As President Donald Trump’s sweeping tariffs push stocks deeper into a selloff, now may be the time for investors to start turning to defensive plays. Stocks tumbled on Thursday, the day after the president unveiled an elevated tariff policy that began at an across-the-board baseline of 10%, and steepened from there for countries such as China, Vietnam and those in the European Union. Investors drove stocks sharply lower in reaction, after realizing the expected tariffs were far higher than Wall Street had expected. For instance, the new reciprocal tariff duty on China, together with existing rates already implemented, brings the effective U.S. tariff rate to a staggering 54%. This trade war-induced fear and volatility has already dragged stocks into the red this year, and things aren’t likely to look up from here, said Kate Moore, chief investment officer at Citi Wealth. “The uncertainty factor is just starting,” Moore said Thursday morning on CNBC’s ” Squawk Box .” “Effectively, we don’t want to be adding to risk right now.” Against this nervous backdrop, CNBC Pro screened for defensive stocks that may be best suited to hedge against rising uncertainty from a mounting global trade war. To be included in the table, stocks had to meet the following criteria: Stable relative to the overall market (beta less than 1.0) Provide a steady income stream (dividend yield above 2%) High U.S. revenue exposure (80% or more) Stock is higher so far this year Low leverage (debt-to-equity ratio less than 1.0) Grew earnings last year, and expected to expand earnings again in 2025 General Dynamics turned up on the screen. The aerospace and defense stock has added more than 3% in 2025. Wall Street has been generally bullish on the defense sector ever since Trump won his second term. Last month, Citigroup analyst Jason Gursky reiterated his optimism , citing tailwinds such as Europe’s continued defense spending and Trump’s plans to fund a “Golden Dome,” or a missile defense dome over the U.S. “Defense spending in Europe is likely headed significantly higher and the U.S. Congress recently passed budget resolutions that add upward of $300 [billion] in spending over the next ten years,” Gursky said. “Importantly, this spending growth is likely to favor modernization in order to buy deterrence against near peers. As such, we think it’s time to buy defense stocks.” The analyst singled out General Dynamics as a buy-rated defense prime contractor that could rally to $335, implying 21% upside from where shares closed on Wednesday. Last week, shares of General Dynamics added 2%, the same week it won a $1.07 billion contract from the U.S. Navy. Insurance stock Principal Financial Group has climbed 5% this year. JPMorgan analyst Jimmy Bhullar believes the stock could rise another 7% from here. In January, Bhullar upgraded Principal to an overweight rating from neutral, citing increasingly enticing fundamentals. “Our upgrade reflects the company’s lower-risk business mix, an incrementally better outlook for operating trends and the stock’s attractive valuation,” he wrote. “In our opinion, PFG has a better business mix than most life insurance peers, with lower tail risk, higher [return on equity] and better free cash flow.” Shares of Vici Properties , a real estate investment trust focused on the casino industry, have advanced 9% this year. But Barclays analyst Richard Hightower thinks they could add another 12% from their Wednesday close. The REIT also yields 5.4%. In January, Hightower initiated research coverage on Vici with an overweight rating. He pointed to the company’s strong portfolio as one of its biggest assets. “Our Overweight rating is based on our view that the quality, geography and ultimate economic productivity of VICI’s assets, in combination with its superior (in most cases inflation-linked) same-store growth and identifiable external growth pipeline, deserve a significantly higher valuation premium relative to the majority of its net lease peers,” he wrote. “Historically, this has been the case, though VICI’s premium has now flipped to a slight discount, which is unwarranted in our view.” Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
