Although the stock market is mainly at the centre of crisis during a market downturn, some specific companies are noted to have outperformed during turmoil, which are referred to as ‘defensive stocks’. This covers major stock market sectors such as utilities, consumer staples and healthcare. Defensive stocks typically have a continual demand for their products or services, even in a period of economic decline or a recession.
For example, companies that provide water, gas, electric or broadband services will always see demand as these are basic necessities for living, along with supermarkets, and general food, beverage and household suppliers. Healthcare providers and pharmaceutical companies have historically performed well during these times, an example being the Covid-19 pandemic and subsequent global recession.
Defensive stocks are the opposite of cyclical stocks, which tend to thrive during economic growth and inflation but fall during periods of hardship.