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This Week's Bonus Story These 3 Defensive Stocks Could Help Portfolios Weather a 2026 DownturnWritten by Chris Markoch. Publication Date: 1/12/2026. 
Article Highlights - Recession risk is rising in 2026, making a defensive portfolio shift a smart way to manage downside without abandoning opportunity.
- Some growth businesses still offer protection by being deeply embedded in daily operations, creating durable demand even in slower economies.
- Essential consumer demand and life-event-driven revenue can provide stability, income, and resilience when economic conditions weaken.
Making economic forecasts is difficult at the best of times. Even though investors have access to more data than ever, uncertainty remains high. For example, in December 2025 many leading financial firms maintained a positive outlook for the U.S. economy in 2026. One notable exception was JPMorgan Chase & Co. (NYSE: JPM). JPMorgan Global Research put the probability of a U.S. and global recession in 2026 at approximately 35%, citing sticky inflation and a slowing labor market. The former CEO of Google calls it the most important thing to happen in 500, maybe 1,000 years of human society. A former U.S. Treasury Secretary says when your great-grandchildren write the history of this period, the political headlines will be the second or third story. The first story is something none of us have seen before. The dot-com collapse, global financial crisis, and COVID-19 pandemic don't compare to what's coming next. We may be entering a period of dramatic, almost unimaginable change. See the full warning and how to prepare now. Last week’s jobs report supported that outlook, and this week’s CPI and PPI readings are likely to reinforce concerns about sticky inflation. JPMorgan reports earnings on Jan. 13, and CEO Jamie Dimon will likely add more color to the firm’s forecast. To be fair, this isn’t the first time Dimon has warned of recession risks recently. That doesn’t mean his comments should be dismissed. The economy feels a bit like getting a “mostly good” checkup: on the surface everything looks fine, but there are a few issues that could cause problems down the road if left unattended. Put another way, Dimon is playing the role of the Ghost of Christmas Future — not predicting an outcome, but illustrating what could happen if the U.S. stays on its present course. That doesn’t mean investors must abandon growth stocks, particularly in technology. But it may be wise to add some defensive positions as a hedge. Here are three stocks that fit that approach. Growth Meets Defense: A Tech Company Embedded in Enterprise The first pick may not look defensive at first glance. But Microsoft Corp. (NASDAQ: MSFT) is a growth company with many defensive characteristics: its products and services function as an operating system for enterprise customers. From cloud computing (Azure) and productivity software (Teams) to generative AI tools like Copilot, Microsoft is deeply embedded with its customers. That creates sticky, growing revenue and earnings and raises switching costs. Investors can also buy Microsoft at a discount—MSFT is down about 6% since November 2025 amid concerns about returns on AI infrastructure spending. Goldman Sachs recently countered that view, rating the stock Buy based on Microsoft’s potential to benefit from what it calls “compounding AI product cycles.” MSFT has a consensus price target of $630.37, roughly 31% higher than its price as of this writing, making it a compelling buy-the-dip candidate. A Defensive Trade With Income and Innovation Potential General Mills (NYSE: GIS) is a classic defensive name: a consumer staples giant whose brands appear in many households. GIS is down more than 25% over the past 12 months, and its total return over the last five years is about -4.09%. That weakness has pushed the dividend yield to roughly 5.6%. The defensive trade hasn’t been the market focus recently. Investors shifted from the meme-stock mania of 2020–21 into the AI trade, leaving many consumer staples behind. General Mills projects weaker revenue and earnings in 2026 but is investing in innovation and marketing to spur future growth. Real Estate Resilience: Profiting From Life-Event Demand Dividend-paying stocks are often defensive, making REITs like Public Storage (NYSE: PSA) attractive. The company focuses on self-storage units, whose demand is driven more by life events than by broad economic cycles. A recession could increase life events—downsizing, job changes and relocations—that boost self-storage demand. REITs like Public Storage also benefit from pricing power that helps protect margins, and PSA has one of the strongest balance sheets in its sector. PSA is down roughly 3% over the past 12 months but surged in the first two weeks of 2026. Analysts see about 13% upside, and the stock yields around 4.12%, with annual dividends totaling $12 per share.
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