Analysts and investors began to brace for a souring economic environment as the 10-year Treasury yield fell below that of a 3-month note in late February—an inverted yield curve, typically seen as a key indicator of an upcoming recession. Of course, a recession will only be confirmed after at least two-quarters of negative GDP growth, and it is possible that the yield indicator will be incorrect. After all, many analysts predicted a recession in 2024, but it never materialized.
Still, the prospect of a potential downturn is enough to send more risk-averse investors running toward defensive plays. In this case, exchange-traded funds (ETFs) already represent a strong option. These funds tend to diversify across a range of securities typically linked by a common theme or focus, often minimizing risk at the same time.
