Top 5 Stocks in a Recession

Of course, nothing in life is certain—especially not the stock market. We’ll always recommend that you tread extra carefully in extra uncertain times. But here’s a list of the industries who have historically proven themselves to be recession-proof, or at least highly recession resistant.

1. Utilities

Allow us to state the obvious: recession or not, we all rely on utilities on a daily basis. While spending on “extras” tends to decrease when people feel a squeeze on their discretionary income, utilities like water and electricity are usually the last thing to cut from a budget (and something nobody cuts by choice).

As a defensive stock, i.e., a stock that remains relatively stable regardless of the economy’s performance, utilities have historically been a safe bet. This neutral nature does also mean that you shouldn’t expect to see massive income gains from a utility stock, but if slow and steady is what you’re looking for, don’t forget to look at stocks in things like gas, electricity, and water companies.

2. Consumer Staples

You don’t need to be a marketing maven to know that certain items are more recession-proof than others. No matter what the economy is like, people are still going to be buying core food items like grains, dairy, and produce. Don’t forget that this also includes non-edible items like toothpaste, deodorant, and haircare products. And, because everyone has different definitions of which items are “essential”, you could even include beauty products like makeup and self-care items like bubble bath in this.

To determine whether or not a stock is a consumer staple, look to the some of the most commonly used household items in your house and think about where these items are sold. Keep in mind that many of these items belong to a parent company.

If the items are mostly sold at a grocery store or pharmacy, then chances are that they’re essential and can weather a recession (or a pandemic, or everyone’s favourite “double whammy” of a pandemic and a recession).

3. Healthcare

Speaking of pandemics, if there is anything that these past few years have showed us it’s the importance of healthcare-related products and services. Healthcare industries—even the ones in their infancy—are likely to show resiliency during a recession. No matter what the economy

Canada doesn’t have the same level of privitization in its healthcare services as our southern neighbours, but there are still some healthcare-related options if you’re looking for recession-proof stocks in Canada (though you do also have the option of buying US stocks). Try looking for pharmaceuticals or healthcare technology companies, though you might want to avoid trendy healthcare start-ups.

4. Low-Priced Retailers

Hard times are low-priced retailers shine. While many of us would happily spend a few extra dollars to shop at a store with a better atmosphere, variety, or customer service standards, all of these superficial preferences go right out the window when we’re paying close attention to where our dollars go.

It’s this logic that makes financial experts count discount retailers among their list of recession-proof stocks. To determine whether or not a retailer is considered “discount”, think of establishments that offer a “no frills” shopping experience and where the average ticketed item is a few dollars less than competitors.

5. Freight and Transportation

We wouldn’t have any of these recession-proof industries if it weren’t for freight and transport. And even with a (very) messy supply chain, many speculate that the freight, transportation, and logistics world is a safer bet than others, if not a recession-proof stock.

This is a suggestion with a catch: make sure you do your research before you pull the trigger on a transportation stock. It’s been a rough couple of years for the industry and you don’t want to invest your money in a company that might become insolant in a few years.

We can’t predict the future, and if there was anyone left who thought they could, the past few years have definitely proven them wrong. But that doesn’t mean that we can’t rely on cues from our economic past to dictate the moves we make to protect our future. Before you make your next big move on the stock market, ask yourself if your company of choice is essential to the operating of society. If the answer is yes, then there’s a good chance that it’s recession-proof.