Are These 3 Leading Defensive Stocks Too Crowded Heading Into 2026?

When markets get choppy, investors tend to crowd into the same safe places. That can mean defensive consumer staples stocks. These companies sell what people need, no matter what’s happening in the economy. They’re the financial equivalent of comfort food—dependable and familiar.

However, although there’s some evidence of sector rotation, not all defensive stocks have been winners. Walmart Inc. (NASDAQ: WMT) is a clear winner in the defensive trade. WMT stock is up 23.8%, outpacing the market, but it’s trading at a premium valuation at around 39x earnings.

Costco Wholesale Corp. (NASDAQ: COST) is down 5.5% after its stock price jumped to over $1,000 per share in early summer. COST stock is trading at 46x earnings, but that’s a discount to its historic average.

Then there’s Procter & Gamble (NYSE: PG), which is down over 14% as it faces competition from private label brands. However, at around 21x earnings, it’s trading at a discount and may have the most attractive valuation of the three stocks.

But as we head into 2026, the question is shifting from “Are these safe?” to “Are they too crowded?” The answer is likely to depend on what happens with the economy. Some analysts think the U.S. economy is about to take off. Others think we could slip into a slowdown. And it’s also possible that we just drift sideways as we did in 2025.

So what happens to these defensive favorites in each scenario? Here's a high-level view of what WMT, COST, and PG might look like if the bulls are right, if the bears take over, or if 2026 ends up feeling like a repeat of last year.

Scenario #1: The Bulls Kick Into Another Gear

What would the best-case scenario look like? The Fed continues to cut rates, spurring capital expenditures. The stimulus from the One Big Beautiful Bill spurs consumer spending. Job growth improves. Consumers feel confident again. In a “risk-on” market like that, defensive stocks usually don’t lead, but that doesn’t mean they disappear.

For Walmart, stronger growth could boost traffic and raise its appeal as more of a tech-enabled retailer. Higher consumer confidence could support margins and maybe even help Walmart+ subscriptions.

Costco might continue to shine if consumers trade up from cheaper alternatives; membership renewals and warehouse traffic stay strong even in good times. It might not lead the market, but it could still grind higher. Plus, if COST stock climbs above $1,000 again, the company may split its stock

Procter & Gamble is more of a slow-and-steady mover. In a booming economy, PG stock may lag behind the others because investors start chasing higher-growth stories in tech, AI, or energy.

In a strong economy, these stocks can still deliver; just don’t expect them to lead the charge. They become more like solid foundations in a portfolio rather than growth engines.

Scenario #2: The Bears Have the Last Laugh

Now picture the opposite. What if inflation creeps back up? What if job numbers stall? What if interest rates stop falling or even rise again? In that environment, defensive stocks usually get another rush of demand.

For Walmart, a weaker economy could actually boost market share as shoppers trade down from Target (NYSE: TGT) or Amazon (NASDAQ: AMZN). That's a trend that the company has already seen in 2025.

Costco tends to perform well in slowdowns because bargains and bulk buying become more attractive. But valuations could become a problem; if investors are already pricing perfection into COST, there may not be much upside left.

Procter & Gamble might see the most stable revenue. However, higher costs and currency pressure could limit earnings growth.

In a bearish setup, all three stocks could hold up better than the market. But investors should be careful not to assume that “defensive” automatically means big gains. Sometimes it just means losing less.

Scenario #3: The Economy Runs It Back in 2026

If 2026 ends up feeling like a repeat of 2025:  still uncertain, still uneven, and still full of mixed signals, the story for defensive stocks becomes less about the economy and more about valuation and expectation. These stocks may not crash, but they may not fly either.

Walmart could continue to benefit from a “barbell” consumer. That is, more affluent consumers hunt for convenience and budget shoppers hunt for savings.

Costco might just keep doing what it does best: slow and steady comp sales growth with any special catalysts tied to membership fees or a special dividend.

Procter & Gamble may continue with small price increases and efficiency improvements to protect margins.

In this middle-ground scenario, these stocks might be “fine.” Not thrilling. Not disappointing. But if the share prices are already priced for perfection, “fine” might feel like a letdown. That’s where investors must decide whether certainty alone is worth paying up for in 2026.

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