The 3 Most Recession Resistant ETFs to Buy Ahead of Tariff Uncertainty

While the Trump tariff policies have given an unprecedented boost to US business and manufacturing in particular, there are both geopolitical and domestic question marks that can rock the markets in the near future, which retirees may find unpalatable. The following three ETFs might be worth considering to add to a portfolio for some extra stability and peace of mind:

• Vanguard Utilities Index ETF (NYSE: VPU | VPU Price Prediction)

• ProShares S&P 500 Dividend Aristocrats ETF (BATS: NOBL)

• iShares 0-3 Month Treasury Bond ETF (NYSE: SGOV)

Tariffs Boost US Business But Other Factors Can Undermine Them

Tariffs have done much to balance the global trade playing field and created signifcant incentives for new US manufacturing businesses and investment.

The Trump administration’s economic policies, spearheaded by Treasury Secretary Scott Bessent, has made some unquestionably savvy strategic moves that have helped the overall climate of US corporate business. Aside from banking reforms with ISO 20022 and Basel III compliance, the Treasury Department has asserted greater control over the economy, including floating the notion of gold denominated Treasury bonds. However, tariffs have played the biggest role in the revival of US business. Restoring incentives for US manufacturing, rebalancing a playing field that had heavily penalized US businesses, and triggering over $18 trillion in new US business investment, the tariffs, combined with DOGE wasteful spending cuts, have slowed the growth of deficit growth and begun taking a bite, albeit a small one, out of the national debt.

However, a softer US dollar, continued appreciation of precious metals, and uncertainty over the Iran War are wild cards that can still instill undue volatility into the market. Additionally, a February Supreme Court ruling limited circumstances under which tariffs could be justified, requiring the administration to apply different statutes to keep them in force. As a result, there is a significant level of potential market turbulence on the horizon 

Vanguard Utilities Index ETF

VPU utilies stocks contain compamies that control a variety of power generation plants that may utilize gas, coal, or even nuclear.

Launched in January 2004, VPU is a utilities index ETF that uses the MSCI US Investable Market Utilities 25/50 Index as its benchmark. Holding roughly 70 stocks, VPU’s utilities focus is a sector that is relatively impervious to the aforementioned tariff and other potential event risks. If anything, surging power generation demands from the proliferation of A.I. data centers will inevitably continue to escalate gains for the utilities sector.

VPU’s Top 10 largest holdings:

• NextEra Energy – 11.89%
• The Southern Company – 6.35%
• Duke Energy – 6.26%
• Constellation Energy – 6.26%
• American Electric Power – 4.40%
• Sempra – 3.87%
• Vistra Corp. – 3.63%
• Dominion Energy – 3.32%
• Xcel Energy – 3.04%
• Entergy Corp. – 2.95%

ProShares S&P 500 Dividend Aristocrats ETF

Dividend aristocrats are companies with a minumum of 25 consecutive years of dividend increases.

Dividend Aristocrats are a favorite category of conservative, risk-averse retirees and institutional investors who want steady gains with a dividend kicker. Dividend Aristocrats are large-cap stocks with a history of 25 consecutive years or more of dividend increases. For a company to continually sustain dividend increases for that sustained period is indicative of strong management, products, and/or services that have firmly established themselves in their particular industries. NOBL tracks the S&P Dividend Aristocrats Index. It holds roughly 72 stocks. 

Top 10 stocks of NOBL:

• Sysco Corp – 1.65%
• Colgate-Palmolive – 1.62%
• PepsiCo, Inc. – 1.61%
• Linde plc – 1.61%
• Caterpillar, Inc. 1.60%
• Clorox Company – 1.60%
• Procter & Gamble Co. – 1.59%
• Church & Dwight Co., Inc. – 1.59%
• Amcor plc – 1.59%
• Exxon Mobil Corp. – 1.58%

iShares 0-3 Month Treasury Bond ETF

Ultra short-term Treasury Bonds have zero interest rate risk and zero credit risk.

Perhaps the least volatile negotiable securities in the market, short term treasuries are US government debt obligations with 3 months or less to maturity. SGOV invests 90% of its assets into short term US bonds in the ICE 0-3 Month US Treasury Securities Index. Super conservative and capital protective, they carry some remaining income and are often interchangeable with cash due to their stability. With monthly payouts, zero interest rate risk and zero credit risk, SGOV is ideal for the most risk-averse investors.  

A Strategy For Dealing With Volatility Risk

Adding stability to a portfolio during periods of anticipated volatility may make for less sleepless nights.

Bearing in mind that the experts have repeatedly gotten it wrong about numerous moves by the Trump administration: tariffs, inflation, job creation, manufacturing, shifting from green energy back to oil and gas, and many other topics. 

With that said, the odds that recent doomsayers predicting a potential recession being wrong are also good. However, adhering to the term ‘better safe than sorry” is something that will help many retirees and conservative investors sleep better at night. Therefore, including the above suggested ETFs into a portfolio to offset volatility may dampen potential gains, but will also preserve against prospective losses. Given the liquidity and transactional ease of ETFs, recession resistant ETFs should at least be a consideration until the turbulence has passed.