Bearish Investors Can Seek Refuge in Recession-Resistant ETFs

Written by Nathan Reiff

Analysts and investors began to brace for a souring economic environment as the 10-year Treasury yield fell below that of a 3-month note in late February—an inverted yield curve, typically seen as a key indicator of an upcoming recession. Of course, a recession will only be confirmed after at least two-quarters of negative GDP growth, and it is possible that the yield indicator will be incorrect. After all, many analysts predicted a recession in 2024, but it never materialized.

Still, the prospect of a potential downturn is enough to send more risk-averse investors running toward defensive plays. In this case, exchange-traded funds (ETFs) already represent a strong option. These funds tend to diversify across a range of securities typically linked by a common theme or focus, often minimizing risk at the same time.

Some ETFs are particularly recession-resistant due to their defensive strategies. Three such funds—one focused on low-volatility stocks, one targeting the utility sector, and one with a broad basket of consumer staples names—may be worth considering if the economic environment worsens.

Minimize Volatility to Reduce Downside Risk

Factor investing remains a popular strategy among retail investors, although many overlook volatility compared to more popular factors like momentum and value. But the iShares MSCI USA Min Vol Factor ETF (BATS: USMV), with its focus on limited-volatility equities, could just shore up defenses against a recession. USMV tracks an index of large- and mid-cap stocks with lower volatility than the broader U.S. market.

Investors in USMV access a portfolio of about 185 U.S. firms, roughly two-thirds of which are major players in the information technology, financials, health care, and consumer staples sectors. Assets are well-distributed, with no single name occupying as much as 1.7% of the portfolio as of February 22, 2028.

USMV aims to limit downside risk by focusing on stable companies with a history of minimal share price shifts. However, this also means that upside potential is similarly capped. Year-to-date, as of February 22, 2028, the fund has returned 4.8%, while in the 12-month period ending on that date, it posted returns of 16.1%. In booming economic periods, investing in USMV might mean giving up the potential for gains—but in a recession, investors may be looking for a cautious strategy just like this funds.

Affordable, Broad Access to Utilities and Dividends

Investors commonly flock to the utilities sector during a downturn, thanks to the consistent demand for these companies’ services. That said, individual companies still face unique risks, particularly during a recession, and diversification through an ETF like the Utilities Select Sector SPDR Fund (NYSEARCA: XLU) provides it.

Utilities is a small sector in terms of the number of names, and XLU holds a relatively broad swath of them, with 66 holdings as of February 22, 2025. Although the portfolio is concentrated in a few stocks—the top five holdings occupied about 40% of invested assets as of that date—XLU’s low expense ratio of 0.09% makes it a cheap and effective way of accessing the space. Further, utility names often have attractive dividends, and XLU capitalizes on that with a dividend yield of 2.8% as of the date above.

Inexpensive and Varied Consumer Staples Exposure

Consumer staples is another sector that may be resistant to a recession, as companies in this space provide goods vital to everyday life. One issue many investors experience with ETFs targeting consumer staples, however, is a heavy weighting toward major companies like Coca-Cola Co. (NYSE: KO) at the expense of smaller firms. The Vanguard Consumer Staples ETF (NYSEARCA: VDC) manages to respect the sway of Coca-Cola and a handful of other massive consumer staples names while still holding more than 100 different securities. Investors can thus turn to this fund for a balanced approach to the sector that still prioritizes some of the largest players.

Another key benefit to VDC is its low expense ratio. Like XLU, VDC has a fee of just 0.09% per year. This can help to keep investor costs to a minimum during a recession or any other time when every dollar can make a difference in investment outcomes.

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3 Oversold Magnificent Seven Stocks at Key Levels: Buy Now?

Written by Ryan Hasson

U.S. stocks turned sharply lower over the previous weeks, weighed down by economic concerns and a shifting sentiment landscape. Fears that President Trump’s tariffs could negatively impact the world’s largest economy further accelerated the selloff, pushing U.S. equities into the red year-to-date (YTD). However, a late Friday rally pared losses, with the benchmark SPY ETF closing the week up 1.38% YTD.

Despite the bounce, equities remain under pressure, reflecting a cautious, risk-off stance as investors grapple with stretched valuations and looming earnings worries. This dynamic is visible in the performance of the Magnificent Seven stocks, seven of the largest, most influential companies in the U.S. market. Interestingly, the Roundhill Magnificent Seven ETF (NASDAQ: MAGS), which tracks these tech titans, is in the red YTD.

Yet, an intriguing setup is forming: several Magnificent Seven stocks have tumbled toward their crucial 200-day simple moving averages (SMA), a level often viewed by technical traders as a key support zone. Historically, touching or dipping below the 200-day SMA can signal a potential buying opportunity, particularly if forward valuations look more reasonable.

Is this the moment to dip buy these tech giants as they hover around significant support levels? Let’s break down three beaten Magnificent Seven stocks that may be offering a compelling risk-reward profile right now.

1. Alphabet

Alphabet (NASDAQ: GOOGL) has entered correction territory, down nearly 18% from its 52-week high as of Friday’s close. The stock took a hit after its latest earnings report, where it narrowly beat EPS estimates but fell short on cloud revenue. Concerns over decelerating growth and aggressive AI spending also spooked investors.

Despite the selloff, Alphabet trades at a forward P/E of 16.6, flirting with value stock territory. However, it has fallen below its 200-day SMA. With earnings growth expected in the coming year, a $0.20 quarterly dividend, and $70 billion in authorized share buybacks, the current valuation suggests that Alphabet might be a bargain for those eyeing a recovery. If the stock can reclaim its 200-day SMA, it could spark renewed bullish momentum.

2. Amazon

Amazon (NASDAQ: AMZN) has also retreated into correction territory, sliding 12.4% from its recent 52-week high. Although the stock remains up over 40% from its 52-week low, the broader market downturn has weighed on its momentum. Even after strong earnings that crushed EPS and beat revenue estimates, forward guidance and AI spending concerns dampened investor enthusiasm.

Currently, Amazon sits at a forward P/E of 27.8 and hovers near its 200-day SMA around the $200 mark. Should the selling persist, pushing its valuation even lower and the stock closer to its 200-day, Amazon might enter into dip-buying territory. With solid EPS growth projections for the upcoming year, a bounce off the 200-day SMA may present an attractive entry point for long-term investors.

3. Tesla

Tesla (NASDAQ: TSLA) has been one of the worst-performing S&P 500 stocks YTD, shedding a staggering 40% from its 52-week high. However, the stock found support near its 200-day SMA on Friday and rallied into the close, a potential sign of a short-term bottom.

Unlike Alphabet and Amazon, Tesla’s forward P/E remains elevated at 76. Tesla’s shareholders have incredibly high expectations for future growth tied to expectations of AI, autonomy, and robotics projects. In a post on X, CEO Elon Musk recently forecasted a potential 1,000% profit surge over the next five years, contingent on “outstanding execution” in advancing Tesla’s Robotaxi and Optimus humanoid robot initiatives.

From a purely technical standpoint, Tesla’s bounce off its 200-day SMA and alignment with prior resistance levels suggest a favorable risk-reward setup. If Tesla holds this key support, it could mark the beginning of a broader turnaround.

The Bottom Line

The Magnificent Seven stocks have undeniably experienced a rough start to the year, with several slipping into correction territory and testing critical technical levels. While AI hype and growth fears loom, these recent pullbacks have brought select names, like Alphabet, Amazon, and Tesla, closer to their 200-day SMAs, potentially offering dip-buying opportunities for investors willing to stomach some volatility.

Of course, the path forward hinges on broader market sentiment, macroeconomic developments, and company-specific execution. But these three tech giants might be flashing buy-the-dip signals for those eyeing high-risk-reward setups.

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3M to Hit $175 by Mid-Year, and Higher Highs Are Likely

Written by Thomas Hughes

The market for 3M (NYSE: MMM) stock is on fire, with shares rising by 7% in the final week of February and 65% in the preceding 12 months, and there is more upside ahead. The strong technical indicators point to a move to $175, possibly higher by midyear. The reason is simple: this once-Dividend King is back in action with its legal troubles behind it and business growth in the forecast.

The business highlights from 2024 include a rapidly improving balance sheet and capital return outlook, including investor-attracting distribution increases and share-count-reducing buybacks. The takeaway is that market fears have been alleviated, and the premium this stock deserves is getting priced in and may result in a new all-time high for this industrial stock by year’s end.

3M Benefits From a Bullish Analyst Sentiment Shift

The analysts’ sentiment trends reflect a significant change in market attitude. The trends include a 60% increase in coverage to 16 analysts since the low in April 2024, firming sentiment with consensus up from Hold with a bearish bias to Moderate Buy with a bullish bias, and a rising price target. The Moderate Buy rating has a bullish bias because 67% rate the stock at Buy or higher with no end to the upgrade cycle in sight.

The price target is significant because it assumes fair value at the March open after rising 40% in 12 months, and a move into the high-end range is likely. That puts this market at a nearly decade high and on track to retest the all-time high soon after.

The insiders are selling 3M shares, but this isn’t a problem. They benefit from share-based compensation and have been stalwart holders. They only sold into the rally after the stock price reclaimed multiyear high price points, and institutional activity offsets this.

The institutional activity is noteworthy because the group sold on balance in Q2 and Q3 of 2024, then reverted to buying in Q4 and ramped their buying activity to a six-quarter high in Q1 2025, aligning with the shift in analysts’ sentiment. They own about 65% of the stock and provide a strong tailwind for the market.

The capital return is solid and improving in both quality and size, a driving force for sell-side investors. The company’s combined dividend distribution and share repurchases amounted to $3.8 billion in F2024, about 77% of the free cash flow, and the guidance for 2025 is better.

The company is guiding for $5.25 billion in FCF at the mid-point, putting the capital return, if left unchanged in 2025, at 71%. The dividend is attractive, with a 1.85% and positive outlook for annual distribution growth; the share repurchase is also appealing, ramping at year’s end to reduce the count by 1.6% compared to Q4 2023 and expected to remain strong in 2025.

3M Reverts to Growth in Q4 2024

3M’s Q4 results and guidance for 2025 were not robust and included the impact of its divestiture in 2024 but showed the company turning a corner. Highlights include a return to growth in ongoing operations driven by organic gains and an expectation for increased traction in 2025. The forecast is for roughly 1% growth in ongoing business and improved margins and cash flow as the impact of legal settlements dwindles in the rearview mirror. In the long term, 3M is forecasted to sustain mid-single-digit top and bottom-line growth through 2030 with modest acceleration.

The technical action in MMM stock is very bullish, showing a Bullish Triangle on the weekly chart and a Bullish Flag Pattern on the monthly. These patterns suggest a move to $180 is likely, and a higher is probable because of the business, analysts, and institutional trends. The questions are if the 3M market will enter a consolidation once it reaches $180 and how long it will last, or if the rally will continue on the all-time high quickly.

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