Stock Market Update

[BRIEFING.COM] There is a clear divide in the market today between higher-beta stocks and lower-beta stocks. We can look to a few ETFs as proxies for this bifurcation.

The Invesco S&P 500 High Beta ETF (SPHB 136.38, -7.62, -5.29%) is down more than 5.0%, while the Invesco S&P 500 Low Volatility ETF (SPLV 75.84, +1.30, +1.74%) is up 1.7%.

This shift has been catalyzed by worries that the AI buildout is becoming increasingly more expensive and competitive as companies at the center of it, like Meta Platforms (META 646.99, -50.53, -7.24%), compete for capital. At the same time, expansion plans are being crimped by supply chain constraints, which have resonated in Lam Research (LRCX 232.38, -28.42, -10.90%) guidance and which, in turn, have raised questions about the ability to deliver on investors' high growth expectations in the near term.

Separately, the rotation into lower-beta stocks (but not necessarily low P/E stocks) has been facilitated today by the earnings results from Procter & Gamble (PG 166.25, +9.41, +6.00%), which featured an acceleration in fiscal Q1 organic sales growth to 4.0% from 0.5% in fiscal Q4. PG maintained its core EPS guidance for FY27 of $6.89-7.11, which leaves it trading at nearly 24x FY27 estimates versus 21x for Meta.

Meta has the stronger growth profile, but PG has the lower 3-yr adjusted beta of 0.44 versus 1.31 for META, according to FactSet. For today anyway, lower beta is in and higher beta is out.