As Trump Tariffs Spark Panic, Investors Rush Into These 5 'Recession-Proof' ETFs

Author: Chandrima Sanyal | April 08, 2025 01:57pm

Wall Street’s worst sell-off since the 2020 pandemic has sent several major indices into correction or bear territory, prompting a flight to safety.

ETFs that provide exposure to consumer staples, utilities, and healthcare—sectors that have historically been considered defensive during downturns—are now in the limelight.

Some of the top choices are:

• SPDR Select Sector Fund – Consumer Staples (NYSE:XLP): This exchange-traded fund follows businesses that make common items such as food, drinks, and household goods. Sales of these necessities would generally continue regardless of economic downturns. Procter & Gamble Company (NYSE:PG), Costco Wholesale Corp. (NASDAQ:COST) and Walmart, Inc. (NYSE:WMT) are among its holdings.

• SPDR Select Sector Fund — Utilities (NYSE:XLU): Utility firms offer essential services such as electricity and water, so they would be favorites among income-hungry investors amid times of greater uncertainty. The portfolio includes NextEra Energy Inc. (NYSE:NEE) and Pg&E Corp. (NYSE:PCG).

• Vanguard Health Care ETF (NYSE:VHT): Healthcare spending generally holds up in tough times, and VHT provides exposure to a blend of drugstore chains, medical device manufacturers, and healthcare providers. Eli Lilly & Co (NYSE:LLY) and Johnson & Johnson (NYSE:JNJ) are among the top holdings.

Also Read: Trump Tariffs Spark $800M Crypto ETF Rout: Can The Macro Narrative Shift?

Dividend-oriented ETFs are also attracting attention. The iShares Core High Dividend ETF (NYSE:HDV), which owns a portfolio of financially healthy U.S. firms that pay high dividend yields, protects against declining stock prices with consistent income.

Value investing is also gaining traction. The Vanguard Value ETF (NYSE:VTV), which tracks large-cap stocks that are undervalued relative to their fundamentals, is considered a less risky means of remaining invested while reducing exposure to growth stocks with volatile price swings.

The move into defensive positioning occurs as investors process the latest ratcheting up of U.S.-China trade tensions. According to the White House, the U.S. tariff rate on Chinese imports will spike to 104% at 12:01 a.m. ET on Wednesday unless China removes retaliatory tariffs against the U.S.

The risk of blanket tariffs — a 10% base tariff on all imports to the U.S. and higher rates on major trading partners such as the EU, India, Taiwan, and Vietnam — has unsettled markets. Uncertainty about a supposedly planned 90-day tariff break, which the White House called “fake news,” contributed to the fluctuations.

JPMorgan now sees a U.S. recession in the second half of 2025 at 60%, and Goldman Sachs has increased the chances of a recession in the next 12 months to 45%.

In that environment, strategists say it’s not about going after gains — it’s about limiting losses.

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Image: Shutterstock

Posted In: COST HDV JNJ LLY NEE PCG PG VHT VTV WMT XLP XLU