We’re reminded again of the old adage that stocks fall in value much faster than they gain in value. The stunning in drop in various financial markets in the past few months, paired with a rapid plunge in bond yields, has led many investors to adopt a much more cautious stance.

The markets appear to be responding to a growing set of economic reports that point to a slowdown in economic growth. For example, home sales plunged seven percent on an annual basis in November, the fastest drop since 2011. Auto sales are coming off their peak, global trade flows are weakening and confidence in the executive suites is waning.

A recent survey conducted by the Duke University/CFO Global Business Outlook found that nearly half of the chief financial officers interviewed predicted the U.S. economy will enter in a recession in 2019. That figure swells to 80 percent when asked if that will happen by 2020.

Still, not everyone is convinced the economy will stall out in 2019.

“The underlying economic data don’t yet anticipate a recession, though there is clearly a visible slowdown in growth,” says Todd Sunderland, head of risk management and quant strategies at Cushing Asset Management. He notes the sharp drops in stocks and commodities underpin the “palpable fear” in place right now.

Some observers are concerned that fear could become its own negative catalyst.

“If the market continues to sell-off, that could impact consumer and corporate spending,” says Matthew Bartolini, head of SPDR Americas research at State Street Global Advisors. His firm recently issued a 2019 outlook for ETFs that noted frayed US-China relations, less accommodative monetary policies and slowing earnings growth have investors on edge.

While Bartolini agrees with Sunderland that it’s premature to predict an imminent recession, he suggests investors may gravitate towards traditionally defensive sectors such as consumer staples, healthcare and utilities.

It’s interesting to note that “credit-like” equities such as utilities have come back into vogue. Until a few months ago, a rising interest rate environment led many investors to shun rate-sensitive sectors like utilities. Not anymore. The Utilities Select Sector SPDR Fund (XLU) has managed to rally more than three percent in the fourth quarter, a rare bit of green on red trading screens.

This fund, which has a 0.13 percent expense ratio and $8 billion in assets, offers a 3.3 percent 30-day SEC yield. That’s above the comparable yield offered by a 10-Year Treasury Bill.

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.

We’re entering 2019 with a great deal of uncertainty. The U.S. economy may or may not deliver sustained growth, which will impact Fed policy and interest rates. That’s why the best offense right now may be defense, and these ETFs have proven resilience during times of market stress.