What are the best stocks to own during a recession?
Investors seeking stability in a recession often turn to investment-grade bonds. These are debt securities issued by financially strong corporations or government entities. They offer regular interest payments and a smaller risk of default, relative to bonds with lower ratings.
Stock | Implied upside from Feb. 21 close |
---|---|
Walmart Inc. (ticker: WMT) | 4.8% |
Abbott Laboratories (ABT) | 6.9% |
Synopsys Inc. (SNPS) | 6.3% |
Accenture PLC (ACN) | 3.6% |
Investors seeking stability in a recession often turn to investment-grade bonds. These are debt securities issued by financially strong corporations or government entities. They offer regular interest payments and a smaller risk of default, relative to bonds with lower ratings.
On the negative side, energy and infrastructure stocks have been the hardest-hit in recent recessions. Companies in these sectors are acutely sensitive to swings in demand. Financials stocks also can suffer during recessions because of a rising default rate and shrinking net interest margins.
Healthy large cap stocks also tend to hold up relatively well during downturns. Investing in broad funds can help reduce recession risk through diversification. Bonds and dividend stocks can provide income to cushion investors against downturns.
Most stocks and high-yield bonds tend to lose value in a recession, while lower-risk assets—such as gold and U.S. Treasuries—tend to appreciate.
The easiest way to get rich during a recession is to invest as much money into the stock market as you can. When there's a recession, stock market performance declines. Consumers spend less and companies earn less, causing investors to worry.
- Cash Is King During a Recession. ...
- Own Defensive Stocks in a Recession. ...
- Use Dollar-Cost Averaging. ...
- Buy Quality Assets During a Recession. ...
- Avoid Growth Stocks During a Recession. ...
- Invest in Dividend Stocks. ...
- Consider Actively Managed Funds. ...
- Bonds and Uncorrelated Assets.
When things are looking bleak, consider holding on to your investments. Selling during market lows can be one of the worst things you can do for your portfolio — it locks in losses.
Cash. Cash is an important asset when it comes to a recession. After all, if you do end up in a situation where you need to pull from your assets, it helps to have a dedicated emergency fund to fall back on, especially if you experience a layoff.
What stocks did well during 2008 recession?
Luckily, there are some stocks that are more resilient to the negative effects of a downturn. Three stocks that outperformed the S&P 500 during the 2007-09 Great Recession were Gilead Sciences (GILD 1.02%), McDonald's (MCD 0.55%), and Walmart (WMT 1.25%).
Where to put money during a recession. Putting money in savings accounts, money market accounts, and CDs keeps your money safe in an FDIC-insured bank account (or NCUA-insured credit union account). Alternatively, invest in the stock market with a broker.
![What are the best stocks to own during a recession? (2024)](https://i.ytimg.com/vi/P8upKEsCyU4/hq720.jpg?sqp=-oaymwEcCNAFEJQDSFXyq4qpAw4IARUAAIhCGAFwAcABBg==&rs=AOn4CLCcZSLwJCtCOhcrb6wYEZi_WeAgIg)
The phrase means that having liquid funds available can be vital because of the flexibility it provides during a crisis. While cash investments -- such as a money market fund, savings account, or bank CD -- don't often yield much, having cash on hand can be invaluable in times of financial uncertainty.
A recession can create opportunities for certain types of businesses, primarily those that offer essential products or services that people cannot do without. These businesses tend to perform well during economic downturns because they cater to basic human needs.
Although the government has stepped in to contain the damage caused by the bank failures and ensure account holders can access their funds, inflation and interest rates remain high, so the threat of a recession persists. Generally, money kept in a bank account is safe—even during a recession.
Defensive stocks, like shares of healthcare or utilities companies, are often cited as recession-proof investments.
Toothpaste, deodorant, shampoo, toilet paper, and other grooming and personal care items are always in demand. Offering these types of items can position your business as a vital resource for consumers during tough times. People want to look good, even when times are tough.
- Invest in stocks. Every investor wants to buy low and sell high. A stock market downturn during a recession might be an opportune time for bargain hunters. ...
- Invest in real estate. Real estate offers another potentially lucrative opportunity during a recession.
What are some examples of businesses that thrive in recession? Due to the elasticity of demand, recession-proof industries are usually in essential services, like health care, senior services, grocery stores, and maintenance, such as plumbing and electrical.
GOBankingRates consulted quite a few finance experts and asked them this question and they all said basically the same thing: You need three to six months' worth of living expenses in an easily accessible savings account. The exact amount of cash needed depends on one's income tier and cost of living.
Can banks seize your money if economy fails?
Banking regulation has changed over the last 100 years to provide more protection to consumers. You can keep money in a bank account during a recession and it will be safe through FDIC insurance. Up to $250,000 is secure in individual bank accounts and $500,000 is safe in joint bank accounts.
“In any economy, consumers should pay off their debt as quickly as possible,” says Kayse Kress, financial planner at Physician Wealth Services. “Take a hard look at your finances and make some adjustments. Analyze your fixed expenses first, and then decide what you can downsize or eliminate.”
In general, a recession lasts anywhere from six to 18 months. For example, the Great Recession that started in December 2007 lasted 18 months. But the recession prompted by the pandemic in 2020 only lasted two months. When a recession is on the horizon, it's impossible to know how long it will last.
- You've found something better. ...
- You made a mistake. ...
- The company's business outlook has changed. ...
- Tax reasons. ...
- Rebalancing your portfolio. ...
- Valuation no longer reflects business reality. ...
- You need the money.
While holding or moving to cash might feel good mentally and help avoid short-term stock market volatility, it is unlikely to be wise over the long term. Once you cash out a stock that's dropped in price, you move from a paper loss to an actual loss.
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