Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

As of 12:30 p.m. EST, the Dow Jones Industrials (^DJI -0.99%) added to their losses from January, falling another 222 points. While the fact that the Dow appears headed toward a possible correction isn't all that surprising in itself, what might surprise many investors is that the usual ways of defending yourself against falling markets haven't worked out too well lately. In particular, Procter & Gamble (PG 0.19%) hasn't managed to fare much better than the Dow's 6.8% drop in 2014, while Coca-Cola (KO 0.46%) and Wal-Mart (WMT -0.11%) have actually fallen more than the Dow.

Source: Wikimedia Commons, courtesy CJohnson7.

Part of the problem with defensive stocks such as Procter & Gamble and Coca-Cola is that investors have been anticipating potential downdrafts in the Dow and broader stock market for months now. As a result, risk-averse investors have already bid up their shares to fairly high levels from a valuation standpoint, especially in comparison to their increasingly questionable growth prospects. In addition, the strong dividend yields on these stocks make them doubly attractive to those who need income from their portfolios.

Yet when defensive stocks trade at above-market earnings multiples, they lose much of their standard advantage. The margin of safety that conservative investors rely on largely disappears when Coca-Cola or Procter & Gamble trade at high P/E ratios, and that's a big part of why their shares haven't given investors the usual protection against the full extent of the Dow's steep drop in 2014.

History doesn't always repeat
The other problem with the Dow's traditional go-to defensive stocks is that many industries have become more competitive. Wal-Mart is a perfect example, as it managed to rise in value during 2008 even when the Dow crashed. But the retail giant now faces much heavier competition from online peers, as well as its traditional rivals in the retail space. Particularly telling is Wal-Mart's steep drop after today's news that the manufacturing industry slowed down in the U.S. recently; similar moves in the past would have often led to gains for Wal-Mart as it anticipated seeing more upper-end consumers looking for the discount retailer's lower price points.

The lesson that investors need to understand is that even though some stocks have a reputation for being defensive, they won't always succeed in protecting you from downturns. Be sure to look at stocks that have held up the best more recently for ideas on how you can defend yourself in the current environment -- even if the Dow keeps dropping from here.