Price fluctuations of defensive stocks are usually contrary to movements in the business cycle.

Question

Quizplus · Accepted Answer

Defensive stocks are typically those of companies that are less affected by economic downturns and are expected to maintain stable earnings and dividends regardless of the business cycle. Therefore, their price fluctuations are usually opposite to the movements in the business cycle. When the economy is weak and stocks in other sectors are declining, investors may seek out defensive stocks for their stability, causing their prices to rise. Conversely, when the economy is strong and stocks in other sectors are performing well, investors may be less interested in defensive stocks, causing their prices to decline.

Price Fluctuations of Defensive Stocks Are Usually Contrary to Movements