U.S. stocks extended their longest winning streak in a year on Wednesday, with the S&P 500 closing at 7,609.78, according to FRED data, and the Dow Jones Industrial Average at 51,307.79. The rally — fueled by enthusiasm over artificial-intelligence stocks and a resilience in corporate profits despite the ongoing U.S.-Iran war — has been overwhelmingly led by high-beta, volatile names. Since the April market bottom known as “Liberation Day,” the S&P 500 High Beta Index has outperformed a group of low-volatility stocks by a staggering 123 percentage points, according to data from the Dutch asset manager Robeco.
That performance gap, while exhilarating for momentum traders, may be setting the market up for a sharp reversal, according to a body of academic and practitioner research known as the Low Beta Anomaly. First documented in the academic literature in the 1970s, the anomaly directly contradicts the bedrock capital-asset pricing model, which holds that riskier assets must deliver higher returns to compensate investors. Instead, the research shows that portfolios of boring, low-volatility stocks have consistently generated superior risk-adjusted returns over long holding periods — and that the current market configuration, in which investors are paying a historically high premium for volatile stocks, is a classic precursor to a regime change.
Pim van Vliet, chief quant strategist at Robeco, and his colleague Jan de Koning published a study and a subsequent book documenting the anomaly’s persistence. They found that a portfolio of low-volatility U.S. stocks has never produced a losing decade since the 1930s, whereas a high-beta portfolio suffered outright losses in the 1930s, the 1970s and the 2000s. The reason, they argue, is behavioral: during bull markets, investors tend to pile into exciting, high-growth names and overpay for them, suppressing their future returns. When the tide eventually goes out, low-beta stocks shine.
Van Vliet said in research accompanying the findings that “many investors miss the full benefit of the Low Beta Anomaly” because its edge is concentrated in periods when the stock market itself is trading quietly and not attracting new participants. During boom times, he said, investors “assume continued gaudy returns” and bid up volatile stocks beyond what fundamentals justify.
The current setup fits that pattern. Over the 14 years preceding the Liberation Day selloff in April 2026, the S&P 500 low-volatility group traded at an average premium of 20% to the high-beta group on a trailing price-to-earnings basis, reflecting the typical safety-seeking behavior of long-term investors. That premium has now flipped to a roughly 40% discount — meaning investors are paying 40% less for the boring stocks that, historically, have delivered better risk-adjusted performance over the long run.
The rotation from high-beta to low-beta is not guaranteed to happen overnight. The Iran war continues to roil energy markets, with oil prices rising again Wednesday after a fresh exchange of fire between U.S. and Iranian forces overnight, according to the WSJ. A government report on crude inventories due later Wednesday could further fuel supply concerns. In that environment, volatility itself could persist.
But the structural argument, grounded in eight decades of market data, is clear: boring stocks are historically cheap relative to their volatile peers, and the long-run evidence suggests they are due for a comeback.
In individual stock moves Wednesday, Marvell Technology shares surged another 12% in premarket trading after Nvidia CEO Jensen Huang said the company could be the next trillion-dollar chip stock, following a 32% gain the prior day. GameStop rallied after reporting higher first-quarter earnings and announcing a $2 billion buyback. GitLab fell 6% after saying it would cut about 14% of its staff in a pivot toward AI. Palo Alto Networks dropped 5% in premarket trading despite beating earnings forecasts; the stock has nearly doubled since April.