P 500. Yet low-volatility stocks like Berkshire Hathaway, Coca-Cola, and Johnson & Johnson defied the chaos.

• Berkshire Hathaway (BRK.A): Despite its $1.1 trillion market cap, Berkshire's YTD return of 5.56% (vs. the S&P 500's -3.3%) highlights its defensive moat. Its diversified holdings in railroads, utilities, and insurance shield it from sector-specific risks.
• Coca-Cola (KO): KO's 16.02% YTD return as of April 2025 exemplifies the power of global scale and consistent dividends. Even as the Nasdaq 100 fell, KO's 2% global volume growth and 6% organic revenue rise underscore its resilience.
• Johnson & Johnson (JNJ): JNJ's 2.4% Q1 sales growth and 3.4% dividend yield reflect its stability in healthcare's choppy waters.

Why These Stocks Succeed in Volatile Markets

1. Dividend Discipline: JNJ's 3.4% yield and KO's 2.8% dividend provide ballast in volatile times.
2. Diversified Cash Flow: Berkshire's railroad and utility businesses generate steady income, insulating it from tariff-related trade disruptions.
3. Global Footprint: Coca-Cola's 6% organic revenue growth in Asia-Pacific and Europe shows how geographic diversification mitigates regional risks.

The Role of Tariffs in Driving Flight to Stability

Tariffs amplify uncertainty, pushing investors toward low-volatility stocks. Consider:
- 2025's Selloff: The April tariff announcement triggered a 19% S&P 500 drop, but low-volatility stocks lost just 3%.
- Historical Precedent: During the 2018 trade war, the low-volatility Russell 1000 index outperformed the S&P 500 by 6 percentage points.

Building a Resilient Portfolio: Factor-Based Diversification

Factor-based investing is key to weathering volatility. A portfolio combining low-volatility stocks with quality and value factors can maximize stability while capturing upside. For example:
- Low Volatility: BRK.A, JNJ, KO.
- Quality: Mastercard (MA), Marsh & McLennan (MMC).
- Value: Chevron (CVX), Walmart (WMT).

This mix balances defensive traits with cyclical opportunities, reducing reliance on any single factor's performance.

Academic Validation: The Volatility Premium Revisited

Research by Blitz and van Vliet (2007) found that low-volatility stocks outperformed high-volatility peers by 2% annually from 1929–2006, with minimal risk. In 2025's context, this means investors in low-volatility stocks are not just avoiding losses—they're generating superior returns.

The Call to Action: Invest Now, Before the Next Storm

The writing is on the wall: tariffs and trade disputes are here to stay. With the S&P 500's tariff-driven volatility peaking at a 20-year high in Q2 2025, the time to act is now.

Buy Berkshire Hathaway (BRK.A) at $379,000 (Class A shares):
- Why: Its 109.27% 5-year return and $347.7 billion cash reserves make it a fortress in turbulent times.

Add Coca-Cola (KO) at $6.5 billion market cap:
- Why: Its 16% YTD gain and 5–6% 2025 organic revenue growth target position it to thrive in emerging markets.

Anchor with Johnson & Johnson (JNJ) at $435 billion:
- Why: A 3.4% dividend yield and 4.2% operational growth (excluding currency headwinds) offer stability.

Final Thought: Volatility Is Here to Stay—Embrace It

Factor-based investing isn't about timing the market—it's about building portfolios that thrive regardless of the economic climate. Low-volatility stocks like BRK.A, JNJ, and KO are not just safe havens; they're engines of long-term wealth. With tariffs set to remain a market wildcard, these stocks are more than defensive plays—they're investments in resilience itself.

The clock is ticking. Act now, before the next tariff storm hits.

Data as of May 2025. Past performance does not guarantee future results.