In the chart below, the yellow line represents the VIX Index, also referred to as the “fear index”, which is commonly used to reflect market volatility. The blue bars in the chart represent the monthly performance difference between the MSCI USA Minimum Volatility Index and the S&P 500. When the blue bar is above the zero percent axis, the min vol index is outperforming the S&P 500. Conversely when the blue bar is below the 0 axis, the min vol index is underperforming.
When volatility is rising, equity markets have typically faltered because there is a lot of fear in the market. As you can see from this chart, when the VIX was rising, the min vol index was usually outperforming the S&P 500. In other words, when the equity markets were dropping, the min vol index acted as a cushion in these volatile markets, providing stronger relative performance. However, when fear started to ease out of the market and the VIX began to decline, the S&P 500 generally outperformed the minimum volatility index.