3 Defensive Investments for a Market Under Pressure

March 10, 2025 at 09:02 AM EDT

Small brass lock on a pile of shiny copper euro coins.

As March 2025 unfolds, the U.S. stock market is flashing warning signs. Trade war fears sparked by tariff threats, cooling investor optimism, and a sharp pullback in high-flying tech names like the Magnificent Seven are putting portfolios under pressure. With economic uncertainty looming and recession whispers growing louder, portfolios are under pressure.

For investors tired of riding the market’s rollercoaster, especially in individual high-growth tech stocks, chasing the next hot stock offers little comfort. Instead, dependable havens like consumer staples, gold, and dividend ETFs beckon, offering stability, income, and a buffer against the potential storm. In times like these, a defensive playbook isn’t just prudent; it’s essential.

So, let’s examine three ways investors can add an extra layer of defense to their portfolios.

Gold Shines During Uncertainty

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There’s a reason the price of Gold per ounce and the SPDR Gold Shares ETF (NYSEARCA: GLD) are hovering near all-time highs. Gold shines as a go-to asset during periods of uncertainty because it’s a time-tested haven. Investors often flock to Gold to protect their wealth when markets get rocky—think trade wars, geopolitical tensions, or increasing recession fears.

Unlike stocks or bonds, Gold isn’t tied to any one economy or company, so it tends to hold its value or potentially rise when other investments falter. Its price often moves opposite to the stock market, offering a buffer against volatility. It’s a tangible asset, which adds a layer of comfort when trust in financial systems wavers.

Plus, Gold has a knack for hedging against inflation. When central banks crank up the money printer or currencies lose their buying power, Gold’s scarcity keeps it in demand.

The GLD ETF is a promising choice for investors seeking exposure to the precious commodity.

Consumer Staples Sector Is a Solid Defensive Play

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From a technical perspective, the Consumer Staples Sector (NYSEARCA: XLP) is holding up exceptionally well year-to-date (YTD), vastly outperforming the market. It's up 5.4% versus the benchmark’s decline of close to 2%. Why? Consumer staples are a solid defensive play during uncertainty because people don’t stop buying the basics, no matter how shaky the economy gets. These are the everyday essentials, like toothpaste, toilet paper, cereal, and soap, produced and sold by companies like Procter & Gamble, Coca-Cola, Walmart, or Johnson & Johnson.

Demand stays steady even when wallets tighten, giving these stocks a reliable edge over flashier sectors like tech or luxury goods, which take a hit when spending slows. That stability translates to fewer wild price swings, making staples a calm market corner when everything else is jittery.

On top of that, many consumer staples companies are dividend champs, churning out consistent payouts that cushion portfolios when growth stalls. They’re not sexy, so it is unusual to see blockbuster returns like one does with high-flying tech names, but they deliver predictability and resilience.

Dividend ETFs: Steady Income and Diversification

Dividend ETFs can be a smart pick during uncertain times because they combine the steady income of dividends with the diversification of an exchange-traded fund. These funds bundle together stocks, often from reliable sectors like utilities, staples, or healthcare, that pay regular dividends, giving investors a stream of cash even when markets turn sour. That income can be a lifeline, either to reinvest or pocket, softening the blow of falling stock prices and offering stability when growth stocks are stumbling.

Their focus on quality makes dividend ETFs especially appealing in shaky markets. Many target companies with strong balance sheets and a history of consistent payouts, which tend to hold up better during downturns. They’re less volatile than chasing individual high-flyers, and the diversification spreads risk across dozens or hundreds of stocks.

While they won’t dodge every market dip, historical data, like the outperformance of dividend-focused funds during significant market downturns, shows they can provide a smoother ride, making them a practical anchor for portfolios when uncertainty reigns.

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