The U.S. Stock Market Bounced Back After Tariff Relief. Here's How You Can Protect Your Portfolio From Further Volatility

Investors got what they were hoping for on Wednesday—temporary relief from tariffs imposed by the Trump administration, which helped put an end to a sharp two-day selloff that had rattled the stock market earlier in the week. However, despite this reprieve, new reciprocal tariffs on imports from key U.S. trading partners are still scheduled to take effect in April. This has left many investors questioning how to brace themselves for another round of market turbulence caused by trade policies.

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Earlier in the week, President Trump enacted tariffs against three major trading partners, triggering swift retaliatory measures from Canada, China, and Mexico. The market reacted sharply, with concerns growing that escalating trade tensions could push the U.S. into an economic downturn.

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On Wednesday, U.S. stocks managed to recover some losses after the White House announced a one-month exemption on auto tariffs for Canada and Mexico. The Dow Jones Industrial Average rebounded by about 485 points, or 1.1%, after plummeting more than 1,300 points in the previous two sessions. Similarly, the S&P 500 climbed 1.1%, while the Nasdaq Composite advanced by 1.5%, according to FactSet data.

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During times of broader market declines, defensive stocks—those in consumer staples, healthcare, and utilities—are typically viewed as safe havens, helping investors manage risk. However, even these stocks were not immune to this week’s selloff, as concerns about slowing economic growth weighed heavily on the market.

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Despite being one of the best-performing sectors in the S&P 500 this year, the consumer-staples segment has dropped 0.8% so far this week. Utilities have been hit

even harder, declining by 2.2%, while healthcare stocks have managed to eke out a modest 0.4% gain, according to FactSet.

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Hartford Funds’ global investment strategist Nanette Abuhoff Jacobson pointed out that while defensive stocks have led market rotations this year, they may not hold up if a recession becomes a strong possibility. “If recession really becomes a higher probability, no equity is going to work,” she cautioned.

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Brad Roth, chief investment officer at Thor Financial Technologies, noted that widespread selloffs are common when recession fears shake the markets. However, he emphasized that over the long term, defensive stocks still tend to outperform the broader S&P 500 and more cyclical sectors in a recessionary environment.

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Investor anxiety has been building since early 2025, with many shifting toward defensive positions due to rising concerns over stagflation—a combination of persistent inflation and sluggish economic growth. The Atlanta Federal Reserve’s GDPNow model recently estimated that U.S. GDP will shrink at an annualized rate of 2.8% in the first quarter, worsening from an earlier estimate of a 1.5% contraction. Additionally, payroll processor ADP reported that only 77,000 private-sector jobs were created in February, a sign of a potential slowdown.

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Roth observed that investors have been gravitating toward utilities and other defensive stocks over the past few months, a trend that he sees as a sign of ongoing market uncertainty. He also suggested that investors might look to high-quality, dividend-paying stocks as a way to preserve capital. “We’re focusing on Dividend Aristocrat-type stocks—safer, steadier, and more resilient with a solid yield,” he said.

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With tariff concerns driving investors toward safer assets, demand for U.S. government debt surged earlier this week. The 10-year Treasury note saw approximately $18 billion in net inflows between Monday and Tuesday alone, according to Thor Financial Technologies.

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“Treasurys are your friend in major equity selloffs,” Abuhoff Jacobson noted. However, she cautioned that if the Federal Reserve implements additional rate cuts, the real return on Treasurys and cash-like investments will be diminished. “They are really just places to preserve capital when volatility spikes,” she added.

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Another traditional safe-haven asset, gold, has also seen strong demand. The most actively traded gold futures contract has climbed 2.7% this week, settling above $2,926 per ounce on Wednesday afternoon. Historically, gold tends to gain value during periods of economic uncertainty, as investors seek its stability and intrinsic worth.

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While the U.S. dollar is typically considered a safe-haven currency, it has weakened in 2025 amid fears that the Trump administration’s tariffs could slow economic growth.

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The euro has gained nearly 4% this week, climbing to around $1.08, as defense spending increases in Europe and rising bond yields boost demand for the currency. The ICE U.S. Dollar Index, which measures the greenback’s value against a basket of major currencies, has dropped 3.1% this week, falling to its lowest level since November at 104.29, according to FactSet.

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As investors navigate continued uncertainty, attention remains focused on how markets will react to the upcoming wave of reciprocal tariffs. With volatility expected to persist, defensive strategies, safe-haven assets, and high-quality investments could play a critical role in portfolio positioning over the coming months.

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