The best in the middle of the bleeding

The markets interpreted it as a huge turn to protectionism, in a context that was already complicated by economic deceleration signals.

The reaction was immediate and violent: the day following the announcement, the S&P 500 retreated 4.9%, Nasdaq collapsed 5.4%, while Dow Jones and Russell 2000 fell 4%and 6.4%, respectively. And on Friday the bleeding continued after China announced reprisals. There were falls similar to Thursday. Total massacre.

Let’s look at the S&P 500 graph:

From the February maximum, it accumulates a fall greater than 12% and reached price levels not seen since August last year.

Within the chaos, there were assets that fulfilled their defensive role, in the midst of a great “Fly to Quality” (quality flight). What are they?

Treasury bonds

When the market enters panic, money seeks immediate shelters. And one of the most classic and effective are the letters of the American treasure.

The Treasury Lyrics (T-Bills) are very short-term bonds, with maturities lower than one year. They do not pay interest regularly, but they are bought with discount and are charged to full value (100) at the expiration. In other words: you know exactly how much you will receive and when. In days like today, when everyone looks for security and liquidity, these letters usually rise in price, since there is a massive demand for their ultra conservative profile.

Steps above in Duration are the greatest expiration bonds. For example, the ETF IEF, which invests in medium -term treasure bonds (7 to 10 years). What does this mean? That are more sensitive to the movements of interest rates. Technically, they have a greater duration: that means that if the rates go up, these bonds fall more price, but if the rates fall (as is happening, for fear of a slowdown), then they rise more strongly. But be careful: this ETF has much more risk than a letter. It works as a refuge only if shock is accompanied by rates fall, as in this context.

Gold

Although gold suffered a correction after Trump’s ads, it does not stop fulfilling its historical role: acting as a refuge in the face of uncertainty.

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Its long -term bullish trend remains intact, sustained by solid foundations such as the weakness of fiduciary currencies, chronic fiscal deficits and the accumulation of metal by central banks. Despite this fall, it still has good arguments. Although it is worth noting that he does not promise any return, so he can continue correcting.

“Defensive” actions

While technology, banks and the energy sector collapsed strongly, some historical names suffered more controlled falls. Actions such as Coca-Cola (KO) and McDonald’s (MCD) had increases higher than 2% on Thursday, April 3. However, on Friday 4 they fell in magnitude.

These companies belong to the basic consumption sector and usually have stable income, beyond economic volatility. To capture these types of companies together, there is the ETF XLP, which groups the main defensive consumption actions. Among its largest participations are: Procter & Gamble (PG), Coca-Cola (KO), Costco (Cost), Pepsico (Pep), Walmart (WMT), Colgate-Palmolive (Cl).

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While the main indices suffered bloody corrections, XLP is only 6% below historical maximums.

However, it is worth clarifying that these types of actions “defend”, but do not shield. After all, they are still actions, and if the scenario is significantly aggravated, they can also be dragged. Proof of this was Friday, April 4, with the XLP falling 4%. The big difference is in speed and magnitude: while other sectors can collapse quickly, XLP tends to shine the blows better.

Conclusion: Are you managing your risk well?

Days like the current not only shake the portfolios: they also test your strategy. Did you have everything in technological actions because “they didn’t stop up”? Did you fall short with your bond position? Did you never consider gold in recent years?

The function of a portfolio is not just winning when everything goes up. It is more important to protect you when the market falls.

And it is not about guessing what will happen. Trump may feel to negotiate with countries to reduce or get tariffs. Or there may be more reprisals. No one knows. Not even the market. But what you can do is be prepared. And for that it is essential to have a plan.

Finally, I want to invite you to download a report that I prepared for this year. There you will find 7 concrete ideas with really surprising alternatives, which present a great risk-back relationship. You can download it in this link: https://clubdeinversores.com/pdf-7-ideas-de-inversion-para-2025/

Note: The material contained in this note should not be interpreted under any point of view as an investment council or recommendation for the purchase or sale of a particular asset. This content has only educational ends and represents only an opinion of the author. In all cases it is advisable to advise with a professional before investing.