Investing in Defensive Sectors Amid Stagnant Wage Growth in 2026

As of 2026, global economic growth remains robust at 2.8%, with the U.S. outperforming at 2.6%. However, labor markets have struggled to reflect this strength, with job growth falling below pre-pandemic levels. This disconnect between GDP gains and employment highlights the need for defensive investments. Sectors like healthcare, utilities, and consumer staples are expected to thrive under stagnant wage growth, offering stability and resilience. Below, we analyze key stocks and sectors best positioned to weather this economic environment.

Healthcare: Johnson & Johnson (JNJ) as a Pillar of Stability

Johnson & Johnson (JNJ) has emerged as a standout in the healthcare sector, with its stock price rising 44% year-to-date as of late 2025. This growth is driven by strong demand for MedTech products and a robust pipeline in Innovative Medicine. The company's fair value estimate stands at $209.29, suggesting it is modestly undervalued. Financially, JNJ maintains a debt-to-equity ratio of 57.8% and a strong EBIT of $24.5B, while its Return on Assets (ROA) of 13.40% underscores its operational efficiency. These fundamentals position JNJ as a reliable defensive play, even amid macroeconomic headwinds.

Utilities: NextEra Energy (NEE) and the Power of Structural Demand

NextEra Energy (NEE) has raised its 2026 adjusted earnings per share (EPS) guidance to $3.92–$4.02, driven by surging power demand from data centers. For 2025, the company now expects adjusted EPS between $3.62 and $3.70, reflecting improved performance. NEE plans to grow dividends by approximately 10% annually through 2026, a testament to its commitment to shareholder returns. Analysts project Q4 2025 earnings of $0.64 per share, a 20.8% increase from the prior year. However, NEE faces challenges, including a debt-to-equity ratio of 1.72 and insider selling activity. Despite these risks, its fair value estimate of $91.14 per share highlights structural demand for clean energy, making it a compelling defensive pick.

Consumer Staples: Kraft Heinz and Campbell's as Affordable Safeguards

Consumer staples remain a cornerstone of defensive investing, with Kraft Heinz and Campbell's standing out for their affordability and strong economic moats. According to Morningstar, these companies are trading at discounts to their fair value estimates, offering attractive entry points. Kraft Heinz, in particular, plans a 2026 spin-off following a decade of slow growth, a move expected to enhance shareholder value. These stocks cater to habitual consumption patterns, ensuring steady demand even in stagnant wage environments.

Rails: A Sector Aligned with GDP Growth

The rails sector is another defensive segment poised to benefit from 2026's macroeconomic landscape. According to AAM's 2026 Fixed Income Outlook, the sector's growth aligns with overall GDP expansion, supported by capital spending and diversified end-market exposure. While trade uncertainties and tariff impacts persist, the sector's structural resilience makes it a strategic addition to defensive portfolios.

Conclusion: Strategic Allocation for Resilience

Defensive sectors like healthcare, utilities, and consumer staples offer a buffer against the volatility of stagnant wage growth. Stocks such as Johnson & Johnson, NextEra Energy, and Kraft Heinz combine strong fundamentals with sector-specific advantages, while the rails sector provides macroeconomic alignment. Investors should prioritize companies with robust balance sheets, structural demand, and disciplined capital allocation to navigate 2026's economic challenges effectively.