Signs of spring have emerged here in central Indiana. Little League bat pings echo through the park. My three little boys are chasing rabbits again — nature's cardio. And the snow on the driveway has given way to abstract chalk art and muddy footprints.
I like having four seasons. Each brings its own kind of busyness for our family of six, and I’m often reminded how fleeting they are when the kids start asking when their next birthday will finally arrive.
Seasons in the stock market aren't so orderly. You don't know how many you'll get in a year, or how long they'll last. Some drag on for years before shifting in an instant.
If you’re not careful, it's easy to mistake an endless summer for permanence — and pay any price for a t-shirt, just as winter rolls in.
Frost returned in the opening quarter for the first time in years. After hitting a record in February, the S&P 500 tumbled 10% — one of its fastest corrections in history — ending the quarter down 5%.
Investors who gorged on the one-way tech trade got a sharp reminder that volatility cuts both ways. The once-unstoppable "Magnificent 7" — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla — stumbled 16%, marking the group's worst quarter since 2022.
Fittingly, this drawdown arrived just after last quarter's newsletter cautioned against chasing momentum stocks. I don’t try to predict market moves (my weather forecasts are equally unreliable), but the AI-driven frenzy had pushed tech valuations to their highest levels in over two decades.
The result was a market that looked both expensive and uncomfortably top-heavy, while many high-quality dividend stocks were trading at historically attractive valuations by comparison.
If anything happened to disrupt the enthusiasm for AI, crypto, and business-friendly policies under President Trump, the script looked like it could flip quickly. That appears to be playing out now. When investors turn jittery, they swap excitement for stability. Risky, high-priced stocks and speculative bets usually take the hardest hits, while strong companies with reliable cash flows, defensive qualities, and sensible prices regain their appeal.
Quality dividend growth stocks tend to shine in this kind of environment, and they took center stage in the first quarter.
While the S&P 500 dropped 5% and Big Tech fell 16%, our model portfolios performed well. The Top 20 portfolio gained 5%, and the Conservative Retirees portfolio rose 9%. The Dividend Aristocrats Index and Schwab’s U.S. dividend ETF (SCHD) each returned 3%, too. With their lower volatility and potential for steady, rising income in all manner of environments, dividend stocks offer a powerful one-two punch for retirement portfolios that prioritize stability over excitement — especially when the market storms.
Trade tariffs have been a major source of recent market anxiety. Investors fear they will drive up costs for businesses and consumers, leading to higher inflation and weaker consumer spending. Companies often pass higher costs on to customers, while disrupted supply chains reduce efficiency and profitability.
Retaliatory tariffs from other countries can make it harder for companies to sell abroad as well, reducing revenues for globally exposed industries. Meanwhile, uncertainty around trade policy may cause businesses to delay investment and hiring, slowing overall economic growth.
All this worrying, in addition to government spending cuts, has sent a popular measure of U.S. consumer confidence to its lowest level in four years and led many Americans to expect an uptick in inflation and unemployment.
Source: Bloomberg
As sentiment turned sour, economists raised the odds of a recession in the next 12 months — from 20% in January to roughly 33% by the end of March.
Source: Bloomberg
Of course, forecasts like these should always be taken with a heavy grain of salt. As Charlie Munger once said:
"There are 60,000 economists in the U.S. trying to forecast recessions and interest rates, and if they could do it successfully, they'd all be millionaires by now. As far as I know, most are still gainfully employed, which ought to tell us something."
President Trump's swift policy moves haven’t made forecasting any easier. Recession worries intensified after his April 2 announcement of sweeping new tariffs, including 20% on the European Union, 24% on Japan, and 34% on China.
According to The Wall Street Journal, these measures could amount to the largest effective U.S. tax increase since at least the 1950s. Some economists estimate tariffs could impact households by over $3,000 annually due to higher costs for cars, electronics, and other imports.
The market didn't take it well. The S&P 500 dropped 4.9% the next day, while the Magnificent 7 slid 6.9%. Once again, defensive dividend stocks proved their worth: our Top 20 portfolio fell 2.2% and our Conservative Retirees portfolio was down just 0.9%. SCHD lost 4.1%.
We may be in the early innings of a shift to defense if the momentum trade continues to unwind and recession risks grow. The S&P 500 still trades near a historically high 20 times forward earnings and is down just 10% from its peak. Since 1960, the market has suffered six declines of 30% to 60%, or roughly one per decade on average.
I’m not rooting for that outcome, but it's always a possibility worth keeping in mind, especially after the sugar rush that can come from two straight years of 25% gains. Stocks rarely move in a straight line for long. For self-directed investors, one of the greatest keys to success is staying disciplined through both good and bad markets.
I don’t plan to adjust our portfolios much in response to the recent volatility. They’re behaving just as I hoped in a risk-off environment. My focus remains on high-quality businesses with safe, growing dividends, dependable cash flow in all seasons, and the kind of durability that would give me peace of mind even if the stock market closed for five years.
As for the trade war, I won't pretend to know how it ends. The global economy and geopolitics are far too complex — well outside my limited circle of competence.
President Trump could choose to walk the tariffs back if trade partners return to the negotiating table, potentially rekindling a risk-on rally. Or he may hold firm, trading short-term pain for the possibility of long-term gains.
Either way, I don't recommend getting too cute with your portfolio by trying to guess trade war winners and dump the losers. It's a fast-moving, fear-driven situation that's difficult to predict — and easy to misplay.
That said, if you're curious which areas of the market held up best (and worst) after Trump's April 2 tariff announcement, we did some digging. We grouped the biggest winners and losers by sector to help you see how things are playing out so far.
For the most part, a classic recession trade unfolded:
Biggest Winners
Utilities — Defensive stalwarts with steady demand; water utilities led as their ultra-stable cash flows made them more rate-sensitive than electric and gas peers.
National Grid, Middlesex Water, American Water Works, Essential Utilities, Duke Energy, Consolidated Edison, Exelon, York Water, Fortis, American States Water, NextEra Energy, California Water Service, Xcel Energy, SJW, CMS, etc.
Consumer Staples — People still need to eat, clean, and brush their teeth; consistent demand and strong brands make this group a safe haven.
Kroger, Unilever, General Mills, Mondelez, Hormel, Colgate, Coca-COla, Church & Dwight, Albertsons, J&J Snack Foods, Hershey, Procter & Gamble, Kimberly-Clark, PepsiCo, etc.
Healthcare — Essential products, pricing power, and reliable cash flows from insurers, drugmakers, and distributors; pharma exempt from tariffs.
Elevance, GSK, Cencora, UnitedHealth, McKesson, Johnson & Johnson, Haleon, AstraZeneca, Cigna, Quest Diagnostics, Amgen, etc.
Franchise-Driven, Affordable Restaurants — Fast food is still cheaper than eating at sit-down restaurants, and franchise model carries very high margins.
McDonald's, Restaurant Brands, Yum Brands
Canadian Banks — Relief from no additional tariffs on April 2; possibly perceived as more conservative with less U.S. exposure than a peer like TD.
Canadian Imperial, Royal Bank of Canada, Bank of Nova Scotia
Canadian Midstream — Relief from no additional tariffs on April 2; long-term, fee-based contracts help insulate revenue from commodity price swings.
Royal Gold, Franco-Nevada, Wheaton Precious Metals, Agnico Eagle
Biggest Losers
Apparel & Footwear — Highly discretionary purchases with thin margins and heavy exposure to global supply chains.
Gap, V.F. Corp, Nike, Tapestry, American Eagle, Levi Strauss, Kontoor Brands, Buckle, Weyco
Big-Box & Department Store Retailers — Sensitive to shifts in consumer spending and heavily reliant on imported goods, which face rising costs under tariffs.
Best Buy, Dick's Sporting Goods, Kohl's, Target, Macy's
Home Furnishings & Decor — Big-ticket, deferrable purchases tend to get cut first in downturns, and many of these companies are exposed to Chinese suppliers.
Semiconductors & Hardware Tech Capital-intensive, globally integrated, and closely tied to the economic cycle; many chipmakers and hardware firms have heavy China exposure.
Banks & Consumer Finance — Credit risk rises in a slowdown, lending margins compress, and loan growth weakens; investors fear rising defaults.
Bank of America, Capital One, Discover, Citigroup, Morgan Stanley, OneMain, Synchrony, American Express, Synovus, Zions Bank, KeyCorp, Citizens Financial, Goldman Sachs, Comerica, Huntington, OZK, Discover, OneMain, Synchrony, American Express, Ally Financial, etc.
Industrial Equipment & Tools — Cyclical businesses tied to capex and construction, both of which pull back when growth slows; global supply chain.
Eaton, Parker-Hannifin, Stanley Black and Decker, Dover, Emerson, Regal Rexnord, nVent
Transportation & Logistics — Shipping volume and freight rates tend to fall as global trade cools.
FedEx, UPS, Ryder, C.H. Robinson, J.B. Hunt, Global Ship Lease
China-Exposed Consumer Growth — Brands with meaningful China revenue could face a consumer backlash or weaker demand if tariffs hurt China's economy.
Starbucks, Estee Lauder
Energy – Oil prices slid on fears of slowing global demand; upstream producers and oilfield services are especially sensitive to price swings.
Travel and Leisure – Highly discretionary and quick to get cut from budgets in downturns; among the first to feel a consumer pullback.
Park Hotels & Resorts, Service Properties, Wynn Resorts, Host Hotels, Brunswick, Camping World, Polaris, LCI Industries, Thor Industries, Hasbro, Apple Hospitality, Walt Disney
Some investors worry the U.S. could be headed toward stagflation — that dreaded mix of slowing growth and rising prices. In those environments, defensive sectors like consumer staples, healthcare, and utilities tend to outperform. These companies usually have pricing power and steady demand, which helps them protect margins when inflation runs hot.
During the stagflation era of the 1970s, the S&P 500 barely moved for a decade. More than 70% of total returns came from reinvested dividends, not stock appreciation. Many of the high-flying growth darlings of the 1960s (the so-called "Nifty Fifty") collapsed under the weight of rising inflation and interest rates, which crushed valuations.
Will history repeat? I can't say. But after a long winter, dividend stocks are finally back in bloom — and I suspect the season may last a while.
First-quarter earnings season kicks off in earnest this month. We'll be closely monitoring results across our coverage universe to ensure our Dividend Safety Scores continue to reflect our best assessment of dividend risk, especially in light of the new tariff landscape.
We were here for our members when the pandemic struck, and we'll be here now — providing the research and insight you need to navigate this latest wave of uncertainty.
Thank you for your continued support of Simply Safe Dividends. As always, please don't hesitate to reach out if you ever have any questions or suggestions for how we can keep improving the service for you.
