Do Defensive Sectors Outperform In Down Markets?

Do Defensive Sectors Outperform In Down Markets? by Andrew Birstingl, FactSet

With U.S. stock indices in the red to start the year and market volatility beginning to climb, some are suggesting that investing in the defensive sectors may be a smart bet. The intuition here is that companies in the defensive sectors, like Consumer Staples, Utilities, and Health Care, have lower betas and are, therefore, less prone to changes in the business cycle. Do defensive sectors outperform in down markets and, if so, by how much? How do defensive sectors perform during varying levels of market volatility?

For this report’s analysis, the Consumer Staples, Utilities, and Health Care sectors are classified as the defensive sectors (“Defensives”), and the S&P Composite 1500...