To The Moon

Tariffs can introduce significant volatility and uncertainty into global markets. When seeking "tariff-resistant" ETFs, the goal is typically to find investments that are less directly exposed to international trade disputes or that tend to perform well during periods of economic instability.

A rotation into defensive sectors can offer investors a strategic edge—especially when macro risks like tariffs, inflation, or slowing growth start to cloud the outlook.

In this article, I would like to explore and break down how this shift can benefit portfolios and where to look for opportunity.

While we explore which sector might be rotating, we should also stick to our long-term portfolio which need to contain good quality stocks, which should give us a pretty good returns in terms of dividends.

Why Rotate into Defensives?

while the market isn't entirely defensive, there's a clear trend of investors seeking refuge in these sectors due to ongoing uncertainties. If this rotation solidifies, it suggests a more cautious market environment with potentially lower overall returns, but with defensive sectors providing relative stability and outperformance.

Capital Preservation: Defensives like utilities, healthcare, and consumer staples tend to hold up better during market drawdowns due to stable demand.

1. Income Stability: Many defensive stocks offer reliable dividends, which can cushion returns when capital appreciation slows.

2. Valuation Rebalancing: After a tech-led rally, defensives often trade at discounted valuations—offering upside as capital rotates.

3. Macro Hedge: In times of policy uncertainty (e.g. tariffs, Fed ambiguity), defensives act as a volatility buffer.

There might be some market volatility which could cause further sector rotation so a well-designed portfolio should contain some long-term quality stocks paired with some defensive.

In the following section I will be sharing on how I will be breaking down the different factors and also evaluate them using valuations and technical setups.

Top Defensive ETFs to Consider

Individual Defensive Stocks to Watch

Strategy Insight

Tactical Allocation: Consider trimming high-beta tech and reallocating 10–20% into defensives if volatility rises.

Pairing Idea: Long $Health Care Select Sector SPDR Fund(XLV)$ + $Utilities Select Sector SPDR Fund(XLU)$ , short $Invesco QQQ(QQQ)$ (tech-heavy) as a hedge.

Valuation Tilt: $Johnson & Johnson(JNJ)$ and $NextEra(NEE)$ offer the best blend of value + yield; PG and UNH provide defensive growth.

In the next section, I will share what I have gotten after screening for undervalued dividend growers with strong technical setups, and then overlay macro indicators like bond yields and PMI trends to help time a potential rotation into defensives more precisely.

🧾 Screening Criteria

Here are the criteria that I have used for the screening, so this might not suit every investors, hope this can be a reference for investors who are also looking for opportunities when sector rotation is happening.

• Dividend growth: 5+ years of consistent increases

• Undervaluation: Low forward P/E, PEG < 1.5, or high FCF yield

• Technical strength: Above 50- and 200-day MAs, bullish RSI/MACD

• Macro alignment: Favorable in a falling yield + slowing PMI environment

🏆 Top Dividend Growers (July 2025)

These names were highlighted in recent analyses of undervalued dividend aristocrats and small-cap insider buying screens.

📉 Macro Overlay: Bond Yields & PMI Trends

I have also include the overlaying of macro indicators like bond yields or PMI trends to help me to time the shift more precisely.

🏦 Bond Yields

• 10-year U.S. Treasury: ~4.26% and trending lower

• Singapore 10-year: ~2.23%, down from 2.42% in May

• Implication: Falling yields favor yield-sensitive sectors like utilities, REITs, and staples.

🏭 PMI Trends

• U.S. Manufacturing PMI (July): 52.9—2-year high, but plateauing

• Implication: Suggests late-cycle environment—ideal for defensives and dividend growers.

The Global Manufacturing PMI, sponsored by J.P. Morgan and compiled by S&P Global Market Intelligence, rose from 49.5 in May to 50.3 in June, edging above the 50 'no change' level for the first time in three months to indicate a marginal improvement in business conditions at the end of the second quarter.

Strategic Insight

So this is what I would be planning a strategy to take advantage of this sector rotation, but as mentioned above, we might see more sector rotation coming, and we should be fluid enough to adjust accordingly.

• Timing the Rotation: With bond yields falling and PMI peaking, this is a prime window to rotate into high-quality dividend growers.

• Pairing Idea: Long XLV + XLP + $Realty Income(O)$, short QQQ or reduce tech beta exposure.

• Watchlist Alerts: Set alerts for RSI dips to 50–55 or MACD crossovers for reentry.

Summary

While the market is not entirely defensive, there is a clear trend of investors seeking refuge in these sectors due to ongoing uncertainties. If this rotation solidifies, it suggests a more cautious market environment with potentially lower overall returns, but with defensive sectors providing relative stability and outperformance.

For diversified portfolios, the defensive tilt can help cushion downturns and reduce overall portfolio volatility, preserving capital.

Potential for "Value" to Outperform "Growth": Defensive sectors often align with value investing principles, so this rotation could signal a period where value stocks broadly outperform growth stocks.

Appreciate if you could share your thoughts in the comment section whether you think having a part-defensive. strategy could allow us to take opportunities when we faced market volatility or uncertainity.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.