By Ian Salisbury
President Donald Trump's threats over Greenland are rattling the stock market. Fortunately, investors have lots of sound options for playing defense.
Fears of new political tension over the White House's aggressive foreign policy and his demands to buy Greenland sent the S&P 500 down 2% on Tuesday. For stock market investors -- who were already worried about a shaky U.S. economy and runaway artificial-intelligence spending -- it's yet another red flag.
As it turns out, the market has already spent the past several weeks rotating into more defensive sectors, some with attractive dividends. Fortunately, many of these sectors still boast price-to-earnings ratios that far below the broader market, suggesting investors still have plenty of time to jump in.
So far, some of 2026's biggest winners are last year's also-rans. The $76 billion Schwab U.S. Dividend Equity exchange-traded fund, one of the market's largest dividend ETFs, struggled last year: It returned just 4.3%, when the market returned nearly 18%.
So far this year, the Schwab fund is already up 5.4% -- eclipsing its 2025 return in just two weeks -- thanks to heavy exposure to suddenly hot corners of the market like energy and consumer defensive stocks.
The State Street Energy Select Sector SPDR is up nearly 7%, despite the U.S. military operations in Venezuela and ongoing trouble in Iran. The turmoil has some analysts, such as those at Citigroup, hiking forecasts for oil prices, which have languished in recent years, hampering the sector's growth. Stocks in the fund trade at an average of 16 times next year's earnings, compared with 22 times for the broad market. The energy ETF yields 3%, higher than any sector after real estate's 3.4%, and nearly three times the 1.1% for the S&P 500 as a whole.
Shares of Exxon Mobil have rallied 7.1% in 2026, as investors bet it can withstand political pressure to rush into Venezuela. Analysts expect Exxon's earnings to creep up just 1% in 2026, but surge more than 20% in 2027, according to FactSet. Meanwhile, Exxon's 3.2% yield looks safe, considering a payout ratio of below 60%.
Consumer staples is another out-of-favor corner of the market investors have recently taken a shine to. The State Street Consumer Staples Select Sector SPDR returned just 1.6% in 2025, as tepid consumer sentiment and worries about a K-shaped recovery, in which Main Street consumers struggle despite rising stock prices. Stocks in the fund trade at an average of 19 times next year's earnings, while yielding 2.7%.
Those defensive stocks have looked a whole lot more appealing in 2026 -- with Consumer Staples ETF returning 5.7% so far. Shares of Costco Wholesale have surged 11.7% this year, thanks in large part to a stronger-than-expected December sales report. Some analysts pointed to the numbers as a potential turning point for the beaten-down stock.
Investors who are more focused on dividends than growth can also check out Altria, parent of tobacco company Philip Morris, which boasts a yield of 6.9%. While analysts expect profit growth of just 2% to 3% in 2026 and 2027, its dividend looks safe with a payout ratio of just 78%. Altria is also in bargain territory, trading at 11 times next year's earnings.
Write to Ian Salisbury at ian.salisbury@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 20, 2026 15:13 ET (20:13 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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