Weekly Market Summary

Extra Credit^*

• Volatility is commonly measured by the standard deviation of an investment’s returns, which captures both the range of potential outcomes and the likelihood of each. This makes it a useful, though simplified, way to gauge investment risk. Those probabilities typically form a bell-shaped curve, where modest returns occur most often and extreme gains or losses are less frequent. The possibility of extreme gains or losses at the edges of the return distribution has shaped many of the ETFs coming to market today. Volatility defines a large share of the more than 940 ETFs launched in the first 11 months of 2025, with Morningstar Direct labeling roughly 30% as trading tools and another 5% as digital asset (crypto) funds. Most of these products introduce far more volatility than broad-market ETFs, making them especially attractive and risky vehicles for speculation.
• The focus of speculation has changed over time, but the urge to speculate remains as strong as ever. Assets invested in ETFs categorized as trading tools, primarily leveraged and inverse funds, have nearly quadrupled over the past six years, rising from $36 billion in January 2020 to more than $140 billion by the end of November 2025. While these ETFs can deliver eye-catching gains over short periods, they are volatile and unpredictable, and they tend to erode value over time. As a result, they are fundamentally unsuitable for long-term investors.
• Investors continue to favor low-cost, broadly diversified ETFs, with Vanguard S&P 500 ETF, Vanguard Total Stock Market ETF (VTI), and iShares Core S&P 500 ETF (IVV) attracting billions of dollars in new assets each month. These ETFs continue to see growth despite the growing appeal for higher-volatility products.

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Morningstar as of 1/21/2026.