🏰 Defensive Stocks Are No Longer Cheap

With markets looking frothy and a handful of mega-caps doing most of the heavy lifting, it’s no surprise investors are eyeing “defensive” sectors as a potential safe house. 

The catch is that in 2025, many of those supposed safe havens are trading at anything but bargain prices, and some are behaving more like growth stories than shock absorbers. 

In this piece, we’ll cover the key defensive sectors across the US, Canada, the UK, Europe, and Australia, compare their valuations to the broader market, and highlight where “safety” might actually be expensive risk in disguise. 

By the end, you’ll have a clearer sense of which defensives still make sense, where caution is warranted, and what to consider instead if you want resilience without overpaying.

🎧 Would you prefer to listen to these insights? You can find the audio version on our Spotify, Apple Podcasts or our YouTube! (Released by 5pm Monday AEST).

This week's Market Insights is an 8 minute read! Full article here

Quote of the week

"The individual investor should act consistently as

an investor and not as a speculator." 

Ben Graham

What Happened In The Markets This Week?

Here’s a quick summary of what’s been going on:

🤖 Google makes a splash in the AI race (Axios) 

• Nvidia’s AI throne just got a bit shakier. Google’s Gemini 3 is reportedly outperforming ChatGPT and runs on its own TPUs, not Nvidia’s chips. Meta is even eyeing Google’s silicon for its data centers.
• This dents the narrative of Nvidia’s unchallenged dominance. With $4T market caps now within reach for both firms, investors may begin to price in real competition.
• Nvidia’s dip and Alphabet’s rally show how fast sentiment can shift in AI. The bigger risk is that a fragmented chip ecosystem could challenge Nvidia’s pricing power and future margins.
• If Google starts licensing TPUs more widely, that could open a new AI arms race and alter chip allocation across the tech stack.
• Nvidia’s moat is still wide, but not unbreachable. Investors betting on eternal AI supremacy from this stock may want to revise some of their forecasts to be more conservative. 
• Check out the latest Nvidia narratives from our community to see what other investors are saying.

📈 Australia’s consumer inflation accelerates to 3.8% in October, overshooting estimates (CNBC)

• Inflation in Australia is picking up speed again, with October CPI rising 3.8%, the fastest in 7 months and above forecasts. Housing and electricity were the big culprits, with power costs alone jumping over 37%.
• With the RBA already cautious about rate cuts, this fresh inflation surge could delay any easing moves deep into 2026. Traders hoping for relief in 2025 may need to recalibrate.
• The Aussie economy is holding up better than expected, but persistently high inflation narrows the central bank’s wiggle room.
• Bond yields ticked higher, and the AUD slipped, suggesting markets are bracing for tighter-for-longer monetary policy.
• Since rate cuts are likely on pause, rate-sensitive sectors could experience pressure and keep AUD volatility alive.

To see our take on these market stories below, simply check out the full article!

• 🚕 Uber rolls out driverless robotaxis in Abu Dhabi (CNBC)

• 📉 China industrial profits drop 5.5% in October, worst performance in five months (CNBC)

• 🕶 Alibaba launches $500 AI smart glasses to take on Meta (CNBC)

Now let’s dive into the main piece!

🛡️ Fortifying your Portfolio with Defensive Stocks

Defensive stocks as a group have drawn attention recently, but over the course of the year, their performance has been varied. 

In the US market, Utilities have outperformed year-to-date, while Healthcare stocks lagged initially and outperformed more recently. Consumer Staples are barely in the green for the year, and way behind the S&P 500.

US Defensive Sectors vs S&P 500 - Simply Wall St

Before we take a closer look, let’s have a quick look at what counts as a defensive stock, industry, or company.

These are the ‘boring’  companies that keep chugging along regardless of the state of the economy. They offer steady cash flows and usually feature a low "beta" (finance speak for "they don't have a panic attack every time the S&P 500 sneezes"). 

But in 2025, even the boring stuff is getting complicated...

Defensive sectors are meant to be the market’s safe harbor,

but in 2025, many of them are priced like growth stocks.

We unpack where defensives still offer protection,

and where “safety” may now be the bigger risk.

So our full piece covers:

🧼 Which sectors are truly defensive across staples,

healthcare, utilities, telecoms and REITs in today’s market.

📈 Where valuations look stretched

across the US, Canada, the UK, Europe and Australia.

🧠 How to avoid the defensive trap of overpaying,

mistiming rotations and turning ‘safe’ stocks into performance drags.

🪙 Practical ways to dampen risk from quality defensives

to contrarian value, commodities and cash as dry powder.

💬 Join the discussion by leaving a comment!

How much of your portfolio is allocated to defensive stocks?

Key Events During the Next Week

Tuesday

• 🇺🇸 US JOLTs Job Openings 
  • 📉 Forecast: 7.2M, Previous: 7.23M 
  • ➡️ Why it matters: A cooling labor market supports the case for Fed rate cuts.
• 🇪🇺 EU Inflation Rate YoY Flash 
  • ▶️ Forecast: 2.1%, Previous: 2.1% 
  • ➡️ Why it matters: Steady inflation near target levels reinforces expectations for the ECB to maintain current interest rates.

Wednesday

• 🇦🇺 AU GDP Growth Rate YoY 
  • 📈 Forecast: 2.2%, Previous: 1.8% 
  • ➡️ Why it matters: Accelerating growth reduces recession fears but could prompt the RBA to keep rates tighter for longer.
• 🇺🇸 US ADP National Employment Report 
  • 📉 Forecast: -15.0k, Previous: 42.0k 
  • ➡️ Why it matters: A contraction in private payrolls signals significant economic weakness, likely fueling expectations for Fed rate cuts.

Thursday

• 🇺🇸 US Balance of Trade 
  • 📈 Forecast: -57.0B, Previous: -59.6B
  • ➡️ Why it matters: A narrowing trade deficit positively impacts GDP growth calculations and may reflect stronger export performance.

It’s a big week for cloud software, and for discount retailers:

• Salesforce
• CrowdStrike
• Snowflake
• Marvell Technology
• Kroger
• MongoDB
• Dollar General
• Dollar Tree

Until next week, invest well.

Simply Wall St