Time to Play Great Defense, Not Great Offense
3 min read
Paul Tudor Jones is known for saying that the most important rule of trading is to play great defense, not great offense. It’s a principle traders live by — and it’s just as true for long-term investors. Protecting what you have should always come first. Growth is important, but defense is what keeps you in the game.
2025 has been an unexpected ride in the markets so far, with indexes climbing more than 1% per month as we slid through Labor Day weekend. Meanwhile, homeowners are starting to winterize their houses — protecting what they’ve built to make sure it lasts. That’s the mindset investors should carry now.
We’re heading into the Fed meeting on Wednesday with markets believing a rate cut is coming. But the latest data — namely inflation creeping up to 2.9% and a sizable downward revision of 911,000 jobs through March — suggests that if the rate is cut, it won’t be as aggressive as many hoped. The more likely scenario is a 25 basis-point cut — a move that preserves the Fed’s sense of independence — rather than a 50 bp cut, which would risk signaling panic.
As I noted in last month’s “Green Markets, Yellow Flags” post, the market had already priced in a September rate cut. But given how inflation and labor market data are pushing back, that pricing is being tested.
In this kind of environment, playing defense means safeguarding what you’ve built (your nest egg), while staying positioned to seize opportunity. It’s not about throwing everything into risk assets; it’s more about preserving, selectively growing, and preparing for volatility.
So how do you protect your nest egg when rate policy, inflation, and markets all send mixed signals?
Here are five defense-first moves worth considering.
🛡️ 5 Defensive Moves to Lock In Gains (3–5 Year Horizon)
🏢 Own Quality, Not Hype
Stick with companies that have strong cash flows, low debt, and recurring revenues. Growth is fine — but resilience keeps you from handing profits back.💰 Prioritize Yield & Income
Dividend growers, short-duration bonds, and real assets give steady cash flow while buffering volatility.🧊 Tilt Toward Defensive Sectors
Healthcare, utilities, and consumer staples hold up when growth slows — unlike momentum-heavy tech that can reverse fast.💵 Keep a Cash / Liquidity Buffer
Cash is defense. It prevents forced selling at bad prices and lets you seize opportunities when others panic.📊 Stress-Test & Rebalance
Don’t let a 60/40 silently drift into an 80/20. Run scenarios for sticky inflation or slower rate cuts — and realign before the market does it for you.
This is easier said than done. For example, when confronted with price action like we’re seeing in $ORCL (Oracle Corporation). The stock is up +80% for the year, despite missing revenue expectations last quarter. It’s a clear example of the market’s sometimes irrational behavior, as buyers rush in to capitalize on the narrative and AI-driven momentum the company is projecting. And Oracle isn’t alone — dozens of companies can see outsized price moves when narratives take hold, even if fundamentals lag. That’s the kind of FOMO trap disciplined investors need to guard against.
Bringing it all together doesn’t mean taking zero chances. Having the right defensive posture means you’re ready to lean into opportunity when it appears — without exposing the foundation you’ve worked so hard to build.
If you haven’t reviewed your retirement plan in light of recent inflation data, rate expectations, and stock market signals, today’s a good time. Consider consulting with BMG to stress-test different scenarios, rebalance your portfolio toward more resilient income assets, and ensure your strategy reflects both the risks and the opportunities. Your future self will thank you.
