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Markets have a funny way of making everyone comfortable right before they decide to shake things up. You’ve seen it — 12 stocks in the S&P 500 (SPY) basically drove the entire recent rally, most of them tied to Big Tech.
That kind of concentrated momentum feels great on the way up, and punishing on the way down.
So what does defense look like when you think someone has a finger on the stop button? Goldman’s playbook points to five specific defensive categories worth understanding before rotation happens, not after.
Let me walk you through each one.
Volatility, Tech and Energy Hedges
First up: VIX instruments for volatility insurance. The VIX stayed elevated even while the market was marching higher, which is unusual. Elevated volatility during an uptrend tells you traders never fully trusted the rally.
That makes hedges like VIX, iPath S&P 500 VIX Short-Term ETN (VXX) and ProShares Ultra VIX Short-Term ETF (UVXY) useful when you want protection against sudden air pockets, though they require careful timing.
VXX and UVXY decay over time, so they’re less about holding and more about being positioned before the storm.
Second category: Tech hedges through instruments like the Nasdaq 100 ETF (QQQ) puts, ProShares Short QQQ (PSQ) or ProShares UltraPro Short QQQ (SQQQ). If a rally’s driven by momentum and systematic buying, the most extended leadership pocket is where you expect the first pain.
This isn’t a doom prediction — just a reminder that in corrections leaders usually get punished. Gravity loves popular names. Keep in mind that leveraged instruments add even more risk as well as reward.
Third: Energy as the messy hedge through Energy Select Sector (XLE), United States Oil Fund (USO), Occidental Petroleum (OXY), Chevron (CVX) and Exxon Mobil (XOM). Energy rarely gets attention when oil drifts lower and everyone’s celebrating smooth sailing, but that’s exactly when it deserves a closer look.
If shipping risks flare or geopolitical pressure tightens, these names stop acting like relics and start functioning like portfolio armor. Energy doesn’t need to be pretty to be effective — it just needs tension to wake up.
Classic Risk-Off Trades
Fourth category: Treasurys through longer duration proxies like iShares 20+ Year Treasury Bond ETF (TLT), intermediate exposures like iShares 7-10 Year Treasury Bond ETF (IEF) or straight T-bills. They’re not exciting, but in a market where investors rediscover the value of not losing money, treasuries become the safe harbor.
When equities wobble, capital doesn’t get picky — it gets conservative. Bonds are where traders go to breathe.
Fifth and final: Defensive sectors like Consumer Staples Select Sector (XLP), Health Care Select Sector (XLV) and Utilities Select Sector (XLU). These aren’t the sectors anyone brags about holding, but they don’t need hype — they need consistency.
People buy toothpaste, medication and electricity in every market cycle. When fear rises, capital prefers reliability over swagger and these sectors quietly do their job.
Here’s what matters…
The key isn’t guessing exactly which candle marks the top — it’s mapping rotation before it happens. Markets love punishing certainty, so it pays to watch where money might hide next.
Who wins if fear rises? VIX products, bonds and defensive sectors. Who gets hit first when the flow trade breaks down? Crowded tech, high beta momentum and anyone who chased record highs because they feared missing out.
Position accordingly.
Jeffry Turnmire
Jeffry Turnmire Trading
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I’m just a regular dude in Knoxville, Tennessee: a husband, father, civil engineer, urban farmer, maker and trader.
I’ve been at this trading thing with real money for 20-plus years, and started paper trading over 35 years ago. I have a knack for making some epic predictions that just may very well come true. Why share them? Because I like helping other people — it’s the Eagle Scout in me.
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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