Though the stock market has generally continued its upward trend so far in 2026, cracks may be appearing. A slowing labor market, the risk of an AI bubble collapse, and a Cyclically Adjusted Price-to-Earnings (CAPE) ratio around 40 all suggest that a crash may be looming for a market that is potentially overvalued.
Many investors had seized on the precious metals rally as a way to reallocate portfolios toward a more defensive position. However, the late-January hiccup in the prices of many key metals might inspire more cautious investors to seek protection elsewhere.
Fortunately, a number of exchange-traded funds (ETFs) aim for an approach that balances risk management if the market were to crash, along with the possibility of returns or distributions. Each of the three funds below takes a different strategy and may appeal to investors seeking safety in 2026.
Low-Volatility Names From the S&P 500 For Dividend Stability
Although the S&P 500 can indeed be quite volatile, there are segments of the index that tend to remain a bit more stable. The Invesco S&P 500 Low Volatility ETF (NYSEARCA: SPLV) focuses attention on just those members of the S&P with the lowest volatility—it tracks an index of the 100 least volatile members of the S&P 500 based on trailing-12-month results.
It will come as no surprise to most S&P investors, then, that the targets of SPLV tend to be large- and mega-cap blue chip names like The Coca-Cola Co. (NYSE: KO) and McDonald's Corp. (NYSE: MCD), both of which are top-10 holdings for SPLV by portfolio weight. These companies tend to be incredibly stable despite fluctuations in the broader market and economy. They may also produce dividends in favor of significant capital appreciation, and SPLV offers a dividend yield of 2% as a result.
SPLV tends to be a defensive play in that its holdings often underperform growth names during bull runs while offering downside protection in bear markets.
The fact that it has returned under 6% in the last year is evidence of this tendency. In exchange for stability, investors in SPLV are likely to sacrifice the potential for significant returns.
Combination of Treasurys and S&P 500 Options for Protected Market Exposure
The Amplify BlackSwan Growth & Treasury Core ETF (NYSEARCA: SWAN), like SPLV above, aims to provide access to the S&P 500 while also controlling for risk. Its approach to this problem is unique: the fund tracks an index with a 90% focus on U.S. Treasurys and 10% of assets devoted to SPDR S&P 500 ETF Trust (NYSEARCA: SPY) in-the-money call options.
With a strong focus on stable Treasurys, SWAN provides protection against a drop in the S&P 500. The options portion of the portfolio can offer uncapped exposure to the market, allowing investors upside potential as well. At the same time, SWAN has a dividend yield of 2.86%, making it a source of passive income.
Over the last year, SWAN has returned just over 10%, slightly below the S&P's 13% over the same period. However, combining returns with dividend distributions, many investors may find this fund provides a compelling, defensive approach, worthy of the fairly high 0.49% expense ratio that comes with the unique strategy.
Long-Dated Treasury Fund For Potential Yield Bonus
As part of a bond-focused portfolio, the iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) can help to boost exposure to long-dated Treasurys. These bonds can offer greater yield potential, but that comes at the cost of higher interest-rate risk. In this way, TLT may be a bit riskier than some other bond funds.
Still, in the case of a market crash, TLT will likely be a much more stable investment than most equities-focused funds. Its diversification across dozens of bonds and its dividend yield of 4.44% may make it attractive for defensive investors, and its 0.15% expense ratio is modest given its targeted approach.
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The article "3 ETFs Designed to Survive the Next Market Crash" first appeared on MarketBeat.
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