What are defensive stocks?

Shares of companies whose sales tend to hold up in a recession because people keep buying what they sell: consumer staples (food, drinks, household goods), health care, and utilities (electricity, gas and water). The opposite is consumer discretionary, such as cars, travel and restaurants, which households cut first.

Do defensive stocks go down in a recession?

Yes, usually by less than the market. In the 2008 financial crisis consumer staples fell about 31% and health care about 40% while the S&P 500 fell about 56%. Smaller falls are still large falls, and in the 2020 crash utilities fell slightly more than the market.

Why did utilities fall so much in 2020?

They went into the crash at high prices, popular as a substitute for bonds, and they carry a lot of debt. When credit markets seized up for a few weeks in March 2020, utilities fell about 36% against about 34% for the S&P 500, even though demand for power barely changed.

Are defensive stocks a good investment for the long run?

They have tended to give a smoother ride and lag in strong bull markets, so whether they come out ahead depends heavily on the period. Over the years since 2010, dominated by fast-growing technology companies, the broad market has generally been hard to beat. Backtesting a defensive tilt over several different periods shows the trade-off better than any single number.

Should I move into defensive stocks before a recession?

This guide cannot answer that for you, and recessions are hard to time: markets often fall before a recession is announced and recover before it ends. Investors who want a steadier portfolio usually change their mix of stocks, bonds and cash and keep it, rather than switching sectors on a forecast.

Do Defensive Stocks Protect You? Staples, Health Care and Utilities in Every Crash Since 2008

7 min read · Updated 2026-10-28

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Some businesses sell things people buy in good times and bad: groceries and toothpaste, medicine and doctor visits, electricity and water. The stock market calls these sectors defensive, and the idea is simple. If their sales hold up in a recession, their share prices should too.

This guide checks the idea against the record. It looks at what the consumer staples, health care and utilities sectors did, by price, in each stock market crash since 2008 compared with the S&P 500, the one crash where the label failed badly, how fast they recovered, and what holding more of them costs in the years between crashes. Educational, not a recommendation.

Stress-test a defensive tilt →

What makes a sector defensive

The S&P 500 is divided into eleven sectors. Three are usually called defensive. Consumer staples are the makers and sellers of everyday goods: food, drinks, household products and the supermarkets that stock them. Health care covers drug makers, insurers, hospitals and medical device companies. Utilities sell electricity, gas and water, usually at prices set or approved by a regulator.

Their opposite is consumer discretionary: cars, travel, restaurants, home improvement and online shopping, the things households cut first when money is tight. Each sector has a widely held fund that tracks it (XLP for staples, XLV for health care, XLU for utilities, XLY for discretionary), which makes it easy to see what each one did in a crash.

What they did in every crash since 2008

Over the months the S&P 500 fell from its peak to its bottom in each crash, here is how the three defensive sectors moved.

In the 2008 financial crisis the S&P 500 fell about 56%. Consumer staples fell about 31%, health care about 40% and utilities about 45%. In the late-2018 selloff, when the market fell about 20%, staples fell about 12% and utilities barely moved (-3%). In the 2022 bear market, all three fell about half as much as the market or less: staples about 12%, health care about 13% and utilities about 13%, against about 25%.

Staples and health care fell less than the S&P 500 in every one of the four crashes. Consumer discretionary, the opposite bet, fell further than the market in 2008, 2018 and 2022, falling about 58%, 22% and 34%. On this record, the defensive label has mostly been earned.

Price change during each stock market crash: S&P 500 vs consumer staples and utilities (percent)

2008 financial crisis: S&P 500

−56%

2008 financial crisis: consumer staples (XLP)

−31%

2008 financial crisis: utilities (XLU)

−45%

2018 fourth-quarter selloff: S&P 500

−20%

2018 fourth-quarter selloff: consumer staples (XLP)

−12%

2018 fourth-quarter selloff: utilities (XLU)

−3%

2020 COVID crash: S&P 500

−34%

2020 COVID crash: consumer staples (XLP)

−25%

2020 COVID crash: utilities (XLU)

−36%

2022 bear market: S&P 500

−25%

2022 bear market: consumer staples (XLP)

−12%

2022 bear market: utilities (XLU)

−13%

Price change of SPY, XLP and XLU over each crash's S&P 500 peak-to-bottom window, from the crash study at /studies/etf-crashes (snapshot of 2026-09-16). Prices only. Four crashes is a small sample, and past crashes do not predict the next one.

Where the label failed: utilities in 2020

In the 2020 COVID crash, utilities fell about 36%, slightly more than the S&P 500's 34%, even though people kept their lights on. Two things went wrong at once. Utilities had become popular as a substitute for bonds, so their prices were high going in, and they borrow heavily to build power plants and networks, which made them vulnerable when credit markets seized up for a few weeks.

The lesson is that a steady business is not the same as a steady share price. What investors paid going in, and how much the companies owe, can matter as much as what they sell. Staples and health care held up better in 2020, falling about a quarter, but nobody escaped a fast, broad panic.

Price change during four stock market crashes (approximate)
Crash	S&P 500 (SPY)	Staples (XLP)	Health care (XLV)	Utilities (XLU)
2008 financial crisis	-56%	-31%	-40%	-45%
2018 fourth-quarter selloff	-20%	-12%	-15%	-3%
2020 COVID crash	-34%	-25%	-28%	-36%
2022 bear market	-25%	-12%	-13%	-13%

Price change over each crash's S&P 500 peak-to-bottom window, from the crash study at /studies/etf-crashes (snapshot of 2026-09-16). Dividends excluded, so total returns were somewhat better, most of all for the higher-yielding utilities and staples.

A smaller fall is still a fall

Defensive does not mean safe. Staples fell about 31% in 2008, and in the dot-com bust, when the S&P 500 fell about 49% over two and a half years, staples ended the period about flat but fell about 34% at their worst along the way. If what you need is money that does not fall in a crash, that is the job of cash and high-quality bonds, not a different kind of stock.

Recoveries vary too. After 2008, staples got back to their old price high about 21 months after the bottom, against about 48 for the S&P 500: falling less left a shorter climb. After 2022 it was the other way round. Staples took about 22 months, health care about 20 and utilities about 23, against about 15 for the market, because the growth stocks that fell hardest also rebounded hardest.

What a defensive tilt costs

The price of a smaller fall is usually a smaller rise. Defensive businesses tend to grow slowly and steadily, so in long bull markets led by fast-growing companies, as in most of the years since 2010, a portfolio tilted toward them has tended to lag the broad market. Whether the tilt paid off over a full cycle depends on the dates you pick, which is exactly why it is worth testing on real data rather than assuming.

You also already own these sectors. Staples, health care and utilities together make up less than a fifth of the S&P 500, and a total-market fund holds them at the same weights. A separate sector fund is a tilt on top of that, and sector funds are more concentrated than the market: a few large companies can make up a big share of each one.

•What is it for? A defensive tilt can make a stock portfolio's falls somewhat smaller, but it is still all stocks. Bonds and cash change the size of a crash far more.
•Do you need the steadier ride? Investors close to spending their money, or who know they would sell in a panic, may value a smaller fall more than a higher long-run return.
•Rebalancing: in a crash the defensive slice will drift above its target as the rest falls further. Trimming it back into what fell is where much of any benefit comes from.

Test it on your own portfolio

The useful question is not whether defensive stocks are good, but what a defensive tilt would do to your mix. Backtest your portfolio as it is and with a slice moved into staples, health care or utilities, and compare the maximum drawdown, the recovery time and the total return over the whole period. Then replay both versions through 2008, 2020 and 2022 in the stress test, since the sectors behaved so differently in each.

Educational, not advice: whether a defensive tilt belongs in your portfolio depends on your goals, your horizon and everything else you own.

Try it yourself

Stress Test / ScenariosReplay a portfolio with a defensive tilt through 2008, 2020 and 2022.Open tool →Backtest PortfolioRun your mix with and without a defensive slice and compare drawdowns and total return.Open tool →Compare XLV vs XLKHealth care against technology, on real data.Open tool →Compare XLE vs XLUEnergy against utilities, two very different sectors side by side.Open tool →

FAQ

What are defensive stocks?: Shares of companies whose sales tend to hold up in a recession because people keep buying what they sell: consumer staples (food, drinks, household goods), health care, and utilities (electricity, gas and water). The opposite is consumer discretionary, such as cars, travel and restaurants, which households cut first.
Do defensive stocks go down in a recession?: Yes, usually by less than the market. In the 2008 financial crisis consumer staples fell about 31% and health care about 40% while the S&P 500 fell about 56%. Smaller falls are still large falls, and in the 2020 crash utilities fell slightly more than the market.
Why did utilities fall so much in 2020?: They went into the crash at high prices, popular as a substitute for bonds, and they carry a lot of debt. When credit markets seized up for a few weeks in March 2020, utilities fell about 36% against about 34% for the S&P 500, even though demand for power barely changed.
Are defensive stocks a good investment for the long run?: They have tended to give a smoother ride and lag in strong bull markets, so whether they come out ahead depends heavily on the period. Over the years since 2010, dominated by fast-growing technology companies, the broad market has generally been hard to beat. Backtesting a defensive tilt over several different periods shows the trade-off better than any single number.
Should I move into defensive stocks before a recession?: This guide cannot answer that for you, and recessions are hard to time: markets often fall before a recession is announced and recover before it ends. Investors who want a steadier portfolio usually change their mix of stocks, bonds and cash and keep it, rather than switching sectors on a forecast.

Key terms in this guide

Plain-English definitions in the Learning Hub.

Beta →Maximum drawdown →Volatility (annualized standard deviation) →Stress test →Correlation →

Already computed · real data

All stocks vs defensive tilt on real data

Side by side, same dates

All stocks (VTI 100%) grew from $10,000 to $76,272 between Jan 2007 and Oct 2026 (10.8% a year). Its worst fall was -51%, from Oct 2007 to Feb 2009, and it took 53 months (about 4 years) to get back to that high. A defensive tilt (VTI 70%, XLP 10%, XLV 10%, XLU 10%) grew from $10,000 to $77,358 between Jan 2007 and Oct 2026 (10.9% a year). Its worst fall was -45%, from Oct 2007 to Feb 2009, and it took 42 months (about 4 years) to get back to that high.

Real 2007-01 to 2026-10 data, dividends reinvested, rebalanced yearly. Past performance doesn't predict future results.

Growth of $10,000, Jan 2007 to Oct 2026

All stocks (VTI 100%)A defensive tilt (VTI 70%, XLP 10%, XLV 10%, XLU 10%)

Run all stocks with your own numbers →Run defensive tilt with your own numbers →

Keep watching one of them, free: all stocks or defensive tilt. A free account saves it as your plan and checks it for you every month.

For educational and informational purposes only, not financial, investment, tax, or legal advice. Backtests are hypothetical; past performance does not guarantee future results.