History suggests that consumer staples also provide a measure of defense. The Vanguard Consumer Staples ETF (VDC) bears that out. The fund’s 16.6 percent drop in 2008 was less than half the drop of the S&P 500.

Three Cheers For Healthcare

Almost everyone interviewed for this story spoke highly of healthcare stocks in these uncertain times. Janet Johnston, portfolio manager at TrimTabs Asset Management, says the sector delivers consistent growth in any economic environment. “People still need to go to the doctor to get their meds,” she says.

Dhruv Nagrath, an iShares investment strategist at BlackRock, adds that health care stocks aren’t tied to global growth, have solid earnings profiles, strong balance sheets and very low sensitivity to interest rates.

Nagrath is especially keen on medical device stocks, which “bring you strong exposure to innovation.” His firm’s iShares U.S. Medical Devices ETF (IHI), which has a 0.43 percent expense ratio and $2.4 billion in assets, has returned roughly 18 percent a year over the past decade. That’s good enough for a five-star rating from Morningstar.

The fund owns a concentrated portfolio of the nation’s largest medical device firms—Abbott Labs, Medtronic, Thermo Fisher and Becton Dickinson comprise more than a third of the portfolio, and will collectively spend nearly $7 billion on R&D in 2018.

The Portfolio Ballast

Any discussion of defensive investing needs to include fixed income. Trouble is, it’s a bit of a challenge to gauge the direction of interest rates in 2019. The Federal Reserve may boost rates modestly or aggressively in 2019, depending on how the economy fares. And with 10-Year Treasuries yielding less than 2.8 percent at the moment, Nagrath says it’s clear that investors see more attractive sources of income elsewhere on the curve, with less duration.

That’s why he and his colleagues at iShares suggest focusing on the short-end of the curve. Investors have already jumped on that bandwagon, with the iShares 1-3 Year Treasury Bond ETF (SHY) and iShares Short Treasury Bond ETF (SHV) experiencing combined net inflows of $15 billion this year.

Both funds carry a 0.15 percent expense ratio. The SHY fund sports a 2.61 percent 30-day SEC yield, which is 29 basis points more than the SHV fund. Either way, you’ll glean a payout ahead of the rate of inflation.