Future-proofing portfolios: A playbook for tariff and recession risks

Key points

• Tariffs and recession risks are likely to co-exist, and investors may need to think about how portfolios can stay resilient through both demand and supply shocks.
• Sectors tied to essential services, domestic demand, and strong balance sheets — such as utilities, retailers with high margins and digital entertainment platforms — may offer relative defensiveness.
• Dividend strategies with a focus on quality and consistency can provide income stability and act as a buffer in volatile markets, but sustainability and valuation remain key.

It does seem like we will be talking tariffs for a while.

And if tariffs stay — in some shape or form — even after negotiations, we’ll likely be talking about recession too. Higher input costs, persistent inflation, and tighter monetary policy are already weighing on global growth. Add rising trade barriers to the mix, and the risks become even more complex.

In such an environment, investors may want to think about how their portfolios are positioned. While it's impossible to fully “immunize” against macro volatility, some sectors and business models may offer relatively better resilience if both tariffs and economic slowdown remain part of the landscape.

Here’s a framework to consider — not as a prescription, but as a starting point for reflection and research.

Understanding the risks

Tariff risks today are not limited to China or any single country. The trade landscape is shifting toward more protectionism — particularly in areas like semiconductors, autos, pharma and clean tech. This creates uncertainty for companies heavily reliant on global supply chains, foreign sourcing, or export revenues.

Meanwhile, recession risks stem from a combination of elevated interest rates, weakening consumer sentiment, and geopolitical uncertainty. The result is an investment environment where both demand and supply-side pressures can hit portfolios — often in unpredictable ways.

While no strategy can fully eliminate risk, it may be helpful to consider these themes when reviewing portfolio allocations in the current environment:

• Domestic demand orientation.
• Limited dependency on foreign sourcing or export.
• Steady or essential end-market demand.
• Strong balance sheets and pricing power.

Portfolio resilience playbook

Here are a few sectors and themes that some investors are exploring, based on the assumption that domestic focus, essential services, and operational resilience may be beneficial in the face of both trade tensions and economic headwinds.

Utilities

Often considered among the most defensive sectors, utilities tend to benefit from steady demand, regardless of the economic cycle. They are also largely domestic in nature, reducing exposure to global supply chains. That said, their capital-intensive nature and rate sensitivity can pose challenges if interest rates remain elevated.

• Companies to watch: NextEra Energy (NEE), Duke Energy (DUK), American Electric Power (AEP)

Digital subscription models

Asset-light software and service platforms — particularly those providing critical business tools — may offer recurring revenue and limited exposure to tariffs. However, in a recession, discretionary digital spending can come under pressure, and high-growth multiples may face valuation compression. 

• Companies to watch: Netflix (NFLX), Intuit (INTU)

Healthcare and insurance

Healthcare services and insurance companies often demonstrate resilience during downturns, as medical care and insurance coverage tend to remain essential. Many of these companies also operate primarily within national borders, lowering exposure to tariffs. However, regulatory risks and cost pressures should not be overlooked.

• Companies to watch: UnitedHealth Group (UNH), CVS Health (CVS), Elevance Health (ELV), Cigna Group (CI)

Consumer staples and big-box retail

From groceries to household products, consumer staples generally see stable demand even in recessions. Companies with large U.S. operations and diversified sourcing strategies may be better positioned to navigate tariff-related cost pressures. Still, margin pressure can arise if pricing power erodes or supply chains remain stressed.

• Companies to watch: Walmart (WMT), Costco Wholesale (COST), Procter & Gamble (PG), General Mills (GIS)

Waste and infrastructure services

Firms in this space often operate under long-term municipal or commercial contracts, providing some revenue visibility. Their operations are typically local, offering insulation from global trade volatility. However, cyclicality in industrial activity and regulatory dependencies are worth noting.

• Companies to watch: Waste Management (WM), Republic Services (RSG)

Telecom and connectivity

Telecom services are deeply embedded in daily life and business operations. Companies in this sector generally rely on domestic infrastructure and can benefit from relatively predictable cash flows. That said, competitive pricing and capital investment cycles remain key watchpoints.

• Companies to watch: Verizon Communications (VZ), T-Mobile US (TMUS)

Discount retailers

In a slowing economy, consumers may shift spending toward value-oriented retailers. While some discount chains may still rely on imported goods, their value positioning and pricing power may help them absorb or pass on cost increases. Investors should watch inventory dynamics and wage pressures in this segment.

• Companies to watch: Dollar General (DG)

Insurance providers

Health, auto, and home insurance are often considered essential expenses. Insurers with sound underwriting and diversified portfolios may offer stability in uncertain markets. However, economic downturns can affect claims trends and investment income.

• Companies to watch: Progressive Corp. (PGR), Allstate Corp. (ALL)

Dividend defense playbook

For investors seeking income stability alongside portfolio resilience, dividend strategies may also be worth exploring — particularly those with a focus on quality and durability. Companies that consistently return capital to shareholders through dividends often exhibit disciplined capital allocation, strong cash flows, and more measured growth trajectories — qualities that may be helpful in navigating both tariff and recession uncertainty.

As with any strategy, dividend investing is not without trade-offs. Payout sustainability, sector concentration, and sensitivity to interest rates are all important considerations.

There are a few broad categories of dividend strategies that have seen renewed interest in the current environment:

High-quality dividend growers

These are companies with a track record of steadily increasing dividends over time. Growth in payouts can signal confidence in future earnings and support long-term total returns. Many of these companies are found in healthcare, consumer staples, and select industrials and tech

• Companies to watch: Microsoft (MSFT), Procter & Gamble (PG), PepsiCo (PEP), Johnson & Johnson (JNJ), Home Depot (HD)

Defensive high dividend yield

This approach focuses on companies with above-average yields, often in sectors like telecoms, REITs, and legacy consumer brands. While attractive in a low-growth environment, sustainability of payouts remains key, especially if earnings are under pressure.

• Companies to watch: Verizon (VZ), Altria (MO), AT&T (T)

Low volatility dividend blend

We ran a screener on this previously in this article. Some investors combine dividend yield with a preference for lower-beta stocks, seeking both income and downside protection. These portfolios may underperform in strong bull markets but can offer a smoother ride during volatility.

Dividend + thematic tilt

Investors may also look for companies that align with broader themes like reshoring, infrastructure investment, or AI — and that also happen to return capital to shareholders. This approach seeks to balance income with long-term relevance.

• Companies to watch: Waste Management (WM), Broadcom (AVGO), Union Pacific (UNP), Cisco (CSCO)Not without caveats

None of these sectors are immune. Even businesses that appear insulated from trade tensions or economic cycles can face regulatory shifts, cost inflation, competitive pressures, or valuation concerns.

It’s also important to distinguish between short-term resilience and long-term structural advantage. For example, utilities and staples may offer near-term defensiveness, while healthcare and digital infrastructure may align better with long-term growth themes.

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