Buy This, Not That: The Clear Winner in Defensive Sectors

Shah Gilani|April 23, 2025

With market volatility spiking and tariff concerns escalating, investors are seeking shelter from the storm…

Two defensive sectors traditionally offer protection, but only one is truly delivering right now.

I’ve analyzed the numbers, and the winner is clear: one sector offers positive returns while the S&P 500 is down 10% year-to-date, plus a dividend yield nearly double its competitor.

See the complete breakdown – including which ETF will weather this market turbulence while still building your wealth.

Click on the thumbnail below to watch.

Transcript

Hello, everybody. Shah Gilani here with your weekly BTNT, as in Buy This, Not That.

Many folks have been asking me what to do when the market is in a whirlwind, volatility is going through the roof, and we’re sliding downward on tariff news and other developments.

The question is…

How do you get defensive?

Where do you go?

I’ve been asked repeatedly in the last couple of weeks about the best defensive sectors.

Where should investors turn when looking for defensive positions?

The two sectors that always come up are healthcare and utilities. Both make logical sense.

For healthcare, people require medical care, medications, and health services regardless of the economy’s state.

This constant demand ensures that healthcare companies often maintain steady business even during recessions.

For utilities, services like electricity, gas, and water are fundamental necessities.

Consumers continue to pay for these utilities even when cutting back on other expenses, providing utility companies with reliable revenue streams during economic downturns.

That’s why we see movement into healthcare sometimes, utilities other times, and occasionally both sectors.

Let’s examine the two major ETFs in healthcare and utilities.

I’ll look at the SPDR ETFs here.

Let me pull up stock charts for XLV, which is the SPDR Healthcare ETF, and XLU, which is the SPDR Utility ETF.

I want to compare which one is performing better.

They’ve tracked somewhat similarly this year while the broader market has experienced a significant decline.

Make no mistake – while these sectors offer safety, they haven’t delivered impressive performance.

Here’s what the S&P looks like:

p>Despite the market’s decline, neither XLU nor XLV has shown strong defensive action.

Looking at XLU year-to-date through yesterday’s close (following a nice rally yesterday), the SPDR Utilities ETF (XLU) is up 3% year-to-date as of yesterday’s close.

This isn’t a dramatic movement, but the positive aspect is that it’s up while the S&P 500, based on yesterday’s close, is down just over 10% year-to-date.

We’re seeing a bounce today (Wednesday). We received positive news from the White House that Donald Trump is not going to fire Jerome Powell, which the markets are responding well to.

The XLU chart shows mostly sideways action, which isn’t exciting, but the positive takeaway is that XLU offers a dividend yield of 2.92%.

While not presenting a particularly attractive growth chart, it’s not a bad defensive position if you established it early enough.

For XLV, I’m less enthusiastic about the healthcare sector because its chart looks concerning.

The XLV is down 2% year-to-date through yesterday’s close.

So while XLU (utilities) is up 3%, the healthcare ETF is down 2% during the same period.

The healthcare ETF does offer a dividend yield of approximately 1.73%.

This means you get a better dividend yield with XLU at almost 3%, plus a better-performing chart since it’s positive for the year while XLV is negative.

Defensively, I would recommend utilities over healthcare.

Additionally, when economic conditions improve, utilities are likely to generate increasing revenue as they expand to meet the growing demands of AI, data centers, and other technological developments.

I believe utilities will show stronger performance moving forward.

You should consider defensive positioning now, and here’s why: despite a nice two-day rally (including today’s strong market opening), we’re still just approaching the top of a concerning downtrend channel. Even if we break above this level, we’re not necessarily in the clear yet.

If you want defensive exposure, I prefer XLU, the utility SPDR ETF, over XLV, the healthcare ETF. That’s all for today. I hope you all have a great day.

Carry on, markets.

Cheers.