SIE Exam Question 552: Answer and Explanation

Question: 552

An investor who believes that an economic recession is imminent should purchase which of the following type of stocks?

• A. Defensive stocks because they tend to underperform during economic downturns.
• B. Defensive stocks because they tend to outperform during economic downturns.
• C. Cyclical stocks because they tend to outperform during economic downturns.
• D. Cyclical stocks because they tend to underperform during economic downturns.

Correct Answer: B

Explanation:

An investor who believes that an economic recession is imminent should purchase defensive stocks because they tend to outperform during economic downturns.