The Health Care Select Sector SPDR Fund (XLV), an ETF tracking the healthcare segment of the S&P 500, has established itself as a cornerstone for investors seeking exposure to one of the most defensive and growth-oriented sectors in the market. With a market capitalization of $33.4 billion and a remarkable dividend yield of 174.09% on a trailing twelve-month basis, XLV reflects the underlying strength and stability of the healthcare industry, which benefits from consistent demand driven by an aging global population and relentless innovation. However, this yield, while attractive, warrants scrutiny as it may stem from specific ETF distribution policies rather than traditional profitability, highlighting the unique nature of investing in passive funds like XLV compared to operating companies.
In a broader market context, the healthcare sector is projected to grow robustly, with global healthcare spending expected to rise by 5% annually through 2027, outpacing overall economic growth. XLV's role in providing low-cost access to this sector—boasting an expense ratio of just 0.10%—makes it a popular choice amid increasing investor interest in defensive assets. Conducting a SWOT analysis is crucial for investors, as it illuminates how XLV's structure and the healthcare industry's dynamics can influence performance, especially in the face of regulatory changes and market volatility. By examining strengths, weaknesses, opportunities, and threats, this analysis equips investors with the insights needed to navigate the fund's potential in a sector that combines stability with high-growth potential.
XLV ETF: Navigating Healthcare Stability and Sector Risks for Strategic Investors
The Health Care Select Sector SPDR Fund (XLV) offers a diversified, low-cost exposure to a resilient healthcare sector with significant growth potential driven by demographic shifts and technological innovation. However, its sector concentration, regulatory vulnerabilities, and external market risks necessitate careful risk management. Investors should weigh its defensive qualities against sector-specific threats to optimize long-term returns.
Key Insights
- •XLV provides broad diversification across healthcare sub-industries, reducing company-specific risks.
- •The fund benefits from demographic trends and technological advances, supporting sustained growth.
- •Its low expense ratio and high liquidity make it an efficient vehicle for sector exposure.
- •Sector concentration and regulatory risks pose significant threats, especially during policy shifts.
- •External market volatility and geopolitical factors can impact performance, requiring vigilant risk assessment.
Investment Thesis: XLV is a compelling long-term holding for investors seeking stable healthcare exposure, but should be complemented with risk mitigation strategies to navigate sector-specific and macroeconomic risks.
SWOT Analysis Overview
Diversification and Cost Efficiency: XLV's Key Strengths
XLV offers broad exposure to the healthcare sector, reducing individual stock risk while providing a cost-effective investment with a low expense ratio of 0.10%. Its diversified holdings across pharmaceuticals, biotech, and medical devices ensure resilience and stable income, making it a reliable component for defensive portfolios. The fund's high liquidity and dividend yield further enhance its appeal for long-term investors seeking stability and income.
- •Broad sector diversification reduces volatility
- •Low expense ratio maximizes net returns
- •High liquidity and strong dividend yield
Sector Concentration and Inflexibility: Challenges for XLV
Despite its strengths, XLV's focus on healthcare exposes it to sector-specific risks, including regulatory changes and industry downturns. Its passive management limits responsiveness to emerging trends or adverse events, making it vulnerable during sector rotations or policy shifts. The fund's reliance on large-cap pharma giants also amplifies concentration risk, potentially leading to significant volatility during industry-specific disruptions.
- •High sector concentration increases risk
- •Limited flexibility in responding to market changes
- •Dependence on top holdings amplifies volatility
Growth Opportunities from Demographics and Innovation
XLV is positioned to benefit from long-term demographic shifts, such as aging populations, and rapid technological advancements like biotech and digital health. These trends promise sustained demand and revenue growth for its holdings, offering investors exposure to high-growth areas within healthcare. The fund's broad diversification allows it to capitalize on innovations like gene therapy and telehealth, potentially enhancing long-term returns.
- •Aging global population drives demand
- •Advancements in biotech and digital health
- •Exposure to high-growth innovation sectors
External Risks: Regulatory, Market, and Geopolitical Challenges
XLV faces significant external threats, including regulatory scrutiny, patent expirations, and geopolitical tensions, which can impact profitability and stability. Sector-specific risks such as drug price controls and supply chain disruptions may lead to volatility and reduced dividends. Broader market fluctuations and geopolitical conflicts further threaten the fund's performance, requiring vigilant risk management.
- •Regulatory and patent-related risks
- •Market volatility and geopolitical tensions
- •Potential for sector-specific downturns
Detailed Analysis
Core Strengths of XLV in Delivering Diversified Healthcare Investment
The Health Care Select Sector SPDR Fund (XLV) stands out as a robust investment vehicle, primarily due to its strategic design that emphasizes broad exposure to the healthcare sector, mitigating risks associated with individual stock volatility. With a market capitalization of $33.4 billion, XLV replicates the performance of the Health Care Select Sector Index, which includes a mix of leading companies across pharmaceuticals, biotechnology, and medical devices. This approach not only capitalizes on the sector's defensive characteristics—such as consistent demand from demographic trends—but also provides investors with a cost-efficient way to participate in healthcare growth. For instance, the fund's low expense ratio of 0.10% enhances its appeal, allowing investors to retain more of their returns compared to higher-cost alternatives, and its high liquidity ensures easy entry and exit, making it suitable for both retail and institutional investors seeking stability in uncertain markets.
Moreover, XLV's ability to distribute dividends effectively, with a trailing twelve-month yield of 174.09%, underscores its strength in income generation, albeit influenced by ETF-specific accounting. This yield is derived from the dividends of underlying holdings, which include industry giants like UnitedHealth Group and Johnson & Johnson, known for their strong cash flow generation. In comparison to broader market ETFs, XLV's focus on healthcare has historically provided a buffer during economic downturns, with the fund often outperforming the S&P 500 in volatile periods due to the non-cyclical nature of healthcare spending. This resilience is supported by data from research analyses, indicating that healthcare revenue growth is expected to exceed 5% annually, driven by factors like an aging population and technological advancements, positioning XLV as a reliable component in diversified portfolios.
Leveraging Diversification for Reduced Risk and Stable Returns#
The primary strength of the Health Care Select Sector SPDR Fund (XLV) lies in its comprehensive diversification across key healthcare sub-industries, which helps mitigate the risks inherent in single-stock investments. By tracking the Health Care Select Sector Index, XLV provides exposure to a wide array of companies, including pharmaceuticals, biotechnology, health care equipment, and services, thereby reducing the impact of adverse events affecting any one firm. This diversification is particularly valuable in a sector known for its stability, as it shields investors from volatility caused by company-specific issues, such as clinical trial failures or regulatory setbacks. For example, with holdings spread across major players like Merck & Co. and Eli Lilly, the fund benefits from balanced exposure that has historically delivered consistent returns, with XLV achieving an average annual return of around 12% over the past decade, outpacing some broader market indices during periods of economic uncertainty.
This diversified approach not only enhances risk-adjusted returns but also aligns with long-term demographic trends, such as the global increase in elderly populations, which drives sustained demand for healthcare products and services. Investors appreciate XLV's structure because it offers a passive, low-maintenance way to gain sector exposure without the need for active stock selection, resulting in lower transaction costs and simplified portfolio management. Compared to more concentrated healthcare ETFs, XLV's broad allocation—typically with no single stock exceeding 20% of the fund—provides a more stable investment experience, as evidenced by its lower standard deviation of returns relative to niche-focused competitors. Ultimately, this strength makes XLV an attractive option for those seeking to capitalize on healthcare's defensive qualities while minimizing exposure to individual company risks.
Cost Efficiency and Liquidity Advantages in ETF Investing#
Another key strength of XLV is its cost-effective structure and high liquidity, which set it apart in the competitive landscape of healthcare investment vehicles. With an expense ratio of just 0.10%, significantly lower than many actively managed funds, XLV allows investors to maximize their net returns by minimizing fees, a critical factor in long-term wealth accumulation. This efficiency is particularly beneficial in a sector like healthcare, where compounding growth from innovations and demographic shifts can be substantial, and even small fee differences can erode returns over time. Additionally, XLV's large asset base and average daily trading volume exceeding 10 million shares ensure high liquidity, enabling investors to buy or sell positions with minimal price impact, a advantage over less liquid ETFs or mutual funds.
In comparison to peers like the Vanguard Health Care ETF (VHT), which has a slightly higher expense ratio, XLV's cost savings translate into better performance tracking of its benchmark index, with historical tracking errors remaining below 0.5%. This precision in replication enhances investor confidence, as it directly correlates with the fund's ability to deliver returns aligned with the healthcare sector's overall growth trajectory. For instance, amid rising healthcare expenditures—projected to reach $6.2 trillion in the U.S. by 2028—XLV's low costs position it as an efficient gateway for investors to benefit from this expansion. By combining affordability with accessibility, XLV not only attracts a broad investor base but also reinforces its role as a foundational holding in portfolios focused on stability and income generation.
Critical Weaknesses in XLV's Sector-Focused Strategy
Despite its strengths, the Health Care Select Sector SPDR Fund (XLV) is not without significant weaknesses, primarily stemming from its concentrated exposure to the healthcare sector, which can amplify risks during adverse conditions. As an ETF that tracks a specific index, XLV lacks the flexibility of active management, meaning it cannot adapt to emerging trends or mitigate sector-specific downturns through strategic adjustments. This rigidity is particularly concerning in healthcare, where factors like regulatory changes or patent expirations can lead to substantial volatility. For example, with a market capitalization of $33.4 billion tied entirely to healthcare, XLV is vulnerable to industry-wide events, such as shifts in U.S. healthcare policy or global supply chain disruptions, which could erode investor returns more severely than diversified funds.
Furthermore, XLV's performance is inherently linked to the fortunes of its top holdings, often large-cap pharmaceutical companies, which can introduce concentration risk. This weakness is compounded by the fund's inability to generate traditional revenue or profitability metrics, as its 'growth' is reported at 0%, reflecting its passive nature rather than operational expansion. In comparison to the broader S&P 500, which offers exposure across multiple sectors, XLV's sector-specific focus has led to underperformance during bull markets dominated by technology or consumer discretionary stocks, with historical data showing lags of up to 5% in strong growth periods. Investors must weigh these limitations against the fund's benefits, recognizing that while XLV provides targeted exposure, it may not offer the same resilience as more diversified investment options in a rapidly changing economic landscape.
Concentration Risk and Vulnerability to Sector Downturns#
One of the key weaknesses of investing in the Health Care Select Sector SPDR Fund (XLV) is its inherent concentration risk, which exposes investors to amplified volatility within the healthcare sector despite its diversification across sub-industries. While XLV spreads its holdings across pharmaceuticals, biotechnology, and other areas, it remains heavily weighted toward large-cap companies, with top holdings like UnitedHealth Group and Johnson & Johnson often comprising a significant portion of the fund. This concentration can lead to disproportionate impacts from sector-specific events, such as regulatory crackdowns on drug pricing or adverse outcomes in clinical trials, which might not affect broader market indices as severely. For instance, during periods of healthcare reform debates, XLV has experienced sharper declines compared to the S&P 500, highlighting how a downturn in key segments can undermine the fund's overall stability.
Additionally, as a passive ETF, XLV cannot actively reallocate assets to avoid underperforming areas, limiting its ability to respond to emerging risks like patent cliffs or increased competition from generics. This rigidity contrasts with actively managed funds that might shift investments toward more promising sub-sectors, potentially leading to missed opportunities or exacerbated losses. Data from market analyses indicate that healthcare ETFs like XLV have underperformed during times of sector rotation, with returns lagging behind the broader market by an average of 3-5% in growth-oriented environments. For investors, this weakness underscores the importance of monitoring healthcare-specific indicators, such as FDA approval rates and policy changes, to better anticipate potential impacts on XLV's performance.
Limitations of Passive Management in a Dynamic Healthcare Environment#
Another critical weakness of XLV is the constraints imposed by its passive management strategy, which prevents it from capitalizing on short-term market inefficiencies or adapting to rapid changes in the healthcare landscape. Unlike actively managed funds, XLV simply mirrors the Health Care Select Sector Index, meaning it cannot exploit opportunities in emerging areas like digital health or personalized medicine through tactical adjustments. This limitation becomes evident during periods of innovation or disruption, where active managers might overweight high-growth stocks, potentially achieving superior returns. For example, while XLV provides broad exposure, its inability to deviate from the index has resulted in tracking errors that, although minimal (typically under 0.5%), can accumulate over time and affect net performance.
Moreover, the passive nature of XLV means it is fully exposed to the sector's cyclical risks without the buffer of active decision-making, such as hedging against regulatory threats or diversifying into non-healthcare assets. Comparative analysis with funds like the iShares U.S. Healthcare ETF (IYH) reveals that while XLV maintains low costs, its lack of flexibility can lead to underperformance in volatile markets, with historical data showing instances where active healthcare funds outperformed by 2-4% annually during turbulent times. Investors should be aware that this weakness necessitates a complementary approach in portfolio construction, perhaps by pairing XLV with more agile investments to mitigate the risks associated with its static strategy in an ever-evolving healthcare sector.
Growth Potential for XLV Amid Healthcare Innovations and Market Expansion
The Health Care Select Sector SPDR Fund (XLV) is well-positioned to capitalize on a range of external opportunities driven by demographic shifts, technological advancements, and expanding global markets, which could enhance its long-term performance. With the healthcare sector expected to grow at an annual rate of 5% through 2027, fueled by rising demand for services and products, XLV offers investors a passive way to benefit from these trends without the need for active stock picking. Its market capitalization of $33.4 billion and diversified holdings allow it to leverage broad industry growth catalysts, such as increased healthcare spending in emerging markets and breakthroughs in medical technology, potentially leading to superior returns compared to more stagnant sectors. However, realizing these opportunities depends on the fund's ability to track its index accurately amid evolving market dynamics.
Additionally, XLV's structure enables it to participate in the sector's innovation wave, including areas like biotechnology and digital health, which are projected to see exponential growth. For instance, the global biotechnology market is anticipated to expand by 10% annually, driven by advancements in gene therapy and personalized medicine, and XLV's exposure to leading companies positions it to capture a portion of this upside. In contrast to broader market ETFs, XLV's focus on healthcare provides a targeted approach to growth opportunities, with historical data showing that the fund has outperformed during periods of economic uncertainty when defensive sectors thrive. Investors should monitor factors like R&D investments and regulatory approvals to maximize the potential benefits from these external drivers.
Capitalizing on Demographic Trends and Medical Advancements#
Significant opportunities for the Health Care Select Sector SPDR Fund (XLV) arise from long-term demographic shifts and rapid medical innovations, which are poised to drive sustained demand and growth within the healthcare sector. With the global population aging—projected to see over 1.5 billion people aged 65 and older by 2050—the need for healthcare services, pharmaceuticals, and medical devices is expected to surge, creating a favorable environment for XLV's holdings. This trend is particularly beneficial for sub-sectors like biotechnology and pharmaceuticals, where companies within XLV are developing treatments for chronic diseases and age-related conditions, potentially leading to higher revenues and dividend distributions. For example, the increasing prevalence of conditions such as diabetes and cardiovascular diseases is anticipated to boost market growth by 6% annually, directly enhancing XLV's performance through its diversified exposure.
Moreover, advancements in medical technology, including gene therapy and immunotherapy, present additional growth avenues that XLV investors can leverage. These innovations not only improve patient outcomes but also open new revenue streams for constituent companies, with global spending on biotechnology expected to reach $727 billion by 2025. XLV's passive strategy allows it to benefit from these developments without incurring the higher costs associated with active management, making it an efficient vehicle for capturing upside. Compared to other sector ETFs, XLV's broad allocation enables it to spread risk while still participating in high-growth areas, as evidenced by its historical correlation with healthcare innovation indices. For investors, this opportunity underscores the importance of holding XLV as part of a long-term strategy focused on demographic inevitabilities and technological progress.
Harnessing Evolving Market Opportunities in Biotechnology and Digital Health#
The Health Care Select Sector SPDR Fund (XLV) is strategically placed to exploit emerging opportunities in biotechnology and digital health, areas that are transforming the healthcare landscape and offering substantial growth potential. As digital health adoption accelerates, with telehealth and AI-driven diagnostics expected to grow at a compound annual rate of 25% through 2030, XLV's holdings in companies like those involved in health care technology can capitalize on this shift, potentially driving fund performance. This evolution is supported by increasing investments in digital solutions, which enhance efficiency and accessibility in healthcare delivery, and XLV provides investors with indirect exposure to these trends through its index-tracking methodology. For instance, the rise of wearable devices and remote monitoring tools is creating new markets that could add billions to the sector's revenue, benefiting XLV's diversified portfolio.
Furthermore, opportunities in biotechnology, such as the development of personalized medicine and gene editing, are set to revolutionize treatment approaches, with the market projected to expand significantly due to unmet medical needs and regulatory approvals. XLV's inclusion of leading biotech firms allows investors to gain from these advancements without the high volatility often associated with individual stocks, as the fund's average annual return has historically captured a portion of biotech growth spurts. In comparison to specialized ETFs focused solely on biotechnology, XLV offers a balanced approach that reduces risk while still accessing high-potential areas. Investors should consider how these evolving opportunities, combined with XLV's low entry barriers, can enhance portfolio diversification and long-term returns in an increasingly digital and innovative healthcare environment.
External Threats and Risks Challenging XLV's Performance
The Health Care Select Sector SPDR Fund (XLV) faces several external threats that stem from the volatile nature of the healthcare sector, including regulatory pressures, market fluctuations, and competitive dynamics, which could adversely affect its returns. As a non-diversified ETF with a $33.4 billion market cap focused solely on healthcare, XLV is particularly susceptible to sector-specific risks, such as changes in government policies or economic downturns that impact demand for healthcare services. For example, regulatory interventions like drug price negotiations under U.S. healthcare reforms could compress margins for key holdings, leading to reduced dividend payouts and lower fund performance. Additionally, the high dividend yield of 174.09% may not be sustainable if underlying companies face profitability challenges, highlighting the need for investors to monitor these threats closely in a sector prone to uncertainty.
Geopolitical events and broader market risks further exacerbate vulnerabilities, with factors like supply chain disruptions or pandemics potentially causing significant volatility. Comparative analysis shows that healthcare ETFs like XLV often underperform during periods of intense regulatory scrutiny or economic contraction, with historical drawdowns exceeding those of the S&P 500 in certain scenarios. Despite its defensive positioning, these threats underscore the importance of a nuanced investment approach, where investors assess not only the fund's tracking accuracy but also the macroeconomic factors that could influence healthcare dynamics.
Regulatory Scrutiny and Patent-Related Challenges#
The most significant threats to the Health Care Select Sector SPDR Fund (XLV) include escalating regulatory scrutiny and patent-related issues that can severely impact the profitability and performance of its underlying holdings. In the U.S., agencies like the FDA and policies such as the Inflation Reduction Act impose strict controls on drug pricing and approvals, which could lead to revenue declines for pharmaceutical giants within XLV. For instance, patent expirations for blockbuster drugs—often referred to as 'patent cliffs'—can result in a loss of exclusivity, allowing generics to capture market share and erode earnings, as seen in cases where companies like Pfizer experienced sharp drops in revenue post-patent loss. This risk is amplified for XLV, given its concentration in large-cap pharma, where such events can cause the fund's value to fluctuate more than diversified indices.
Moreover, ongoing debates over healthcare reimbursement and cost-containment measures globally add to the uncertainty, with potential policy shifts in major markets like the EU or China introducing additional volatility. Data from industry outlooks indicate that regulatory changes have historically led to 5-10% declines in healthcare sector indices during implementation periods, directly affecting XLV's tracking performance. Investors must remain vigilant about these threats, as they not only challenge the fund's income stability—given its high 174.09% dividend yield—but also highlight the sector's exposure to political and economic influences that could diminish long-term growth prospects.
Market Volatility and Geopolitical Influences#
Another major threat to XLV is the impact of market volatility and geopolitical factors, which can exacerbate the inherent risks of sector-specific investing and lead to unpredictable performance swings. As a healthcare-focused ETF, XLV is sensitive to broader economic cycles, where inflation, interest rate hikes, or global conflicts might reduce consumer spending or disrupt supply chains, indirectly affecting its holdings. For example, during the COVID-19 pandemic, while healthcare demand initially surged, subsequent supply chain issues and inflation pressures caused volatility in medical device and pharmaceutical stocks, illustrating how external events can create headwinds for XLV. Geopolitical tensions, such as trade disputes or sanctions, further compound this risk by potentially limiting access to international markets or increasing operational costs for companies within the fund.
In comparison to more diversified ETFs, XLV's lack of exposure to other sectors means it cannot offset losses from healthcare-specific downturns, with historical data showing increased beta (sensitivity to market movements) during turbulent times. This vulnerability is heightened by the fund's reliance on investor inflows, which can dry up during periods of market stress, leading to price declines. Investors should consider these threats in the context of current events, such as ongoing conflicts or economic slowdowns, to better gauge XLV's resilience and incorporate risk management strategies, such as position sizing or pairing with counter-cyclical assets, to mitigate potential impacts.
Strategic Outlook and Investment Considerations for XLV
In synthesizing the SWOT analysis of the Health Care Select Sector SPDR Fund (XLV), it becomes clear that the fund's strengths in diversification and cost efficiency provide a solid foundation for investors navigating the healthcare sector's growth trajectory, despite notable weaknesses and threats. Opportunities from demographic trends and medical innovations offer substantial upside, potentially offsetting risks like regulatory pressures and market volatility, with XLV's passive structure ensuring broad exposure to a sector expected to grow at 5% annually. For investors, this positions XLV as a defensive yet growth-oriented holding, ideal for long-term portfolios, but requires careful monitoring of external factors to manage concentration and execution risks effectively.
Ultimately, the investment implications hinge on an investor's risk tolerance and market outlook; those bullish on healthcare innovation may find XLV attractive for its stability and income potential, while bearish sentiments could prompt diversification into less volatile assets. With a market cap of $33.4 billion and a high dividend yield, XLV remains a compelling option in uncertain times, but success depends on aligning it with a broader strategy that accounts for the sector's dynamic challenges and opportunities.
Frequently Asked Questions
What are the primary strengths of the Health Care Select Sector SPDR Fund (XLV) from an investor's perspective, particularly concerning its diversification and sector exposure?
The Health Care Select Sector SPDR Fund (XLV) tracks the Health Care Select Sector Index, which comprises companies in the healthcare sector of the S&P 500. Its primary strength lies in its broad diversification across major healthcare sub-industries, including pharmaceuticals, biotechnology, health care equipment, health care providers & services, and life sciences & research tools. This diversification reduces single-stock risk and provides exposure to a stable, defensive sector known for consistent demand, driven by an aging global population and ongoing innovation. Its low expense ratio also makes it an attractive option for cost-conscious investors seeking broad healthcare market exposure.
What are the key weaknesses or limitations of investing in the Health Care Select Sector SPDR Fund (XLV), especially regarding sector concentration and potential for underperformance?
XLV's main weakness is its inherent concentration risk within the healthcare sector. While diversified across sub-sectors, it is still heavily weighted towards large-cap pharmaceutical and biotechnology companies. A downturn in these specific segments, driven by regulatory changes, patent expirations, or adverse clinical trial results for key drugs, could disproportionately impact the fund's performance. Furthermore, as an ETF tracking an index, it lacks the active management to capitalize on specific emerging trends or mitigate sector-specific headwinds as effectively as a actively managed fund might.
What are the major growth opportunities that investors can capitalize on by holding the Health Care Select Sector SPDR Fund (XLV)?
Significant opportunities for XLV stem from long-term demographic trends, such as the aging global population, which increases demand for healthcare services and products. Advances in medical technology, personalized medicine, and gene therapy present growth avenues for constituent companies. Furthermore, increased healthcare spending in emerging markets and the potential for innovation in areas like digital health and preventative care offer further upside. The fund benefits from these trends by providing diversified exposure to companies at the forefront of these developments.
What are the most significant threats and risks that could negatively impact the performance of the Health Care Select Sector SPDR Fund (XLV)?
The primary threats to XLV include increasing regulatory scrutiny and potential price controls on pharmaceuticals and medical devices, particularly in the United States. Patent cliffs for major drugs can significantly impact the revenue and profitability of large pharmaceutical companies within the index. Geopolitical instability, global pandemics, and shifts in healthcare policy can also create volatility. Additionally, intense competition among healthcare providers and manufacturers, along with the high cost of research and development, pose ongoing risks.
How does the Health Care Select Sector SPDR Fund (XLV) position itself competitively against other healthcare investment vehicles, and what are its key differentiators?
XLV's competitive positioning is defined by its status as a leading ETF for broad healthcare sector exposure. It competes with other healthcare ETFs (e.g., VHT, IHI) and actively managed mutual funds. Its advantages include its large asset base, high liquidity, and tracking of a well-established index (S&P 500 Health Care Sector). However, it faces competition from more specialized healthcare ETFs focusing on specific niches like biotechnology or medical devices, which might offer higher growth potential but also greater volatility.