Introduction to Economic Uncertainty
Making economic forecasts is difficult at any time. But in an age where investors have access to more data than ever, there seems to be more uncertainty than ever before. For example, in December 2025, many of the leading financial companies had a positive outlook for the U.S. economy in 2026. One notable exception was JPMorgan Chase & Co. (NYSE: JPM). JPMorgan Global Research puts the probability of a U.S. and global recession in 2026 at approximately 35%. The reasons: sticky inflation and the slowing labor market.
Understanding the Forecast
Last week’s jobs report supported that outlook. And this week’s CPI and PPI readings on inflation are likely to support the idea of sticky inflation. Plus, JPMorgan delivers earnings on Jan. 13, and chief executive officer (CEO) Jamie Dimon will likely add more color to the firm’s forecast. To be fair, this isn’t the first time that Dimon has raised recession fears in the past few years. But that doesn’t mean the comments should be quickly dismissed. The economy has a feeling much like going to the doctor and getting a “mostly good” checkup. On the surface, everything’s fine, but you know there are a few things that could cause problems down the road if you don’t take care of them soon.
Interpreting the Warning Signs
Or to use another metaphor, Dimon is playing the role of the Ghost of Christmas Future, not predicting what will happen, but showing what may happen if the U.S. stays on its present course. Depending on how you look at it, that’s the bad news. It wouldn’t seem to be a time to stay away from growth stocks, especially in the technology sector. But it may be time to get a little defensive with a portion of your portfolio. That’s a sensible hedge to protect against whatever may be coming.
Defensive Stocks to Consider
Here are three stocks that fit that description.
Growth Meets Defense: A Tech Company Embedded in Enterprise
The first pick may not seem like a very defensive stock. But Microsoft Corp. (NASDAQ: MSFT) is a growth stock that has many traits of a defensive stock. The company’s products and services act like an operating system for enterprise customers. From cloud computing (Azure) and productivity software (Teams) to its latest generative and agentic artificial intelligence (AI) tools like Copilot, Microsoft is embedded with its customers. That creates sticky and growing revenue and earnings and makes switching costs high.
A Defensive Trade With Income and Innovation Potential
General Mills (NYSE: GIS) may be more of what investors think of when they consider defensive stocks. General Mills is a consumer staples giant that has a portfolio of products that are found in many homes. But GIS stock is down over 25% in the last 12 months. In fact, the total return in the stock over the last five years is –4.09%. That’s even with a dividend that has seen its yield climb to 5.6% on the stock’s weakness.
Real Estate Resilience: Profiting From Life-Event Demand
Dividend stocks are generally defensive stocks. That can make real estate investment trusts (REITs) like Public Storage (NYSE: PSA) attractive. The company focuses on self-storage units, which are driven more by life events and less by the broader economy. However, if the economy is headed towards recession, it may drive more life events such as downsizing, job changing, and moving. All of these could drive demand in 2026. And REITs such as Public Storage have the advantage of pricing power, which protects their margins. Plus, the company has one of the strongest balance sheets in its sector.
Conclusion
In conclusion, while economic forecasts are always uncertain, it’s essential to be prepared for any scenario. By considering defensive stocks like Microsoft, General Mills, and Public Storage, investors can hedge against potential downturns and protect their portfolios. These stocks offer a combination of growth, income, and resilience that can help weather any economic storm. As the economy continues to evolve, it’s crucial to stay informed and adapt to changing market conditions. By doing so, investors can make informed decisions and navigate the complexities of the market with confidence.
