During which phase of the business cycle would a financial advisor most likely recommend increasing exposure to defensive sectors like utilities and consumer staples, while potentially reducing exposure to cyclical sectors?

Question: During which phase of the business cycle would a financial advisor most likely recommend increasing exposure to defensive sectors like utilities and consumer staples, while potentially reducing exposure to cyclical sectors?

Answer options:

• Expansion ✅ Peak
• Trough
• Recovery

Correct answer: Peak

Explanation: At the peak of the business cycle, economic growth is expected to slow or decline, making defensive sectors more attractive due to their stable earnings, while cyclical sectors are more vulnerable to downturns.