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Director of Research, Stansberry Research

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More Reading from MarketBeat

5 Stocks and ETFs to Help Shield Your Portfolio During Volatility

Written by Ryan Hasson. Publication Date: 2/7/2026. 

The U.S. stock market has had an uneven start to the year. Outside a few defensive areas — such as consumer staples and energy — most investors have felt the pressure. Elevated volatility, sharp rotations, and growing uncertainty have eroded overall market confidence, and that’s often when portfolio positioning matters most.

Periods like this naturally prompt an important question: How exposed am I if the market pulls back further? Whether the current environment becomes a routine correction or something more prolonged, history shows certain sectors, ETFs, and stocks tend to hold up better than the broader market when sentiment weakens.

Much of the turbulence so far has come from the tech sector. After leading the market for years, tech has struggled under stretched valuations and heavy AI-related capital spending. Software has been hit particularly hard — the iShares Expanded Tech-Software Sector ETF (BATS: IGV) is down nearly 22% year-to-date — sparking a broader rotation out of high-growth names into more defensive corners of the market.

ALERT: Drop these 5 stocks before the market opens tomorrow! (Ad)

The Wall Street Journal is asking whether a stock market crash is coming. Research from Weiss Ratings suggests the first half of 2026 could be very tough for certain stocks as a radical shift hits the market. Some of America’s most popular names could take serious damage. Analysts have identified five stocks you should consider avoiding before this event plays out. If these are in your portfolio, you’ll want to review your positions carefully.See the five stocks to avoid and learn what’s driving this shift.

Summary

• Rising volatility and sharp sector rotations are pressuring growth stocks, pushing investors to reassess downside exposure and portfolio resilience.
• Defensive areas like healthcare, consumer staples, and dividend-focused ETFs are attracting capital as tech-led weakness and risk-off behavior intensify.
• Resilient stocks and ETFs offering steady demand and dividend yields may help investors weather further market turbulence without abandoning equity exposure.

Adding to the pressure are lingering tariff concerns, a weakening U.S. dollar, and a sharp correction in crypto markets. Bitcoin alone has fallen nearly 40% from last year’s record highs, amplifying risk-off behavior across equities. When multiple risk assets unwind simultaneously, investors tend to favor durability over upside.

For those looking to play defense or balance growth exposure with protection, the market offers several historically resilient options. Some benefit from steady demand regardless of economic conditions, others provide income through dividends — and a few deliver both.

Here are five stocks and ETFs investors may want to consider if volatility persists or deepens.

Healthcare Sector ETF: Defensive Demand Meets Bullish Technicals

Healthcare has long been one of the market’s most reliable defensive sectors, and the current setup reinforces that reputation. The Health Care Select Sector SPDR Fund (NYSEARCA: XLV)provides broad exposure to pharmaceuticals, biotechnology, medical devices, and healthcare services.

The sector’s defensive appeal is straightforward: medical care is not discretionary. Regardless of economic conditions, people still need prescriptions, treatments, insurance, and medical equipment. That steady demand helps insulate revenue and cash flow during downturns, making healthcare stocks more resilient than cyclical sectors tied to consumer spending or capital investment.

XLV also offers an income component, with a 1.6% dividend yield, along with strong liquidity and deep institutional participation. Average daily trading volume consistently exceeds 14 million shares, which helps ensure efficient entry and exit points for investors.

Technically, XLV has been consolidating for several months in a bullish continuation pattern. The $160 level has acted as a key resistance zone since 2024, and the fund now sits just below it — a confirmed breakout would likely draw additional momentum-driven capital.

Fund flows also support the case: XLV has recorded positive inflows year-to-date, signaling growing institutional interest as investors rotate toward defensive exposure. From a composition standpoint, the ETF is balanced, with roughly 54% biotechnology, 28% healthcare equipment and supplies, and 13% healthcare providers and services.

If volatility remains elevated, healthcare’s combination of steady fundamentals and improving technicals makes XLV a compelling defensive allocation.

Johnson & Johnson: A Healthcare Blue Chip with Momentum

Within healthcare, few companies embody stability like Johnson & Johnson (NYSE: JNJ). The diversified healthcare giant has delivered strong performance this year, with shares up almost 16% year-to-date and nearly 40% over the past six months.

JNJ’s defensive characteristics come from its diversified business model. The company operates across pharmaceuticals, medical devices, and consumer health products — categories that experience consistent demand regardless of the economic cycle. That diversification smooths earnings and reduces reliance on any single product line.

In many ways, Johnson & Johnson sits at the intersection of healthcare and consumer staples. Its products are essential, recurring purchases rather than discretionary expenses, making revenue streams more predictable during periods of economic stress.

The company is a Dividend Aristocrat, with a 64-year streak of dividend increases. JNJ currently offers a 2.2% dividend yield and maintains a conservative payout ratio of about 47%, giving investors both income and balance sheet strength.

Institutional behavior further supports the bullish case: over the past 12 months, Johnson & Johnson has attracted $38.5 billion in institutional inflows versus $25.4 billion in outflows, resulting in meaningful net buying. Wall Street sentiment remains constructive, with a consensus Moderate Buy rating based on more than two dozen analyst opinions.

Consumer Staples ETF: A Classic Defensive Anchor

Consumer staples have historically served as a safe harbor during market stress, and the current environment is no exception. The Consumer Staples Select Sector SPDR Fund (NYSEARCA: XLP) offers exposure to companies that produce everyday necessities — items consumers continue to buy regardless of the economy, such as toothpaste, household cleaners, packaged foods, beverages, and personal care products.

That reliability is why consumer staples have a defensive reputation. During prior downturns, including the 2008 financial crisis, the sector generally outperformed more cyclical areas like technology and financials.

XLP enhances that defensive appeal with diversification and income. The ETF manages close to $17 billion in assets, carries a dividend yield of about 2.45%, and trades nearly 23 million shares per day on average.

From a technical standpoint, XLP has been one of the market’s strongest performers this year, rising more than 13% year-to-date and dramatically outperforming the S&P 500. It recently broke above a multi-year resistance level, suggesting a possible regime shift for the sector.

Coca-Cola: Defensive Consistency with Dividend Power

For investors seeking individual stock exposure within consumer staples, Coca-Cola (NYSE: KO)stands out. The beverage giant has enjoyed a strong start to the year, building on momentum from a very solid prior year.

This year’s strength appears tied to the broader resurgence in consumer staples, which lends credibility to Coca-Cola’s advance. KO’s defensive nature stems from its product mix: beverages like Coke, Sprite, and Dasani are affordable, habitual purchases consumers rarely cut back on, even during downturns. That contrasts with discretionary categories that tend to suffer when sentiment weakens.

Coca-Cola is also a Dividend King, with 64 consecutive years of dividend increases. The stock currently yields roughly 2.6% and carries a payout ratio near 68%, making it attractive to income-focused investors.

Analyst sentiment remains favorable: Coca-Cola holds a consensus Buy rating based on 16 analyst opinions, with modest upside still projected. Combined with sector momentum and defensive fundamentals, KO is well-positioned if market volatility continues.

Vanguard High Dividend Yield ETF: Diversification and Income in One Package

For investors seeking broad diversification and income, dividend-focused ETFs can be a valuable defensive tool. These funds reduce single-stock risk while providing regular cash flow, which can help offset market declines.

One standout option is the Vanguard High Dividend Yield ETF (NYSEARCA: VYM). The fund tracks a diversified basket of high-quality, dividend-paying companies across multiple sectors. With over $73 billion in assets under management and a low expense ratio of just 0.06%, VYM is both efficient and scalable.

The ETF currently yields 2.25% and has outperformed the broader market this year, rising more than 8% year-to-date compared with the S&P 500’s modest gains. That performance reflects its limited exposure to high-volatility technology stocks and greater weighting toward defensive and income-generating sectors.

VYM’s portfolio is spread across financials (22%), technology (16%), healthcare (13%), consumer staples (11%), and energy (8%), with additional exposure to utilities, materials, and consumer discretionary. The ETF’s overall diversification helps smooth returns across different market environments, making it an appealing choice for investors looking to balance growth exposure with income and downside protection.

Diversification Could Result in Protection and Performance

Market volatility is uncomfortable, but it is not unpredictable. Every cycle brings periods of uncertainty, and portfolios that account for that reality tend to fare better over time.

Healthcare, consumer staples, and dividend-focused strategies have consistently proven their worth during pullbacks. Whether through broad ETFs such as XLV, XLP, and VYM, or high-quality individual stocks like Johnson & Johnson and Coca-Cola, investors have multiple ways to play defense without exiting the market entirely.

As the year unfolds and uncertainty lingers, positioning for resilience may matter as much as — or more than — chasing returns.

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