The case for defensive stocks in a volatile world
Worried about inflation or trade wars? These stable, essential stocks help you build wealth without the panic.
If you've been feeling like the economy is one big "will-they-won’t-they" breakup between global powers, you’re not alone. Every time I hear the words “tariff escalation,” I feel like I need a cup of tea and a lie-down. Between inflation scares, trade tensions, and whatever the latest central bank drama is, it’s totally normal to feel anxious about investing right now.
But here’s the thing: hiding from the stock market won’t protect your money — not when inflation quietly eats away at your savings like a moth in a cashmere drawer. What can help? A calm, steady investing strategy designed for moments like this. Enter: defensive stocks.
These aren’t glamorous, flashy, or the kind of assets that pop up in viral TikTok portfolios. But if you want your money to feel safe, especially when the rest of the market is acting unhinged? Defensive stocks might just be your new best friends.
What even are defensive stocks?
Let’s break it down. Defensive stocks are shares of companies that provide things people always need — no matter what’s happening in the world. Electricity. Soap. Prescription meds. Toilet paper. (Remember the 2020 rush?) These are the companies that keep the lights on and the laundry clean — literally. These are things we all need and will always need.
That’s why they’re called “defensive.” They don’t swing wildly with the economy. When everyone’s freaking out and selling tech stocks or luxury brands, these steady players just… keep going. It’s like having an umbrella in your bag. You might not always need it, but when the clouds creep up, you’ll be glad it’s there.
It’s important to note here that these stocks aren’t magically immune to economical downturns. They exist in the same economy as the other companies and markets and are also exposed to the classic highs and lows. However, they are more stable than the rest. When everything else is crashing and burning, defensive stocks show smaller drops. When everyone catches a proper cold, these companies just sneeze a little.
It’s also important to remember that these aren’t companies that are likely to skyrocket over night. They still go up and down, just… less. We’re talking about slow and steady gains here, which over the course of 5 or even 10 years, can make a real difference. Defensive stocks, like the majority of investments, work best in the long run.
Why defensive stocks feel safer in uncertain times
When the market gets chaotic (read: now), defensive stocks can help you keep your cool. Here’s why:
Stable demand – People still need electricity, groceries, and medicine no matter what’s trending or who’s elected.
Reliable earnings – These companies tend to have consistent revenue, which means they’re less likely to post shocking losses.
Often pay dividends – Many defensive stocks also share profits with shareholders in the form of regular dividend payments. That’s passive income while you wait.
Historically, defensive stocks outperform during economic downturns. That doesn’t mean they’ll shoot to the moon — they’re not here for drama — but they tend to fall less when everything else is tanking.
So if you’re tired of feeling like your money is at the mercy of global headlines and Twitter rants, defensive stocks can be a grounding force in your portfolio.
The top 3 defensive stock sectors (aka your financial comfort food)
When you think of investing, you might picture fast-moving tech companies or risky bets on trendy start-ups. But when markets get rocky, it’s often the steady, essential sectors that hold up best. These are the industries people can’t live without — and historically, they’ve helped investors sleep better during even the worst financial storms.
Let’s break down the three core defensive sectors — and how they’ve performed in past crises like the 2008 financial crash and the COVID-19 pandemic.
1. Utilities: Keeping the lights on — literally
Utilities companies provide services like electricity, water, and natural gas. These aren’t things people cut back on during recessions. That’s why utilities tend to have predictable cash flows, making them a steady presence in a portfolio. They’re also often government-regulated, which adds an extra layer of stability. During the initial COVID-19 panic in early 2020, utilities saw temporary dips, but most rebounded quickly, especially those involved in renewable energy.
Notable European utilities:
Enel (Italy)
Iberdrola (Spain)
EDF (France)
2. Healthcare: The sector that never sleeps
Whether there’s a bull market or a global crisis, healthcare remains essential. This sector includes pharmaceutical companies, hospitals, biotech firms, and insurers. Demand tends to stay high even during recessions, and in crises like COVID-19, it often surges. In 2020, healthcare stocks were among the first to bounce back, thanks to global demand for vaccines, treatments, and diagnostics.
Notable European healthcare companies:
Roche (Switzerland)
Sanofi (France)
Novo Nordisk (Denmark)
3. Consumer staples: The everyday essentials
Consumer staples are products people continue to buy regardless of economic conditions. This includes food, beverages, household cleaning supplies, and personal care items. These companies usually enjoy steady demand and often pay reliable dividends. During COVID-19, demand for packaged goods, shelf-stable food increased, because everyone was stuck at home with the need to constant feed themselves and their families. Demand for cleaning products skyrocketed, as people grew concerned over hygiene.
Notable European consumer staples companies:
Nestlé (Switzerland)
Unilever (UK/Netherlands)
Danone (France)
4. Insurance: Predictable in unpredictable times
Insurance companies are often overlooked as defensive investments, but they provide a steady source of income thanks to regular premium payments. Life insurance, property insurance, and health insurance all tend to see consistent demand. Many insurers also hold large investment portfolios, giving them additional earning potential — especially in higher interest rate environments.
Insurers can experience short-term volatility during financial shocks, but their core business remains stable. During both the 2008 crisis and the pandemic, major insurance companies continued operating profitably, and many maintained their dividend payouts.
Notable European insurers:
Allianz (Germany)
AXA (France)
Zurich Insurance Group (Switzerland)
5. Telecommunications: Everyone’s always online
Telecom companies provide mobile networks, broadband, and data services — the infrastructure that keeps people connected. These services have become essential, not just for communication but also for remote work, education, and entertainment. In other words, people rarely cancel their phone or internet subscriptions, even when times are tough.
In 2008, telecoms were among the more resilient sectors. During COVID-19, the sector held up relatively well due to surging demand for digital connectivity. Telecoms aren’t known for rapid growth, but they provide consistent revenues and often pay out attractive dividends.
Notable European telecom companies:
Deutsche Telekom (Germany)
Vodafone (UK)
Orange (France)
Holding companies across these five sectors won’t make your portfolio invincible — nothing can — but they can dramatically reduce your exposure to volatility. They’re the financial equivalent of a sturdy pair of boots in a storm: not flashy, but exactly what you want when things get rough.
A quick myth-busting session
Let’s pause for a sec and address the elephant in the portfolio:
“Defensive stocks are boring.” Okay, maybe they’re not the thrill-seekers of the stock market — but they’re the grown-ups. And sometimes, that’s exactly what your money needs.
“I’ll miss out on growth.” Not necessarily. You’re not investing only in defensive stocks — you’re balancing them with higher-growth assets. It’s not about choosing between excitement and safety. It’s about getting both.
“I’m too young to go conservative.” Girl. You are not going full grandma with a few solid defensive picks. You’re just being smart. Long-term investors still benefit from holding stable, dividend-paying companies alongside the sexy, high-growth stuff.
How to invest in defensive stocks — even if you’ve never bought a share in your life
Good news: you don’t need to hand-pick individual companies (unless you want to — power move). You can get exposure through ETFs that focus on defensive sectors, like:
XLP – Consumer Staples Select Sector SPDR
XLV – Health Care Select Sector SPDR
VPU – Vanguard Utilities ETF
These bundles let you invest in a whole slice of the market at once, which is great for diversification and minimizing stress. Even better? Most investing apps today let you buy fractional shares, meaning you don’t need hundreds of dollars to get started. Set up a recurring monthly contribution — even €50 a month — and let your future self send you a thank-you card.
When defensive stocks shine — and when they don’t
Let’s be honest: defensive stocks aren’t miracle workers. They tend to perform best when the market is stressed out, which is why they’re great to own during economic uncertainty. But in a booming bull market, they might lag behind the tech darlings. And that’s totally fine. You’re not trying to win the stock market. You’re trying to build a resilient portfolio that feels solid no matter what’s going on outside. Defensive stocks are your portfolio’s weighted blanket — calming, steady, and low-drama.
Final thoughts: Investing should feel like self-care, not self-sabotage
You don’t need to be glued to CNBC or understand macroeconomics to make smart investing moves. Defensive stocks offer something that’s easy to overlook in the financial world: peace of mind. They’re a reminder that you can be cautious and confident. Strategic and serene.
So if you’re ready to invest without the panic attacks, consider adding some defensive stocks to your mix. Your future self — and your stress levels — will thank you.