Defensive Strategies to the Rescue as “Death Cross” Triggered — Evening Brief – 04.17.25
The financial markets are currently in a turbulent landscape, characterized by sharp volatility and stark contrasts. Mega-cap technology stocks, though slightly less commanding, continue to tilt the S&P 500 toward growth, overshadowing value stocks that now languish at unprecedented lows. Broader economic forces—fluctuations in the U.S. dollar and heightened sensitivity to interest rate shifts—are poised to intensify this instability, creating an unpredictable environment for investors.
Amid this upheaval, market participants are pivoting toward defensive postures to safeguard their equity holdings. U.S. equities have endured widespread declines in 2025, with pronounced disparities across sectors. Exchange-traded fund (ETF) data reveals a striking 19-percentage-point chasm between the strongest and weakest sectors. Consumer staples (XLP) have emerged as a haven, posting a 4.5% gain year-to-date, while utilities (XLU) follow closely with a 3.4% rise. In contrast, the broader US market, tracked by SPY, has slumped 7.7%. The consumer discretionary sector (XLY) has borne the brunt, cratering 15%—a decline twice as severe as the market’s overall loss.
A foreboding technical signal has added to the unease: the S&P 500 triggered a “death cross” this week, with its 50-day moving average slipping below the 200-day moving average. In technical analysis, this crossover is widely viewed as a bearish omen, signaling potential further declines.
Yet, its predictive power is far from ironclad. Adam Turnquist, chief technical strategist at LPL Financial, cautions that historical data often supports buying rather than selling when a death cross appears. Ari Wald of Oppenheimer & Co. underscores this ambiguity, noting, “While every significant market downturn is preceded by a death cross, not every death cross heralds a collapse.”
Historical precedent bears this out: a death cross in March 2022 marked a market trough, paving the way for a robust bull market that crested in February 2025. As investors navigate this uncertain terrain, the death cross serves as a reminder of the market’s complexity, where signals of doom may mask opportunities for recovery.