Amid escalating trade tensions, investors are increasingly turning to defensive stocks, which are known for their stable earnings and dividends. This shift in strategy is reminiscent of previous trade conflicts, where defensive stocks outperformed the broader market. Over the past three weeks, defensive companies within the S&P 500 have gained approximately 2.4%, while cyclical stocks have declined by 1.2%. This trend is driven by economic uncertainty and tariff-related headlines, prompting investors to seek safer bets like H&R Block, Cigna, and Apple, which are characterized by low volatility and high buybacks. The preference for these stocks is further supported by their resilience to market swings induced by trade issues.
The ProShares Short S&P500 ETF (SH) saw a modest increase, rising 0.27% to $41.61 as of 11:20 AM on Wednesday, February 5.