Best Recession proof Investments
By august 2023 we’ll be in the middle of a recession. It’s already here. You’re just not feeling it, yet 72 economists expect a u.s recession by the middle of next year with us elections coming up in November. The government is trying hard to make things seem like business as usual while everyone with half a brain is already feeling the pain and anxiety.
We had a pandemic, a war, the highest inflation rates in recent history, the fall of china’s biggest real estate developer, and supply chain issues all around. The bill is due. Your mortgage or grocery basket has almost doubled in the past two years, while your salary barely saw a 5-bump watch until the end of this post. For your opportunity to get ready, here are 10 recession-proof investments.
1. Consumer Staples
No matter what the economic climate is, there are some things that people will keep on buying. When we say consumer staples, think of Procter gamble Colgate Palmolive, PepsiCo, nestle l’oreal Unilever and anything else you use daily. Look at what you purchase out of necessity, not because you want to. No matter how bad the economy gets, you’re still going to buy toilet paper. Find the companies that make those kinds of products and buy some stocks. Here’s a snapshot of the consumer staples versus the s p 500 in terms of returns after the 2008 crash.
Suppose there’s one thing this generation has taught us. In that case, you can go without food for a few days and call it extended fasting but don’t you touch my internet telecom is growing at almost 10 year-over-year. We’re more dependent on it than ever. When the recession hits, many people in traditional roles will be left out of a job and try to shift to other job prospects. Working from home is becoming the norm. In a recession, companies will be downsizing, cutting down on the number of offices they maintain because rents will be too expensive, so even more people will work from home. As a result, the telecom sector will continue to grow.
3. Cheap Fast Food
Fast food consumption is reversely correlated with the economy. When people have more money, they try to eat at fancier restaurants. When the disposable income drops, it’s back to dining with the clown and the king. McDonald’s, burger king, subway, KFC, Domino’s, taco bell etc., will all do well in the recession. Do you know what you won’t do well? The fast food joins selling 15 burgers delivery services will also be affected.
People will still order in at a much lower rate because post mates and the likes have gotten really expensive, so it’ll make more sense for people to go to a drive-through on their way home than sit on the couch and order in. Plus, these businesses have solid fundamentals. Here’s a list of 20 fast food franchises in the U S ranked by annual revenue.
4. Grocery Stores
Especially price-conscious stores historically do really well Walmart Costco, Kroger aldi sam’s club, little dollar store etc. now here’s where Walmart and Costco’s performance compared to three popular consumer staples chains like whole foods usually get hurt the most as consumers become more price conscious.
5. Self-Education or Mastery
As a great rule in life, nobody can take away anything that you’ve already learned, which is why investing in yourself is definitely recession-proof the more financially educated you are, the less of an impact a recession has on both your financials and your mental health this investment is split into two because you can either one acquire a new skill that will allow you to access new opportunities that you didn’t have access to before or two masters a current skill.
So that, because of your ability, you are more in demand than ever. This recession is quite different from previous ones because, for the first time, remote work has been embraced to this extent. Many individuals will behave as consultants or freelancers outside your current job concerning other projects.
6. Gold and Precious Metals
Gold is a hedge against inflation and economic downturns. It’s actually the favourite hedge of the unsophisticated investor silver is a close second, and you’ll see more old money voices talking about diversifying into metals in the next few months.
For countries to get out of recessions, governments need to stimulate the economy. Their favourite way of doing that is by throwing money at it, which increases the financial supply, and since gold is a fairly scarce asset, its value goes up. The problem with printing more money is they’ve been doing it already for the past few years, which leads to record numbers of inflation. If you’re young, maybe look at some bitcoin as an alternative play as we see it as gold 2.0.
7. Technology Stocks
Tech stocks have taken a beating this year, with many worrying that tech companies are becoming too big but looking toward the future, will google still be around in 10 years? Probably will amazon keep thriving even in a recession? Probably look at the tech companies you use every day because if you use them, it means others are doing so.
It used to be that tech came second to retail, but we believe we’ve crossed the point where tech is the main play in terms of massive returns. Every recession will be a great opportunity for new companies to be born. The 2008 crisis gave us Airbnb, uber Venmo, WhatsApp, Groupon slack, and more, so keep your eyes open.
8. Pharmaceutical Stocks
Recessions are a thriving ground for pharma companies, especially with the bump that they’ve had during the pandemic, you could go straight pharma and invest in the likes of Pfizer, or you could go the retail route with Walgreens CVs or rite aid, the entire pharma sector is up for disruption mark Cuban’s cost plus has caught our eye it’s an online pharmacy that sells generic versions of popular drugs at a fraction of the cost. Like him, there will be others.
9. Utility Stocks
No matter how bad things get, you must turn your lights on. There’s an entire investing strategy to holding utility stocks in your portfolio. One of the best-performing stocks in our portfolio is NextEra energy, one of the largest electricity suppliers in Florida. Over the last five years, it’s returned 21 per year; over the past 10 years, the annualized return sits at 19.2 per cent. Basically, you want to look at energy producers, energy distributors, energy service operators natural gas suppliers, and water and sewer utilities; raw prices might fluctuate, but the demand is only growing.
10. Blue Chip Art
This might surprise most of you, but art, especially good art, is one of the best ways to protect yourself during recessions. Blue chip art is scarce and has demand from people who aren’t affected by recessions. It’s the other way around, as rich people get even richer during recessions.
The art market has consistently outperformed the s p 500 real estate or gold for the past 25 years. Not only that, art is a good performer even in inflationary periods now, you might be thinking, but hey, what do I know about fine art or how am I supposed to afford a Picasso or a war hall? Well, that’s where our friends at masterworks come in masterwork is a platform that allows everyone to invest in high-end art; instead of buying the painting on your own, they break the ownership of a piece into shares the same way a company does with stocks.
You can buy shares in it, and you can sell or buy these shares at any time. Fractional ownership is one of the biggest trends that we are seeing. The way masterworks have executed it in the art space is really inspiring especially considering there’s no minimum investment amount. The platform has also allowed us to learn about the trends in the art space and see just how profitable the art market can be now we mentioned masterworks in the past.
11. Life Insurance
Even more importantly, life insurance is one of the booming plays of a recession. You might not realize this, but rich people use life insurance differently than expected because life insurance is a vehicle to build wealth. It’s like a tax-free personal bank. Basically, instead of putting their money in the bank, they put it in life insurance policies and then borrow against it tax-free the entire mechanism of using life insurance as a bank is fascinating to us, and it certainly needs its own video in the future stress, and financial hardships are common in recessions insurance companies do really well so they might fit your portfolio nicely.
12. Hedge Funds
For those in our community who are already well off, ask your financial advisor for a list of local hedge funds that did well in the past two recessions and start making some meetings. These entities are looking for any opportunity to make as much money as possible in the shortest time frame. Hedge funds get their names because they’re betting strategically against the market. Some of you have seen the movie the big short well, several hedge funds foresaw the fall of the housing market and made sure to capitalize on it. Michael bury, carl lichen, John Paulson and Ray Dalio are just a few of the hedge fund managers who we’ve learned plenty from.
13. Evergreen Businesses
We love businesses with strong fundamentals that offer a great product to a recurring audience evergreen businesses are businesses that have been around forever and will still be around 20, 40, or 60 years from now. Home depot will probably survive a one to three-year recession. Think about your kids. Although you might need to tighten the belt in a recession, you’d still have your child go to daycare or school. If one of your grandparents passes away, you would still use the services of a funeral home. Some businesses will never go away because the demand for them is continuous.
What investment does well during a recession?
Dividends are particularly important during a recession because they provide a cushion, even if stock prices fall. With their reliable and high-paying stocks, Merck and AbbVie are a good alternative to bonds, which many investors flee from in difficult times. Merck’s yield is higher than that of a 10-year Treasury.
What is the safest stock during a recession?
There are not enough stocks that can withstand a recession. Certain sectors such as utilities, consumer staples and health care have done well in recessions than the general market. Advisors also recommend value stocks and commercial property as potential investments in downturns.
Will there be a recession in 2022?
Frank Steemers (senior economist at The Conference Board) stated that while economic output fell for two consecutive quarters during the first half of 2022, strong labour markets mean that we are not likely to be in recession.
Who makes money during a recession?
Food, basic transportation, healthcare, and consumer staples are all industries that can thrive in recessions. They could also be considered essential during a crisis like the COVID-19 pandemic.
Is a recession coming in 2023?
The U.S. will likely enter a recession in the first quarter of 2023, then shrink by 0.4% for the entire year. This is because of the combination of high inflation with tightening monetary policies that bedevils businesses and consumers, Fannie Mae economists stated.
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