Editor’s Note: Let’s face it: volatility is back, baby. And it’s louder, meaner, and more erratic than ever. Stocks are soaring one day and plunging the next, amid chaotic tariff pronouncements, rising geopolitical tensions, and the growing buzz that a recession is just around the corner.

However, before you renounce capitalism and move to a hut in Patagonia, I’ve got a better idea. Below, I show you a time-honored way to stay invested with mitigated risk.

---

Off-the-Chart Stress

First, take a look at the latest reading of the “U.S. Economic Policy Uncertainty Index,” a widely followed indicator that the Financial Times has compiled for the last two decades:

The chart integrates several data sets, including news coverage of economic events, financial market volatility, and surveys of economic forecasters and CEOs. Plummeting confidence among business leaders, consumers and investors during the initial months of the second Trump administration has caused uncertainty to literally go off the chart.

To expropriate Roy Scheider’s famous quote in Jaws: “We’re gonna need a bigger Y axis.”

Enter sector rotation. Most investors are familiar with sector rotation, but its true value, especially in today’s turbulent market conditions, may not be fully appreciated. Sector rotation is a classic strategy where you shift your money into sectors of the market that are poised to outperform under current economic conditions, while backing away from those that are underperforming.

Read This Story: The “Trump Slump” Playbook: How to Invest Now

It’s a bit like switching tables in a casino. You don’t leave the building; you just stop betting on the blackjack table run by the croupier muttering about reciprocal tariffs.

Defensive Sectors Are Your Friends

Right now, with recession fears rumbling like a distant thunderstorm, certain sectors tend to hold up better than others. In chaotic times like these, investors often rotate into so-called defensive sectors, those areas of the market that provide essentials no matter what’s happening in the economy.

The following sectors tend to be less sensitive to economic cycles, and more reliable in the face of bond yield inversions and presidential rages on social media.

Utilities: People still need electricity, even when their portfolios are cratering. No matter how volatile the market gets, turning on the lights or heating your home remains a constant necessity. Utility companies tend to provide reliable, defensive opportunities that thrive in uncertain times. Indeed, utilities have outperformed during recent tariff-induced swoons, due to the enduring reliability of their business model.

Consumer Staples: Shampoo. Canned soup. Toilet paper. Humans don’t stop buying the basics, even when the Dow is in a swan dive. These products are part of our daily routine, and even in economic downturns, people will prioritize purchasing these essential items. That stability can make consumer staples stocks more resilient compared to other sectors during market turmoil.

Health Care: Health care is one of the most recession-proof industries. People always need medical services, no matter the economic climate. In fact, as people age and health care needs increase, this sector’s demand grows, offering consistent investment opportunities. And besides, as the markets lurch up and down, there should be greater demand for blood pressure checks.

Rotate Out of the Hot Mess Express

On the flip side, when the economy and financial markets look shaky, investors typically steer clear of the following sectors.

Technology: Great during booms, as demand for new innovations and products accelerates, fueling growth and higher valuations. However, during busts, when consumer spending slows and investments in research and development dwindle, tech companies typically experience sharp declines.

Industrials: Heavily exposed to global trade tensions and tariffs, which can disrupt supply chains and inflate costs, hurting profit margins. Industrial firms are vulnerable to shifts in global economic conditions, as lower demand for goods and services leads to reduced production and slower growth in key markets.

Financials: Rising recession fears can cause tightening credit, reduced lending, and higher default rates, all of which erode banks’ profitability. As consumer confidence falls, financial institutions struggle to generate returns from traditional lending, making it harder for them to grow earnings and maintain their stock prices.

You Don’t Need to Be a Psychic—Just a Weatherman

The beauty of sector rotation is that it doesn’t require clairvoyance. You don’t need to predict exactly what Trump (or his handlers) will post tomorrow on Truth Social, or exactly when the recession will arrive. You just need to observe which way the economic winds are blowing and adjust your sails accordingly.

Use exchange-traded funds (ETFs) or sector funds if you want to keep it simple and further reduce risk. And remember, this isn’t day-trading. It’s methodical shifting, not frantic flailing.

It’s tempting right now to flee the market entirely. After all, it’s exhausting watching your portfolio drop 3% every time a new tariff headline hits. But exiting the market wholesale is the investing equivalent of slashing your tires because there’s traffic. It feels good for a moment, until you realize you’re going nowhere.

Sector rotation gives you a way to stay in the game. You reduce your exposure to riskier sectors and hang out in the calmer corners of the market until the storm passes (or at least quiets down).

The global chaos we’re experiencing will remain a consistent feature of Trump 2.0. But with sector rotation, you don’t have to sit there and take it. You can adjust and ride out the madness with a portfolio that actually has a shot at keeping its composure.

Got a question or comment? Drop John Persinos a line at mailbag@investingdaily.com

---

5 stocks that can get you through anything

Market volatility is at an all-time high. It’s more important than ever to find investments you can count on — no matter what’s going on in the news.

We’ve pinpointed five stocks that can withstand just about anything, because there’s no substitute for them. They enjoy non-stop demand that’s a luxury few businesses enjoy, which is why they kick the tar out of other stocks.

Since early 2000, they’ve beaten the S&P 500 year in and year out — and we’ve put all the details together on how you can get your hands on them right here.