Market Turning Point: How to Dodge the Downturn

The S&P 500 started 2025 hot (+4.6% through mid-Feb) but has since cratered 6.6%, a stark flip from last year’s 24% rally. Recession whispers are getting louder, and for good reason.

The Red Flags Piling Up

Trump’s reciprocal tariffs are spooking markets. Morgan Stanley estimates they could shave 0.7-1.1 percentage points off U.S. GDP growth. Consumer spending dropped in January for the first time in nearly two years, which matters since household consumption drives roughly two-thirds of U.S. economic growth. The Atlanta Fed’s Q1 2025 model is flashing caution signals too.

Bernie Eichengreen isn’t mincing words—the Berkeley economist warns the U.S. could tip into recession by year-end if policy uncertainty persists.

Here’s the Kicker: Trump Won’t Flinch

BCA Research reckons Trump only pivots if stocks nosedive 15% further (putting the S&P 500 into bear market territory, ~20% below its mid-Feb peak). His recent pause on some tariffs? Not market-driven, he says. That’s the political backdrop we’re stuck with.

Defensive Plays Worth Watching

When storm clouds gather, rotation into boring-but-steady sectors often shields portfolios:

Quality Stocks (QUAL, SPHQ, JQUA, QUS)—Companies with fortress balance sheets and predictable earnings weather volatility better.

Consumer Staples (XLP, VDC, IYK, RSPS)—People still buy groceries in recessions. Rising household debt actually helps these plays.

Healthcare (XLV, VHT, IXJ, IYH)—Non-cyclical by nature. Defensive tilt + solid long-term tailwinds.

Utilities (XLU, VPU, FUTY, IDU)—Low volatility, steady cash flows. Classic “boring = safe” zone.

The Bottom Line

Recession odds are climbing but far from baked in. Still, hedging via defensive ETFs costs less than panic-selling later. Quality, staples, healthcare, and utilities won’t outrun a bull market, but they’re shock absorbers when the ride gets bumpy.