The US stock market continues to defy gravity and logic. Despite growing geopolitical risks, rising gold prices, and unpredictable fiscal rhetoric from the Trump administration, US markets remain defiant.
Following a quick recovery after the tariff-induced slump of early April, both the S&P 500 and Nasdaq 100 are now within spitting distance or record highs.
It seems like a rally built on hope, but for how long can that optimism hold — or is there more to the story?
A trifecta of concerns
Several global issues are threatening to upend this uneasy calm. The ongoing conflict in the Middle East risks sending oil prices sharply higher (or lower, as we saw recently). Any major spike could disrupt global supply chains, squeeze consumer spending, and reignite inflation — all bad news for markets.
Meanwhile, relations between the US and China remain tense. This threatens the supply of rare earth metals, which are essential for batteries in everything from phones and laptops to electric vehicles. Not to mention the Taiwan Strait, where China’s growing military presence threatens the semiconductor supply, the backbone of artificial intelligence and data centre growth.
If markets were truly confident, gold would be stagnant. But instead, the metal, which is often seen as a hedge against uncertainty, is surging. Trump’s proposal to impose a 20% tax on interest from US Treasury bonds has only added fuel to the fire. Even so, US 10-year Treasury yields are up 75 basis points since September, and the dollar has dropped roughly 10% since the start of 2025.
This odd mix of strong stock performance, rising bond yields, and a weakening dollar suggests a market driven more by momentum than fundamentals. For me, that’s a red flag. In this environment, I’m leaning towards defensive shares with consistent earnings, pricing power, and recession-resistant products.
Taking the safe route
Three classic examples of US defensive shares include Pfizer, Brown-Forman, and Constellation Brands. But one company I’m especially fond of – and which operates on both sides of the Atlantic – is global pharmaceutical and vaccine developer GSK (LSE: GSK).
Its product portfolio spans respiratory treatments, HIV medication, immunology, and a strong vaccine pipeline. In 2022, the company completed its demerger of the consumer healthcare arm Haleon, allowing it to refocus entirely on high-margin pharmaceuticals.
Its financials suggest resilience. GSK posted a net margin of 21% in Q3 2024 – a notable increase from earlier periods. The stock trades at an average price-to-earnings (P/E) ratio of 18.5 and offers a solid dividend yield of 4.4%. It may not deliver explosive growth, but it pays shareholders well for their commitment.
In terms of performance, GSK shares are up modestly this year, supported by steady vaccine sales and strong demand in emerging markets. However, it is not without risks. The company carries high levels of debt, and free cash flow has been on the lower side — something worth monitoring if rates remain elevated.
Still, GSK is the type of business investors should consider when the stock market starts to look shaky. It is not particularly exciting, but it offers long-term stability, essential medicines, and dependable income.
In today’s uncertain climate, that’s the kind of reassurance I’m looking for.
