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2026 Downturn Playbook: Defensive Stocks to Buy
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Published in Stocks and Investing on Saturday, November 22nd 2025 at 4:29 GMT by Fortune- 🞛 This publication is a summary or evaluation of another publication
- 🞛 This publication contains editorial commentary or bias from the source
A Quick‑Take on the 2026 Downturn Playbook
In a recent feature on MSN Money, investment advisers and market analysts lay out a concrete “if‑2026‑goes‑down” playbook: five blue‑chip, defensive‑style holdings they recommend adding to a portfolio, and five high‑growth or cyclical names they advise steering clear of. The article’s tone is pragmatic—“Buy the safe bets, ditch the riskier bets.” Below is a concise 500‑word synopsis that captures the core of the piece, the reasoning behind each pick, and the broader market context the writers use to justify their choices.
The Market Landscape: Why 2026 Matters
The article opens by framing 2026 as a “potential turning point” for the U.S. economy. A confluence of factors—slowdown in the tech sector, rising inflationary pressures, tightening monetary policy, and a shift away from “growth” to “value”—could push the market into a correction. The piece cites data from the Federal Reserve indicating that a 25‑basis‑point rate hike in 2025 might be followed by a “rate‑cut cycle” that could still leave asset prices in a fragile state. In short, the writers argue that the next three years could see a shift from a high‑growth, high‑valuation environment to one that rewards fundamentals, cash flow, and sector resilience.
Five Stocks to Buy
| Rank | Company | Sector | Why It’s a Buy |
|---|---|---|---|
| 1 | Procter & Gamble (PG) | Consumer Staples | The article cites P&G’s steady earnings, robust dividend yield (around 2.8 %), and diversified product line. Analysts predict the company will weather a downturn because consumer staples are “inelastic” — people need soap and toothpaste regardless of economic climate. |
| 2 | Johnson & Johnson (JNJ) | Healthcare | JNJ’s mix of pharmaceuticals, medical devices, and consumer products gives it a “balanced risk” profile. The article highlights a dividend yield near 2.5 % and the company’s strong pipeline of new drugs, which could keep earnings solid even in a sluggish economy. |
| 3 | NextEra Energy (NEE) | Utilities / Renewable Energy | NextEra is positioned as a “clean‑energy utility,” a sector that has proven resilient during downturns. The writer cites the company’s 11‑year track record of dividend growth and the increasing demand for renewables, positioning it as a defensive yet growth‑oriented play. |
| 4 | Coca‑Cola (KO) | Consumer Staples | Coke’s iconic brand and global reach make it a “safe harbor” during economic stress. The article notes the company’s dividend yield of roughly 3.2 % and a history of maintaining earnings per share (EPS) growth despite recessions. |
| 5 | Walmart (WMT) | Retail | Walmart is framed as a “price‑sensitive” retailer that thrives during economic downturns when consumers switch to lower‑priced alternatives. Its 2.6 % dividend yield and large cash‑generating store network make it an attractive “defensive” holding. |
Common Themes
Across the five picks, the writers identify a few recurring attributes:
- Defensive Business Models – Companies that provide essential goods or services that consumers buy regardless of economic health.
- Dividend Income – A dividend yield in the 2–3 % range that can help cushion portfolio volatility.
- Strong Balance Sheets – Low debt ratios and high free cash flow, indicating the ability to weather short‑term shocks.
- Growth Potential – Even defensive names are chosen if they show signs of upside (e.g., a healthy earnings pipeline or expanding market share).
Five Stocks to Avoid
| Rank | Company | Sector | Why It’s a Bad Bet |
|---|---|---|---|
| 1 | Tesla (TSLA) | Consumer Discretionary / Tech | Analysts warn about Tesla’s “high valuation” (price/earnings > 70) and the risk of a tightening policy environment that could choke growth. |
| 2 | Moderna (MRNA) | Biotechnology | The article flags Moderna’s heavy reliance on mRNA vaccine sales and the risk of diminishing demand once the pandemic subsides. |
| 3 | Shopify (SHOP) | E‑commerce / SaaS | Despite rapid growth, Shopify’s valuation is deemed “overheated” relative to its fundamentals, with a risk that an economic slowdown could curtail small‑business spending. |
| 4 | Advanced Micro Devices (AMD) | Technology / Semiconductors | AMD’s high sensitivity to the cyclical nature of the semiconductor industry makes it vulnerable to a broader tech slowdown. |
| 5 | NVIDIA (NVDA) | Technology / GPUs | Similar to AMD, NVIDIA’s heavy exposure to gaming and data‑center demand, both cyclical segments, makes it a candidate for a downturn. |
Why These Names Get the Boot
The writers use a few key arguments against the “avoid” list:
- High Valuation – Companies trading at lofty price‑to‑earnings multiples may see a sharp correction when growth slows.
- Cyclical Demand – Sectors like consumer discretionary, biotech (post‑pandemic), and semiconductors are highly sensitive to consumer spending patterns and capital‑intensive cycles.
- Risk of Over‑Capitalization – Firms with a lot of debt or that invest heavily in expansion may struggle to sustain earnings in a tighter‑money environment.
Additional Context: The “Downturn” Narrative
The article goes beyond a simple list and links to a handful of supporting resources:
- A Bloomberg analysis on cyclical vs. defensive sectors – This reference provides a data‑driven comparison of how these categories have performed during past recessions.
- An academic paper from the University of Chicago on dividend‑yield sustainability – This link underpins the writers’ emphasis on stable dividend income.
- An Investopedia guide to “value vs. growth” investing – Offering readers a primer on why value stocks are traditionally seen as more resilient during downturns.
Takeaway
The piece’s central thesis is that if the market turns in 2026, investors would benefit from shifting toward defensive, dividend‑paying stocks that exhibit strong fundamentals and low volatility, while steering clear of highly leveraged, growth‑oriented names that rely on continued economic expansion. The article encourages readers to adopt a “defensive posture” rather than chasing speculative returns, suggesting that the safest path through a potential downturn is to focus on steady cash flows, low debt, and proven business models.
For anyone looking to safeguard a portfolio in an uncertain future, the article offers a concise, actionable roadmap: buy the likes of PG, JNJ, and KO; avoid the high‑growth, high‑valuation names such as TSLA, SHOP, and AMD. While no strategy guarantees a loss‑free outcome, aligning with the principles outlined above could help investors ride out any market turbulence that may arise by 2026.
Read the Full Fortune Article at:
[ https://www.msn.com/en-us/money/savingandinvesting/5-stocks-to-buy-and-5-to-avoid-if-2026-brings-a-downturn/ar-AA1QNMvB ]
