Growth vs defensive stocks: the Covid-19 impact on Australian markets

‘At the end of a growth scare when recession fears emerge, secular growth stocks typically underperform defensives.’

Market musings and growth

Was the vicious sell-off we’ve seen in some of the ASX’s top growth names an inevitability? Or maybe the better question is could (or should) we have seen it coming?

Of course posing that question is not to imply that anyone could have predicted the emergence of the coronavirus (Covid-19) pandemic; black swan events are inherently unpredictable. But, according to some analysts, the signs of economic and market deterioration were there, for those who bothered to look, that is.

Mike Wilson from Morgan Stanely was one such analyst ‘looking’. In his recent Thoughts on the Market podcast, he argued that the pull-back we are now experiencing is actually part of a ‘cyclical bear market’ that started all the way back in 2018.

‘The coronavirus and oil price declines are simply the final disruptions to an already exhausted US and global economic expansion,’ he stylishly elaborated.

Because of this, the economy – in Wilson’s words – were ‘destined’ for a recession; a state which he said has now become the base case for markets.

In stark contrast, late last year, CNBC ran – in what likely looked like click-bait at the time – a story titled 'Investors should short growth stocks'.

Surely some laughs were had! After all, 2019 was a very strong year for global equity markets. The tech-focused FANG cohort had come back to life – and Australia’s own WAAAX collection (which in crisis times would prove a poor imitator to their US idols), were also on their way to delivering investors mouth-watering returns.

Growth was well and truly in vogue.

Of course, the music has very much stopped at this point.

At the time of writing, total global cases and deaths stemming from Covid-19 stood at 375,438 and 16,363, respectively. Markets, worriedly pricing in the economic fallout from this pandemic, have been crushed in the last month.

Morgan Stanley is of the opinion that the US economy will plunge 30% in Q2, according to Bloomberg. Oil markets have collapsed. Iron ore prices remain ‘strangely’ elevated. And some market commentators are even theorising that we could have another great depression on our hands.

Growth stocks, as you’d imagine, have not held up well.

In that same CNBC piece that we referenced above, Morgan Stanley’s Mike Wilson said at the time:

‘At the end of a growth scare when recession fears emerge, secular growth stocks typically underperform defensives.’

The real story – at least with Australian stocks – seems a shade more complex than that.

For example, below is the performance of some of the ASX’s most popular growth names over the last month.

ASX Growth


Share Price

1-Month Performance




A2 Milk















Pro Medicus












Interestingly, though the above listed growth stocks have suffered heavy declines, as the next table shows, some of the ASX’s most revered defensive stocks or 'bond proxies' have in places faced comparably steep losses.

Indeed, as shown below and derived from Macquarie Wealth Management’s recent Defensives and Bond Proxies Strategy Portfolio set-up, no equities have been spared from the heavy selling pressure we have witnessed over the last month.

ASX Defensive


Share Price

1-Month Performance







GPT Group



Spark Infrastructure






Sydney Airport









Ramsay Health Care



As we have said before: equities are equities – though they may provide large opportunities for speculators and investors – the cost is an equally large set of risks.

Or, as the Wall Street Journal aptly wrote in 2012:

‘The truth is that stocks are risky no matter how long you hold them. Yes, equities can be expected to produce a superior average return in comparison to safer investments. That's as it should be, because the higher return compensates investors for taking the added risk.’

How to trade defensive and growth stocks

What are your thoughts: have some of the ASX’s top growth and defensive stocks been oversold, or are there more losses still to come? You can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) a2 Milk, using CFDs, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘A2M’ or ‘A2 Milk’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.