What are defensive stocks and why do they matter during a government shutdown?

Defensive stocks are shares in companies that provide essential goods and services people need regardless of economic conditions. During government shutdowns, these stocks tend to be more stable because their businesses aren't heavily dependent on government operations. Think utilities that provide electricity, consumer staples like food companies, and established defence contractors with long-term contracts.

How does a government shutdown affect the stock market?

Government shutdowns create uncertainty in financial markets, which can lead to increased volatility. Investors often become more cautious and may move money from growth stocks to safer, defensive investments. The impact varies depending on the shutdown's length and scope, but markets typically prefer political stability and clear government operations.

What does 'inelastic demand' mean for these companies?

Inelastic demand means that people continue to buy a company's products or services even when prices change or economic conditions worsen. For example, you still need electricity for your home and businesses still require defence services, regardless of what's happening in Washington. This makes these companies more predictable and stable investments.

Are utilities always good defensive investments?

Utilities are generally considered defensive because they provide essential services like electricity, gas, and water that people use consistently. They're also typically regulated, which provides predictable revenue streams. However, like all investments, they carry risks including regulatory changes, interest rate sensitivity, and infrastructure costs.

What's the difference between defensive and growth stocks?

Defensive stocks prioritise stability and consistent returns, often paying regular dividends. They're found in sectors like utilities, consumer staples, and healthcare. Growth stocks focus on expanding rapidly and reinvesting profits for future growth, but can be more volatile. During uncertain times like government shutdowns, defensive stocks often outperform growth stocks.

15 handpicked stocks

Defensive Stocks: Government Shutdown Risks & Stability

A partial U.S. government shutdown has begun, halting many federal services and creating economic uncertainty. This theme focuses on defensive stocks in sectors like consumer staples and utilities that tend to remain stable during periods of political and market volatility.

Han Tan | Market Analyst

Published on October 1

Top Picks from This Group

Here are a few of the assets in this group. Create an account to unlock the full list.

General Dynamics Corporation

Current price

$339.09

General Dynamics is a major defence contractor with long-term government contracts that provide stability during political uncertainty.

Lockheed Martin Corporation

LMT

Current price

$498.23

Lockheed Martin's defence contracts and aerospace technology make it a defensive play during government shutdowns.

Northrop Grumman Corporation

NOC

Current price

$604.83

Northrop Grumman provides critical defence systems with multi-year contracts that offer revenue stability.

COPT Defense Properties

CDP

Current price

$29.21

Kratos Defense & Security Solutions Inc

KTOS

Current price

$91.95

V2X Inc

VVX

Current price

$58.08

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12 Month Growth Potential

Use the growth calculator to see how much investing in these assets could return over one year, based on aggregated analyst sentiment provided by Refinitive Ltd.

If you invested across these assets:

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In 12 months it might be worth:

$1,000.00

+25.91%

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About This Group of Stocks

Our Expert Thinking

During government shutdowns, smart investors turn to defensive sectors that provide essential services regardless of political gridlock. This collection focuses on companies with stable demand patterns - utilities that keep the lights on, consumer staples people always need, and select government contractors with long-term funded contracts that weather short-term disruptions.

What You Need to Know

These stocks represent sectors traditionally considered recession-resistant and politically stable. They typically offer consistent dividends and steady performance during uncertain times. While they may not provide explosive growth, they're designed to preserve capital and provide reliable returns when markets become volatile due to political events.

Why These Stocks

Each company was handpicked by professional analysts for its ability to maintain operations and revenue streams during government disruptions. These firms provide essential services with inelastic demand - meaning people and businesses continue to need their products and services regardless of what's happening in Washington.

Group Performance Snapshot

25.91%

Average 12 Month Profit

On average, analysts expect assets in this group to grow 25.91% over the next year.

15 of 15

Stocks Rated Buy by Analysts

15 of 15 assets in this group are rated Buy by professional analysts.

7.2% vs 4%

Group Growth vs Bank interest

This group averaged a 7.2% return last month, beating the typical 4% bank rate.

Source: Analyst sentiment is provided by Refinitiv Ltd, a global leader in financial market data with over 40k business clients. Refinitiv Ltd is an independent third party to Nemo. This is not advice.

Why You'll Want to Watch These Stocks

🛡️

Political Storm Shelter

When Washington gridlock creates market uncertainty, these defensive stocks historically provide stability. They're the financial equivalent of a safe harbour during political storms.

⚡

Essential Services Keep Running

Government shutdowns don't stop people from using electricity, water, or needing defence services. These companies provide what society can't do without, making them naturally resilient.

💰

Dividend Income During Uncertainty

Many of these defensive stocks offer attractive dividend yields, providing steady income streams even when growth stocks struggle with political volatility.

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