Wall Street delivered a downbeat performance last week. The S&P 500 Index fell 1.6%, the Dow Jones fell 0.9%, the Nasdaq Composite plunged about 2.9% and the Russell 2000 retreated 0.5% last week.
The renewed geopolitical tensions and the tech slump mainly led to the slump. Oil prices jumped last week, with United States Oil Fund LP USO gaining 10.7% due to the flare-up in tensions between the United States and Iran.
Against this backdrop, below we highlight a few reasons that indicate that low-volatility ETFs could be the best picks now.
Trump Announces 50% Tariffs on Canada
On July 20, 2026, President Trump signed three proclamations that would impose 50% tariffs on a broad range of Canadian imports in response to Canada's policies on automobiles, alcohol and dairy products, as quoted on Yahoo Finance.
According to a senior administration official, the tariffs would affect products "ranging from wine to hockey sticks to cement." The automobile-related proclamation alone spans 18 pages, listing goods that would be subject to the new duties if the measures take effect, per the source.
These tariffs will apply even if the goods were previously exempted under the US-Mexico-Canada Agreement (USMCA). Canada — America's largest export market — has drawn President Trump's criticism over its retaliatory trade measures.
Hormuz Tensions Deepen
President Trump announced last week that the United States would reimpose a blockade of the Strait of Hormuz and levy a 20% fee on cargo passing through the strategic waterway, escalating tensions in the Middle East.
The blockade began on July 14, 2026, with U.S. Central Command saying it would enforce restrictions on vessels traveling to or from Iranian ports and coastal areas (read: Leveraged Oil ETFs Likely to Surge as Hormuz Tensions Deepen).
Vessel traffic through the Strait of Hormuz has declined since then, as escalating U.S.-Iran tensions prompt shipowners to avoid the key energy corridor. Lloyd’s List Intelligence recorded just 53 vessel transits in the week through July 20, down 66% from 157 the previous week, as quoted on CNBC.
Moreover, the U.S. military said a service member was killed after an Iranian attack in northern Iraq on Saturday, a day after an attack on a base in Jordan killed two U.S. soldiers, as quoted on BBC.
Inside the Tech Selloffs
Investors are becoming increasingly cautious about the AI trade as concerns over the sustainability of corporate spending on AI weigh on sentiment. The technology sector, particularly semiconductor stocks, has led the recent market weakness as rising concerns over AI-related capital expenditures and rich valuations dampen investor sentiment.
AI Inflation Fears Intensify
Rising expectations that AI could fuel inflation are expected to keep investors on edge. Goldman Sachs cautions that the rapid adoption of AI is likely to fuel inflation globally as supply struggles to keep pace with soaring demand for critical AI components, including memory chips and semiconductors. The United States is likely to be hit the hardest, as quoted on Business Insider.
Oil-Led Inflation in the Cards?
With renewed Iran tensions, oil prices are likely to stay high in the near term. The United States Brent Oil Fund LP BNO has added about 3.2% over the past week and has surged about 14.4% over the past month (as of July 20, 2026). Energy-led inflation may lead the Fed to hike rates over the medium term, which will be a headwind for growth stocks.
With tech stocks (which are growth-oriented) mainly driving the current Wall Street rally, oil-led inflation may hurt the broader market in such a scenario.
ETFs in Focus
Below we highlight a few low-volatility ETFs that have beaten the S&P 500-based ETF SPY (down 1.17%) over the past week.
Invesco S&P 500 Low Volatility ETF SPLV
Expense Ratio: 0.25%
Past week performance: Down 0.13%
Dividend Yield: 2.10% annually
Fidelity Low Volatility Factor ETF FDLO
Expense Ratio: 0.15%
Past week performance: Up 0.09%
Dividend Yield: 1.41% annually
State Street SPDR SSGA US Large Cap Low Volatility Index ETF LGLV
Expense Ratio: 0.12%
Past week performance: Up 0.40%
Dividend Yield: 2.01% annually
Invesco S&P 500 High Dividend Low Volatility ETF SPHD
Expense Ratio: 0.30%
Past week performance: Up 0.40%
Dividend Yield: 4.40% annually
Franklin International Low Volatility High Dividend Index LVHI
Expense Ratio: 0.40%
Past week performance: Up 0.07%
Dividend Yield: 4.60% annually
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Invesco S&P 500 High Dividend Low Volatility ETF (SPHD): ETF Research Reports
Franklin International Low Volatility High Dividend Index ETF (LVHI): ETF Research Reports
Invesco S&P 500 Low Volatility ETF (SPLV): ETF Research Reports
Fidelity Low Volatility Factor ETF (FDLO): ETF Research Reports
State Street SPDR US Large Cap Low Volatility Index ETF (LGLV): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).