These Sectors Could Save You in a Recession

It’s looking more and more like the Federal Reserve is going to keep stomping on the economic brake pedal that is higher interest rates.

The higher those rates go and the longer they stay there, the greater the chance that the U.S. economy is pushed into a recession.

It’ll also determine whether that recession will be a shallow one like we saw in 2020 or a deep one like the great financial crisis of 2008.

But whether it’s a short, shallow one or an extended and deep drop, there are investments you can make to not only protect your profits, but also grow your wealth.

Recessions Aren’t Always Bad

As I’m sure you already know, during an economic recession, many industries and companies tend to experience a decline in their financial performance.

It’s pretty common knowledge and part of the reason investors tend to fear a recession.

However, there are some types of stocks that tend to perform relatively well during such periods.

These include:

• Defensive Stocks — These are companies that provide essential products or services that people need regardless of the economic conditions.
  
  
• Discount Retailers — During a recession, consumers tend to look for bargains and discounts, which can benefit companies that offer low-priced products.
  
  
• Financial Companies — While some financial companies may struggle during a recession, others can perform well. For example, companies that specialize in asset management or have strong balance sheets may be able to weather the storm better than others.
  
  
• Technology Stocks — Companies that offer innovative technology solutions can also perform well during a recession. For example, companies that offer software and services that help businesses become more efficient may see increased demand.

And I want to share some companies that I’m convinced will weather the approaching economic storm well.

But before we get to that, it’s worth noting that there is no surefire way to predict how any individual stock or industry will perform during a recession.

Also, before we get to my top picks for resisting a recession, I want to give some specific examples from the last really big one we saw…

Putting the "Great" Into Great Recession

Despite the incredibly tough economic times thrust upon the country and eventually the entire world during the Great Recession of 2008, many companies actually performed incredibly well for investors.

And they came from several different sectors and industries…

Companies that provided consumer staples (stuff that people need), like Procter & Gamble (PG), outperformed the market during the depths of the crash and also recovered faster once markets found support:

Companies that helped people whose budgets just got very tight practically overnight also outperformed the market on the way down and on the way back up.

Walmart (WMT) and McDonald’s (MCD) are two great examples of that trend…

Walmart is a discount retailer. McDonald’s falls into the defensive stock category because it allows people to still “eat out” while conserving limited capital.

Both stocks suffered less than the broader indexes as markets tanked. And both experienced significant increases in the years that followed:

Another company whose stock held up well in the 2008 market crash and ensuing recession was Nancy Pelosi’s favorite credit card company, Visa.

That stock outperformed on both the way down and the way back up as consumers leaned harder on credit to support their lifestyles after their cash savings ran out.

And while tech stocks got crushed last year as interest rates soared, there are even some tech companies that will perform well in a recessionary environment.

A great example is Amazon. Back in 2008, it was still a relatively young company in a relatively new industry: e-commerce.

During the recession, the company benefited from consumers turning to online shopping, and its stock held up relatively well.

Talk about market-beating returns, huh?

Coming Soon to a Portfolio Near You

Now that I’ve used up a ton of space explaining who does well during recessions, why they do well during recessions, and which companies have actually done well during recessions…

I’m going to leave you to ponder that for the weekend.

But come Monday (great Jimmy Buffett song, by the way), I’ll be back with my top stocks for investors to buy to resist the recession likely coming our way.

So make sure you keep your eyes out for my next article. You won’t want to miss a word.

In fact, you might not be able to afford to miss one.

To your wealth,

Jason Williams

@TheReal_JayDubs

Angel Research on Youtube

After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter; the founder of Future Giants, a nano cap investing service; the editor of Alpha Profit Machine, an algorithmic trading service designed specifically for retail investors; and authors The Wealth Advisory income stock newsletter. He is also the managing editor of Wealth Daily. To learn more about Jason, click here.