2 ETFs That Have Held Up Best During Every Recent Market Pullback

The article highlights two dividend-focused ETFs that have outperformed in down markets: First Trust Morningstar Dividend Leaders ETF gained about 3% in the 2022 bear market and roughly 15% YTD through March 30, while WisdomTree U.S. High Dividend ETF returned about 4% in 2022 and about 12% YTD through May 27. Both are presented as defensive diversifiers with 5- and 10-year annualized returns near 10%-12.5%, supported by high-dividend portfolios led by names like ExxonMobil, Chevron, Verizon, Altria, Philip Morris, and AbbVie.

Analysis

The important signal is not that these dividend sleeves hold up in drawdowns; it’s that they are functioning as a crowded de-risking trade when growth momentum cracks. That matters because the basket is not a pure “quality” hedge — it is a hybrid of defensives, energy, tobacco, telecom, and health care, so the apparent resilience is partly a sector rotation effect that can reverse quickly if rates fall sharply and cyclicals re-rate. In other words, the downside cushion is real over days to months, but it is funded by giving up upside in any broad risk-on tape led by AI, software, or semis.

Second-order, the composition is a useful read-through for capital allocation pressure on the underlying names. CVX and ABBV are in a position to absorb passive bid support without needing multiple expansion, while VZ remains a yield magnet but structurally low-growth; that makes it the most fragile constituent if rates back up or if investors stop paying for income. MO and PM benefit from the same “bond proxy with cash flow” framing, but regulatory and litigation overhangs cap the durability of the rerating, so the trade is more about cash-return certainty than fundamental acceleration.

The contrarian miss is that ETF inflows into these products can become self-reinforcing at exactly the point when their forward returns compress. If the market gets a softer landing narrative, these funds may underperform sharply because their relative outperformance has already pulled forward some of the defensive bid. The better setup is not to chase them after a strong run, but to own them as explicit hedge carry against a 1-2 quarter growth scare or an equity-vol spike.

On the individual names, NVDA and INTC are the clearest beneficiaries of a broader market risk-off only if the article’s implied rotation stalls; otherwise, they remain the market’s preferred source of capital from defensives into growth. NFLX is the cleanest contrast stock: if investors continue paying for secular growth, dividend funds likely lag and NFLX should continue to outperform on a relative basis even without a major absolute catalyst.

Key Decisions for Investors

• Long FDL or DHS as a 1-3 month hedge against a volatility spike; size at 1-2% portfolio notional and treat it as carry-positive downside protection, not alpha.
• Pair trade: long FDL / short QQQ for the next 4-8 weeks if breadth deteriorates; target 5-8% relative outperformance for the dividend sleeve, stop if semis regain leadership.
• Within defensives, prefer CVX over VZ and MO over PFE-style defensive substitutes; CVX has the cleanest cash-return support while VZ is the weakest secular compounder if rates rise.
• Fade the recent relative strength in high-dividend ETFs only on confirmation of a risk-on reversal; use call spreads on NFLX or long NVDA vs short a dividend basket to express a reopening of growth leadership.
• If the S&P 500 reclaims trend and credit spreads tighten, trim dividend ETF exposure by 25-50% because the upside capture is structurally capped while the defensive premium will compress quickly.