Will this year be a recession? As an investor, it's important to be prepared for market downturns and economic recessions. While no investment can guarantee safety, historically some assets and securities have shown to perform better than others during tough times. In this article, we will explore some of the best recession stocks, recession-proof stocks with dividends, and the most resilient overall securities which may potentially hold up during a market crash. Past results can inform what will happen in future market conditions. However, it's important to note that past performance does not in any way guarantee future results. Any investment decision should be made after careful consideration and due diligence. At markets.com it is possible to trade assets without owning them through CFDs.  

Gold and Gold Mining (Example Stock: Sibanye-Stillwater) 

Not a stock per se but with strong historical data, Gold has been a common consideration in the past when finding the best recession stocks to invest in. Gold is typically considered a reliable commodity to hide in during times of economic hardship, especially when inflationary pressure is high. This is because the value of gold tends to have an inverse correlation with the overall health of the market. Historical data shows that during economic crises, such as the 2008 financial crisis, the Great Depression, and the Credit Crisis of 1772, gold prices have experienced significant increases. This trend has been consistently observed throughout history. As you would expect, as a result of this trend stocks related to gold also tend to perform well during economic downturns. 

Considering the likelihood of a recession, it would not be a wild strategy for keen investors to include stocks such as Sibanye Stillwater in a cautious portfolio. Sibanye Stillwater is the third largest gold producer in the world and has a strong track record in comparison to similar instruments. It boasts revenue nearly three times the industry average and is growing twice as fast as its competitors. Additionally, Sibanye Stillwater pays out a dividend yield of 10.21%, which is more than double what is typical for the sector. With profit margins of 19.2% and a buy rating from JP Morgan analysts, Sibanye Stillwater presents a solid option, particularly for investors who anticipate an upcoming recession. However, while Sibanye-Stillwater has weathered previous recessions well there is no guarantee it will continue to do so in future economic downturns.  

Utilities (Example Stock: PG&E) 

Industries that provide essential services, such as water, gas, and utilities, are typically considered to be resistant to economic downturns. During a recession, utility companies may benefit from low interest rates, which allow them to borrow money at lower rates. Additionally, even in difficult economic times, people still require access to basic utilities, such as heat and electricity, to maintain their quality of life. Therefore, these companies are viewed as relatively stable and can maintain more consistent sales than those operating in more cyclical industries. The essential nature of their services means that people are likely to continue using them regardless of economic circumstances. Historical data may indicate that utilities are some of the best stocks to buy during a market crash. However, it is important to consider the fundamentals of each individual company before making and trading decisions.  

PG&E is a stock that we can look at when considering if utility companies are recession proof stocks. The Pacific Gas and Electric Company, one of the largest utility providers in the United States, supplies natural gas and electricity to areas in both northern and southern California. With revenues surpassing $17 billion in 2014, the dividend the company pays out to its shareholders PG&E could be attractive for recession traders. During the 2008 recession, PG&E's stock price experienced a significant decline but still outperformed the Dow Jones by 11%, which experienced a 53% drop during the same period. People need utilities regardless of the market, meaning it can offer some mitigation of more significant losses occurring elsewhere in the market. Other consumer staples to hide in can be grocery retailers like Kroger or food goods manufacturers like PepsiCo for the same reasons.  

Healthcare (Example Stock: Johnson & Johnson) 

An analysis conducted by LinkedIn's Senior Economist, Kory Kantenga, Ph.D., identified that Healthcare sits amongst industries such as Utilities, Government, Education, and Consumer Services that tend to maintain stability and may even experience growth in employment during recessions. Kantenga suggests that these industries contribute to improving the quality of life, which could explain Healthcare's resilience during economic downturns. According to the U.S. Bureau of Labor Statistics (BLS), healthcare occupations are projected to experience significant growth before 2028, surpassing the predicted average growth rate of 14% for all other occupations. 

Johnson & Johnson is a leading healthcare company with a global presence, offering consumer products, pharmaceuticals, and medical devices. Its popular brands include Tylenol, Listerine, and Neutrogena. With over 175 operations worldwide, the company generates $18 billion annually. Its reputation for affordable and quality products makes it theoretically well-suited to thrive during recessions. However, Johnson and Johnson's Q4 2022 earnings and sales numbers were below expectations, resulting in a drop in share prices. A reduction in demand for the J&J vaccine and several negative news stories in January 2023 contributed to the decrease in stock value. The company's Q4 2022 net earnings were $3.5 billion, a 9% YoY decrease, while sales were $23.7 billion, a 4.4% YoY decrease. However, consolidated sales for 2022 were $94.9 billion, up 1.3% compared to 2021. The lower numbers are attributed to reduced vaccine sales, lack of tax credits, and the strength of the US dollar. Despite all of this Johnson & Johnson has held on during past recessions, outperforming the S&P500 significantly in the 2008 recession; only falling by 21% compared to 54% for the S&P500. 

Conclusion 

In conclusion, while some assets and securities have shown to perform better than others during tough times, it is important to remember that no investment can guarantee safety. A stock market crash means that most of the market does experience significant losses by definition, and no stock is definitively recession-proof. It is crucial to not make investment decisions without thorough consideration and due diligence. Gold, utilities, and healthcare have historically shown resilience during economic downturns, but it is important to conduct research based on the most recent data and analytics available to avoid placing faith in fundamentally weak companies that simply operate within a strong sector.