How to Invest in a Recession Economy?

The internet is buzzing with the word recession since the U.S. economy hit a snag thanks to rampant inflation.  

As the current recession has refreshed memories of the Great Depression, (1930’s) and the Great Recession (2007-2009) we genuinely hope things don’t get as worse as that. Not to mention the loss of energy supplies, as a result of sanctions against the Russian oligarchy has exacerbated the situation. In addition to all this, a breakdown in the supply chain thanks to lockdowns in China as a consequence of the recurring COVID-19, is a slap in the face of any efforts that might mitigate the effects of the inflation.  

While some analysts and economists debate, the arrival time of the recession others are currently, more concerned with the intensity of the recession. However, as investors and traders try to wrap their heads around the upcoming mayhem, we at GTC help to provide you with an investment solution. So without further ado here are some practical tips on how you can invest in a recession economy. 

Should you continue to invest during a recession?

Before discussing what to invest in, it is prudent to talk through whether investing is a wise decision during such testing times. 

A recession doesn’t simply indicate a vanquishing GDP, it is characterized by a shift in labor market dynamics and more government reliefs. However, data from previous recessions have shown that despite slow growth certain stocks always maintain profit regardless of the scenario. 

Although the majority of investors tend to use the exit strategy as recession approaches, others simply diversify their portfolios with the hope of minimizing losses. How you invest is often more crucial than where you invest. If done right, investing during a recession is a good idea as long as you plan to go long-term. Moreover, investing during a recession is more beneficial for someone who has a strong financial standing, approach, and attitude. 

Recession-proof industries 

The decade began with the slowest economic growth as the entire globe struggled during the unpredictable pandemic. Though a considerable amount of businesses and industries went bankrupt, there still existed stocks that continued to make profits. A study of previous recessions indicates that industries related to consumer products were the least to suffer during a recession. To break it down, the industries that have proved to be recession-proof are, 

  • Consumer products
  • Health care
  • Utility companies
  • Retail stores 

A very good instance of retail stores is Walmart stocks (NYSE:WMT) during the year 2007 recession and the COVID-19 pandemic. As markets crashed, Walmart stocks not only regained losses but were among the highest stocks in 2020, making it a recession-resistant stock. Walmart is a cost-conscious retail store like Costco (NASDAQ:COST), Dollar General (NYSE:DG), and Home Depot (NYSE:HD). These stores will continue to get sales regardless of conditions, as a result, they don’t go out of business. 

Even though past performers do not guarantee that these stocks will perform the same in another downturn, however with a little mindfulness one can easily identify which stocks would perform well. 

Examples of consumer staples stocks worth investing in during a recession include,

  • Proctor and Gamble (NYSE:PG)
  • Unilever (LON: ULVR)
  • Kroger (NYSE:KR)
  • PepsiCo (NASDAQ:PEP)
  • General Mills (NYSE:GIS)
  • Tyson Foods (NYSE:TSN)

Best examples of healthcare stocks that are worth investing in during a recession are,

  • Johnson & Johnson (NYSE:JNJ)
  • Pfizer, Inc. (NYSE:PFE)
  • CVS Health (NYSE:CVS)
  • Walgreens Boots Alliance (NASDAQ:WBA)
  • UnitedHealth Group (NYSE:UNH)

Interest rates in the U.S have never been raised at such a pace leaving consumers’ jaws dropping to the floor. This has led to discouraging consumer sentiment. The best way to ride out a recession is by focusing on defensive stocks. Stocks having steady margins are usually safe bets.  

Insights for Better Trading Habits 

Amid fears of a regression substantial stocks have been losing grip in the market as they slide down the curve. In situations like these analysts advise inventors to stick with stocks that don’t go out of business. As mentioned, stocks from consumer-based companies, healthcare organizations, and utility-providing entities have the tendency to remain afloat, regardless. 

Apart from having the right stocks, having the right aptitude also matters. While building a portfolio during a recession, try the following,

  •  Diversify your portfolio
  • Create a recession resistance portfolio

Final Word

We have all seen the movie The Big Short, the takeaway, be mindful of what is actually happening rather than just being a part of the herd. It is imperative to remain wide-eyed while making money decisions. How you invest is sometimes more important than where you invest. However in case you remain unsure about how to diversify your portfolio or where to invest, GTC provides you with a platform with only the best trading options. Our highly skilled brokers are apt enough to lead you to create a winning strategy. Moreover, our social trading option can link you to your choice of top-scoring trader. 


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