As the US implements new tariffs on key trade partners, investors are adjusting their portfolios to navigate the market uncertainty, Business Insider reports.
Concerns over rising costs, slower economic growth, and inflation have led to volatility, with major stock indexes experiencing sharp declines. The S&P 500 has dropped 6% from its February peak, while the Nasdaq Composite is down 8%.
Although some experts believe the market reaction may be exaggerated, others warn that tariffs could have long-term consequences for corporate profits and employment. With uncertainty looming, investment strategists suggest defensive sectors, financials, quality assets, and fixed income as potential safe havens.
1. Defensive Sectors: Healthcare and Consumer Staples
Amid trade uncertainty, defensive sectors like healthcare and consumer staples are seen as relatively stable investments. These industries provide essential goods and services, making them less sensitive to economic downturns or changes in trade policy.
- Healthcare stocks remain attractive due to long-term trends, such as an aging population and increasing demand for medical services.
- Notable picks: Merck (MRK), Gilead (GILD), CVS Health (CVS), Amgen (AMGN), and Stryker (SYK).
- Consumer staples, including food and household goods, also tend to perform well during economic slowdowns.
“This is the time to play defense and really protect yourself,” said Callie Cox, chief market strategist at Ritholtz Wealth Management.
2. Financial Stocks Stay Resilient
Unlike industrials or materials, which are directly impacted by tariffs, financial stocks are seen as relatively insulated from trade disputes.
- Banks and insurance firms do not have global supply chains, making them less vulnerable to increased import costs.
- Some strategists see financials benefiting from deregulation under the Trump administration, which could boost dealmaking activity.
- Notable pick: Progressive Insurance (PGR), due to its ability to adapt marketing strategies in response to economic conditions.
“If you think about sectors that are not as exposed to goods production, financials are the obvious one,” said Cox.
3. Quality Stocks and Tangible Assets
Investors are advised to focus on high-quality stocks with strong balance sheets and consistent earnings growth.
- Large and mid-sized companies with proven profitability are considered safer bets than small caps, which face higher volatility and lofty earnings expectations.
- Real assets like gold may also serve as a hedge against inflation and fiscal concerns.
“Other diversifiers are needed when inflation and fiscal concerns take the lead again,” wrote Gabriela Santos, chief market strategist for the Americas at JPMorgan Asset Management.
4. Fixed Income: A Safe Haven
With uncertainty surrounding economic growth, high-quality bonds are gaining appeal as a hedge against market downturns.
- Bond yields remain elevated, offering investors a chance to lock in stable returns.
- Treasury Inflation-Protected Securities (TIPS) could help guard against potential price increases triggered by tariffs.
“If there’s any place to hedge against the downside risk to growth that comes from trade uncertainty, it is high-quality fixed income,” said Matt Stucky, chief portfolio manager at Northwestern Mutual.
