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The Earnings360 Team
For Your Education and Enjoyment 3 Smart Defensive Stocks for an Uneasy MarketWritten by Chris Markoch. Published 11/18/2025. 
Key Points - Despite new market highs, recession risks remain elevated due to weakening consumer credit and signs of job market stress.
- Procter & Gamble and Johnson & Johnson offer stable dividends, strong balance sheets, and catalysts that could provide upside in a downturn.
- A rotation away from AI and into Dow components could make the DIA ETF a compelling defensive play for 2025.
At one point in early November, the Dow Jones Industrial Average (DJIA) briefly topped 48,000 for the first time ever. At different times in 2025, the NASDAQ and S&P 500 have made new all-time highs (ATHs). Despite sharp price swings, it's been a solid year to own stocks. Yet many economists, analysts, and investors remain uneasy. The market appears priced for perfection—while recession risks are not fully reflected in prices. Amazon has quietly poured $144 million into a secretive AI chip company, and committed to buying a staggering $650 million of their product. Why? Because this obscure startup holds the key to unleashing the full potential of Nvidia's revolutionary Blackwell chip. Discover the company at the heart of the AI arms race. Even with broad gains, skepticism persists. The Magnificent 7 trade may have cooled, but a narrow group of names, largely tied to the AI boom, is still lifting the market. The K-Shaped Economy Concern Current commentary centers on a K-shaped recovery. Higher-income consumers are navigating inflation near 3%—still above the Federal Reserve's informal 2% target but manageable for affluent households. Lower-income consumers, however, have been under pressure for several years. Rising credit defaults, delinquent auto loans, and an uptick in foreclosures suggest the problem is worsening. The labor market, once the economy's strongest pillar, is beginning to show strain as well. JPMorgan Chase & Co. (NYSE: JPM) recently lowered its estimated probability of a recession from 60% to 40% after some de-escalation in trade tensions. That's a meaningful risk level nonetheless. Market Breadth Remains Narrow as Investors Chase Mega-Caps Data from Charles Schwab shows the percentage of S&P 500, NASDAQ, and Russell 2000 stocks trading above their 200-day moving average was slightly above 50%. That indicates historically narrow market breadth, which feeds investor concerns. This isn't a repeat of 2021, when investors poured money into unprofitable SPACs hoping for quick riches. Today's froth is concentrated in mega-cap companies that often have large cash balances; yet many investors worry those stocks are overvalued. So what's an investor to do? Below are three names that offer a defensive tilt while still providing asymmetric upside in an uneasy market. Procter & Gamble Has More Than a Dividend to Like Procter & Gamble Co. (NYSE: PG) is a member of the exclusive Dividend Kings club, having increased its dividend for 70 consecutive years. That track record makes PG a staple for income-oriented portfolios. The stock yields about 2.8%, which could look more attractive if interest rates decline. Analysts' consensus $171.53 price target implies roughly 17% upside from current levels. It's still unclear how Procter & Gamble's proposed acquisition of Kenvue (NYSE: KVUE) would affect near-term earnings. If the deal closes and any Tylenol-related controversies ease, the company would likely see modest EPS dilution in the first year. Over time, however, cost synergies and scale could turn that initial dilution into EPS accretion, supporting both growth and the dividend. Johnson & Johnson Doubles Down on Medtech and Oncology Growth Johnson & Johnson (NYSE: JNJ) spun off Kenvue in 2023 to focus more on medtech and pharmaceuticals. Recent dealmaking underscores that strategy. One example is J&J's $3.5 billion acquisition of Halda Therapeutics, a clinical-stage company whose HLD-0915 candidate adds to J&J's oncology pipeline. HLD-0915 is a once-daily oral prostate cancer therapy that received fast-track designation from the U.S. Food & Drug Administration (FDA). Adding this asset should be a meaningful boost to J&J's oncology franchise, which makes the stock more attractive to investors seeking defensive exposure with growth potential. The DIA ETF Could Benefit From a Flight to Safety Over the past five years many investors embraced a passive "SPY and chill" approach, using the SPDR S&P 500 ETF Trust (NYSEARCA: SPY). SPY can still be a solid choice, but with potential AI-driven overexuberance, it may be worth considering the SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA: DIA) as a defensive alternative. If concerns about an AI bubble prompt a rotation out of the largest tech names, investors may rotate into the Dow 30 components—making DIA a way to capture that move. As of this writing, DIA has roughly 37% institutional ownership, but it has seen more buying than selling in seven of the last eight quarters, suggesting institutions may be positioning DIA as a hedge against a tech slowdown.
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