As volatility spikes and markets gyrate, some investors have turned to more conservative stocks and defensive sector exchange traded funds to ride out the storm.
For instance, many have traditionally turned to defensive sectors like utilities, consumer staples and health care – sectors that would hold up in any economic cycle as U.S. consumers will always need basic electricity, foods and health services.
Investors can also capitalize on these more defensive plays through sector ETF options. For example, the Vanguard Utilities ETF (NYSEArca: VPU) , iShares U.S. Utilities ETF (NYSEArca: IDU) and Fidelity MSCI Utilities Index ETF (NYSEArca: FUTY) provide broad exposure to the utilities sector.
The Consumer Staples Select SPDR (NYSEArca: XLP), First Trust Consumer Staples AlphaDEX Fund (NYSEArca: FXG) and Vanguard Consumer Staples ETF (NYSEArca: VDC) allow investors to gain access to the big consumer staples names.
Lastly, investors can track the diversified health care sector through the Health Care Select Sector SPDR (NYSEArca: XLV), iShares U.S. Healthcare ETF (NYSEArca: IYH), Vanguard Health Care ETF (NYSEArca: VHT) and Fidelity MSCI Health Care Index ETF (NYSEArca: FHLC).
“With U.S. stock indices in the red to start the year and market volatility beginning to climb, some are suggesting that investing in the defensive sectors may be a smart bet,” writes Andrew Birstingl, Research Analyst at FactSet. “The intuition here is that companies in the defensive sectors, like Consumer Staples, Utilities, and Health Care, have lower betas and are, therefore, less prone to changes in the business cycle.”