Why SCHD Is Rising While the Stock Market Crashes: The Secret Behind Its Strength

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Why Is SCHD Rising While the U.S. Stock Market Declines?




Summary of Key Points About SCHD

  • Fund Name: Schwab U.S. Dividend Equity ETF (SCHD)
  • Index Tracked: Dow Jones U.S. Dividend 100 Index
  • Investment Focus: High-quality dividend-paying U.S. stocks
  • Expense Ratio: 0.06% (Low-cost ETF)
  • Dividend Yield: Approximately 3.3%
  • Rebalancing Frequency: Quarterly
  • Top Sectors: Defensive sectors such as consumer staples, healthcare, and financials
  • Key Holdings: PepsiCo (PEP), Coca-Cola (KO), Merck (MRK), Broadcom (AVGO), Home Depot (HD)
  • Why It’s in Focus: SCHD is outperforming the broader market despite the ongoing stock market downturn

Why Is SCHD Outperforming in a Bearish Market?

Today, the U.S. stock market is experiencing a broad decline due to macroeconomic concerns, including inflation fears, potential interest rate hikes, and earnings season volatility. However, while major indices like the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average are trading lower, SCHD is moving against the tide with positive gains.

So, what factors are driving SCHD’s resilience and upward trend? Let’s analyze the key reasons why SCHD is outperforming the market despite the downturn.

1. Defensive Sector Allocation: Stability in Uncertainty

SCHD is structured to invest in high-quality, dividend-paying stocks that historically outperform during market downturns. Unlike growth-heavy ETFs that depend on technology stocks, SCHD focuses on sectors that remain resilient regardless of economic conditions, such as:

  • Consumer Staples (PepsiCo, Coca-Cola, Procter & Gamble) – Demand for essential goods remains strong even in economic downturns.
  • Healthcare (Merck, Amgen, Pfizer) – Pharmaceutical and healthcare companies provide consistent revenue, driven by healthcare needs.
  • Financials (BlackRock, JPMorgan, Charles Schwab) – Well-capitalized financial firms benefit from rising interest rates and stable dividend payments.

During a market correction, investors tend to rotate capital into defensive assets, making SCHD a preferred choice for stability.

2. Strong Dividend Focus: An Attractive Income Source

One of SCHD’s strongest attributes is its emphasis on high-yielding dividend stocks. With a current dividend yield of around 3.3%, SCHD provides a reliable source of income for investors.

  • In times of uncertainty, investors seek dividend-paying stocks as a hedge against volatility.
  • SCHD excludes companies with weak dividend sustainability, ensuring that only financially sound firms with a consistent payout history are included.
  • Reinvestment potential: Many long-term investors reinvest dividends, compounding their total return over time.

As interest rates remain high, many investors prefer dividend-focused ETFs over riskier growth stocks.

3. Lower Volatility Than Growth ETFs

Market uncertainty tends to hurt high-growth stocks, especially in sectors like technology. ETFs tracking growth stocks—such as the Invesco QQQ ETF (QQQ) or ARK Innovation ETF (ARKK)—are more vulnerable during market pullbacks because they rely on future earnings potential.

In contrast, SCHD holds profitable, well-established companies that generate steady cash flow and dividends. This structure makes SCHD significantly less volatile than growth-oriented ETFs, giving investors a safe haven amid turbulence.

4. Institutional and Retail Demand Is Growing

SCHD is not just a retail investor favorite—institutional investors are also allocating more capital to this ETF.

  • Fund inflows have increased in 2024 and 2025, signaling growing demand from pension funds, hedge funds, and large asset managers.
  • Institutional investors typically favor funds with low expense ratios, strong liquidity, and historical outperformance—all of which apply to SCHD.

This sustained buying pressure supports SCHD’s upward trajectory, even when broader markets are in decline.

5. Low Expense Ratio: Cost Efficiency for Long-Term Investors

With an expense ratio of only 0.06%, SCHD remains one of the cheapest high-quality dividend ETFs on the market. Compared to actively managed funds that charge 0.50% or more, SCHD delivers long-term value at a fraction of the cost.

  • Lower expenses mean more returns stay in investors’ pockets.
  • Cost-conscious investors prefer SCHD over similar dividend ETFs with higher fees.

Final Thoughts: Will SCHD Continue to Outperform?

As market conditions remain uncertain, SCHD’s defensive nature, strong dividend focus, and lower volatility make it an attractive investment. While the broader stock market struggles with macroeconomic challenges, SCHD is proving resilient—driven by solid fundamentals and strong demand from income-seeking investors.

If market volatility persists, SCHD could continue to attract capital, maintaining its upward trend despite broader market weakness. Investors looking for stability, dividends, and low fees should consider adding SCHD to their portfolio.

Key Takeaways

✔️ SCHD is rising despite a declining U.S. stock market.
✔️ Defensive sector allocation (consumer staples, healthcare, financials) provides stability.
✔️ A high dividend yield (3.3%) attracts investors seeking reliable income.
✔️ Lower volatility than tech-heavy ETFs makes SCHD a safer choice in downturns.
✔️ Institutional demand and low expense ratio (0.06%) add to its appeal.

Would you consider investing in SCHD in today’s volatile market? Share your thoughts in the comments below!

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