Published on: 2026-02-26
When the safest ETFs to hold when tech stocks start dropping suddenly become the focus, investors are rarely chasing upside. They are trying to protect capital, keep liquidity high, and reduce the odds of a forced sale during a volatility spike. In that environment, “safe” is less about eliminating risk and more about choosing exposures that historically behave predictably when growth stocks reprice and correlations compress.
The setup in late February 2026 makes that distinction even more important because markets remain highly sensitive to the cost of capital. The US 10-year Treasury yield has been hovering around the 4% area, with 4.04% recorded on February 24, 2026, a level that keeps valuation pressure on long-duration equities whenever growth expectations wobble.
| ETF (Ticker) | Expense ratio | Fund size (Net assets) | Yield metrics (latest) | Duration |
|---|---|---|---|---|
| SGOV (iShares 0-3 Month Treasury) | 0.09% | $74.92B | 3.53% (30-day SEC) | 0.10 yrs |
| USFR (WisdomTree Floating Rate) | 0.15% | $16.12B | 3.57% (SEC 30-day) | 0.02 yrs |
| SHY (iShares 1-3 Year Treasury) | 0.15% | $24.92B | 3.38% (30-day SEC) | 1.82 yrs |
| IEF (iShares 7-10 Year Treasury) | 0.15% | $48.29B | 3.88% (30-day SEC) | 6.93 yrs |
| SCHP (Schwab U.S. TIPS) | 0.03% | $15.51B | -0.09% (SEC Yield, 30 Day) | 6.50 yrs |
| MUB (iShares National Muni Bond) | 0.05% | $43.05B | 3.12% (30-day SEC) | 6.31 yrs |
| LQD (iShares $ IG Corporate Bond) | 0.14% | $31.13B | 4.87% (30-day SEC) | 8.07 yrs |
| USMV (iShares MSCI USA Min Vol) | 0.15% | $23.27B | 1.48% (12m Trailing) | N/A |
| XLP (Consumer Staples Select Sector SPDR Fund) | 0.08% | $17.42B | 2.38% (Fund distribution yield) | N/A |
| IAU (iShares Gold Trust) | 0.25% | $83.33B | No yield | N/A |
All figures are the latest displayed on fund issuer pages and are subject to change with market conditions and daily reporting cutoffs.
SGOV is designed for one job: behave cash-like while still providing a Treasury-linked yield. Its very short effective duration helps reduce the risk that a rate spike turns a defensive position into a surprise drawdown. For investors de-risking quickly, it is one of the cleanest ways to keep liquidity high while stepping away from tech beta.
Where it fits best: when the priority is stability and optionality, especially during fast, headline-driven tech drops.
What to watch: its return profile is tied to short rates, so income can fall if policy rates decline.
USFR is often the most comfortable “safe haven ETF” when the market is selling tech and the bond market is unsettled at the same time. Because the underlying Treasury floaters reset, USFR’s rate sensitivity is extremely low, which matters when the sell-off is driven by higher yields rather than recession fears.
Where it fits best: tech drawdowns paired with inflation anxiety or shifting rate expectations.
What to watch: it is still a bond ETF, and its yield can drift lower if short-term rates trend down.
For investors who want a slightly higher yield than cash but still require minimal volatility, the iShares 1–3 Year Treasury Bond ETF is a reliable option. While it carries a modest duration of 1.82 years, it remains significantly more stable than intermediate-term bonds during market stress. It serves as a foundational ballast for conservative portfolios.
Where it fits best: conservative fixed-income exposure that can remain in place even after volatility fades.
What to watch: it can still dip when yields jump quickly, just usually less than longer-duration funds.
The iShares 7–10 Year Treasury Bond ETF typically thrives when the tech sell-off is triggered by fears of a broader economic recession. When growth expectations fall, investors often flock to intermediate Treasuries, which can lead to capital gains as yields drop. However, its higher duration means it can be sensitive if inflation remains high.
Where it fits best: risk-off regimes where the bond market is likely to rally.
What to watch: duration risk can dominate returns when yields move higher.
When tech drops because inflation surprises keep the discount rate high, inflation-linked Treasuries can provide a different defensive profile than nominal bonds. SCHP gives broad TIPS exposure, which can help when the market is wrestling with inflation persistence rather than pure growth fears. Its standardized SEC yield can look counterintuitive over short windows, but its role is longer-horizon inflation protection, not short-term yield optics.
Where it fits best: inflation uncertainty alongside tech multiple compression.
What to watch: TIPS prices can still fall if real yields rise.
The iShares National Muni Bond ETF is a favorite for investors in higher tax brackets who seek high-quality income. By holding investment-grade municipal bonds, MUB offers a yield that is often exempt from federal taxes. While it has some interest rate sensitivity, the credit quality of the underlying holdings provides a reliable cushion during equity market dislocations.
Where it fits best: diversified fixed income with an emphasis on tax efficiency.
What to watch: rate sensitivity and occasional liquidity stress in sharp market dislocations.
The iShares iBoxx $ Investment Grade Corporate Bond ETF is best used for its yield rather than absolute safety. It holds debt from the most stable corporations in America, offering a higher yield than Treasuries. Investors should note that it can experience price drops if credit spreads widen during a severe economic contraction, so it belongs in the "defensive income" category.
Where it fits best: investors seeking higher-quality income while accepting some credit and duration exposure.
What to watch: credit spread widening, especially if recession fears intensify.
USMV is for investors who want to remain in equities while dialing down volatility and concentration risk. In tech-led sell-offs, minimum-volatility strategies often hold up better than high-beta growth exposure because they tilt toward steadier businesses. It is not “safe like Treasuries,” but it can be safer than broad market equity exposure when tech is driving the downside.
Where it fits best: reducing equity volatility without exiting equities.
What to watch: factor rotations can cause short bursts of underperformance during sharp risk-on rebounds.
When investors rotate out of high-growth tech, they often rotate toward sectors with steadier demand and more predictable cash flows. XLP concentrates that defensive tilt into one liquid vehicle. It can reduce portfolio swings during tech drops, but it remains equity exposure, so it should complement, not replace, the Treasury side of a defensive allocation.
Where it fits best: a tactical or strategic defensive tilt inside the equity sleeve.
What to watch: sector concentration risk and lag risk if growth leadership resumes quickly.
The iShares Gold Trust provides a way to diversify away from traditional financial assets altogether. Gold often moves independently of corporate earnings and bond yields, acting as a "portfolio insurance" policy during geopolitical stress or sudden regime shifts. Because it pays no yield, it should be used as a small, strategic slice of a broader defensive allocation.
Where it fits best: modest allocation for regime diversification.
What to watch: gold can weaken when real yields rise or when the US dollar strengthens sharply.
Tech’s drawdowns in early 2026 have looked less like a single macro shock and more like repeated repricing of the same two variables: the durability of AI-driven demand and the cost of capital used to value long-dated cash flows.
NVIDIA’s latest results show why investors can be impressed and cautious at the same time. The company reported $68.1 billion of revenue for the quarter ended January 25, 2026 and guided $78.0 billion (plus or minus 2%) for the first quarter of fiscal 2027, while noting it is not assuming any Data Center compute revenue from China in that outlook. In other words, the growth engine remains powerful, yet investors are increasingly focused on concentration risk, policy constraints, and how much spending is cyclical versus structural.
A 10-year yield near 4% changes the valuation gravity for tech because a larger share of expected cash flows sits further out in time. When yields rise or even refuse to fall, multiples in growth-heavy indices typically compress faster than fundamentals change.
When performance is dominated by a smaller set of mega-cap names, the index can move like a single trade around earnings and guidance, which pushes investors toward liquidity and simple hedges rather than nuanced positioning.
The practical implication is straightforward: when tech starts dropping, the “safest ETF” is usually the one with the least sensitivity to earnings narratives and the clearest sensitivity to rates.
For most investors, a Treasury bill ETF such as SGOV is the cleanest “safe haven” choice because it has minimal credit risk and very low rate sensitivity. It is built for liquidity and stability, not for large upside during sell-offs.
Treasury bill ETFs like SGOV are generally considered the safest because they carry minimal interest rate risk and are backed by the US government. They focus on preserving your principal and providing liquidity rather than seeking significant capital appreciation or gains.
Not necessarily, as bonds can fall alongside stocks if the sell-off is caused by rising inflation or higher interest rates. While Treasuries often protect against growth scares, they may lose value if the cost of capital continues to climb rapidly.
Low-volatility ETFs like USMV allow you to remain invested in the equity market while reducing the depth of your potential losses. This is ideal for investors who believe the long-term bull market is intact but want to minimize short-term turbulence.
The safest ETFs to hold when tech stocks start dropping typically fall into two categories: cash-like Treasuries that preserve liquidity, and selective defensive diversifiers that aim to reduce drawdowns without relying on tech earnings narratives. SGOV, USFR, and SHY are usually the first line of defense because they keep rate sensitivity low and liquidity high.
IEF and SCHP can add protection when the macro regime shifts toward slower growth or inflation persistence, while MUB and LQD can provide diversified income with clearer trade-offs. USMV and XLP are practical defensive equity tools, and IAU can diversify when investors want exposure outside stocks and bonds.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
