If There Is A 2023 Recession Coming, Where Should I Invest?

Key Takeaways

• A recession doesn’t impact every sector or company equally, and some industries won’t see wild swings in demand, even in a recession.
• Market volatility is expected during a recession, but you can still protect yourself by investing in companies that are prepared for a downturn. See recommendations below by industry.

As talk of a recession hangs over the economy, many people are worried about the possibility of finding themselves out of work. During a recession, the unemployment rates tend to increase as companies have to cut back on staff due to decreased consumer spending. When a company makes less money, its shares also tend to go down. This leaves employees and investors wondering if there are any recession-resistant industries out there.

Many experts believe that a recession is a possibility for 2023, but they can’t seem to agree on when it will hit. The National Bureau of Economic Research makes the call when we’re officially in a recession, which has always been defined as a decline in GDP for two consecutive quarters. Unfortunately, GDP is a lagging indicator, so the effects of an official recession are felt long before the announcement of one.

Investors are increasingly concerned about where to hold assets during an economic downturn because many industries don’t fare well when times are tough. This is why we’re going to look at industries that are traditionally considered recession-proof so that you can assess how to adjust your portfolio before we’re officially in a recession.

What Are Recession Proof Industries?

We recently looked at seeking out defensive stocks during a recession to mitigate investing risks. These companies tend to have consistent cash flow with limited volatility and a history of strong business performance regardless of market conditions. During the last few years, we saw how some businesses could thrive even during complete global uncertainty. There are industries that don’t get impacted as severely by a recession. We’re going to highlight these industries in this section and even share a few companies that you may want to invest in based on their financial performance and scale.

Which industries are believed to be recession-proof?

Healthcare

Healthcare will always be a priority because we can’t ignore the realities of falling ill, and we’ll always have to take care of ourselves and our loved ones. You’re still going to see your doctor and purchase basic medications in a recession. Healthcare ranges from medical services to essential over-the-counter products you pick up at your local pharmacy.

Some stocks to consider in healthcare are:

1. CVS Health (CVS) | Even during an economic downturn, people will need to visit the local pharmacy to refill prescriptions and purchase medication.
2. Pfizer (PFE) | As evidenced during the pandemic, this company makes pharmaceutical drugs and vaccines that cover various health issues.
3. UnitedHealth Group (UNH) | They offer information and technology-enabled health services, healthcare coverage, and benefits services.
4. Johnson & Johnson (JNJ) | They make essential products (ranging from bandages to headache relief) that we’ll always need.

Basic consumer goods

Certain products have fairly inelastic demand due to their necessity for survival. Basic consumer goods will always be needed since our needs won’t suddenly vanish during a recession. For example, you’ll still have to shave and take care of basic personal hygiene no matter what happens in the economy.

A recession will just shift consumer spending habits. You may have less discretionary money to put towards going out for dinner, but you won’t stop eating in general. So instead of going out for dinner, families may find themselves cooking at home more often or looking for deals in the grocery store.

What are companies in this sector worth investing in?

• General Mills (GIS) | This maker of packaged food products will continue to make sales during a recession because people will have to eat.
• PepsiCo (PEP) | Grocery stores are filled with popular Pepsi products that will remain in demand.
• Procter & Gamble (PG) | They sell well-known household and personal products consumers will still need (ranging from Pampers to Gillette).

Utilities

Regardless of how the economy performs, we’re going to need utilities. We must continue paying for electricity, gas, water, and waste services. You’ll keep the heat on and have the lights on regardless of how rough the economy is.

What are utility companies to invest in?

• Waste Management (WM). They specialize in waste collection and recycling, both of which won’t disappear during a recession.
• Brookfield Infrastructure (BIPC). They own utilities, power lines, pipelines, and cell towers. They have government-regulated services that won’t be going away.

Discount retailers

Everyone loves a good deal, especially during a recession. This is why companies that offer cost-conscious retail perform better during tough economic times. As people continue to spend money on basic necessities, discount retailers will likely see sales increase as more shoppers find themselves on a tighter budget.

What are some companies worth investing in?

• Walmart (WMT) | A company that touts everyday low prices will likely stay busy during a recession.
• Costco (COST) | Customers traditionally flock to Costco to make purchases in bulk to save money.

Alcohol

Alcohol consumption may get more expensive, but the demand usually doesn’t go down during a recession. People may opt out of the top shelf, but they’re still going to consume alcohol.

Beer producers like AB InBev are worth paying attention to as the economy continues to suffer. As evidenced during the pandemic, people may consume more alcohol when they’re out of work or bored at home.

Maintenance and repair services

This general category covers a lot of ground, but anything to do with maintenance or repair services will still do well during a recession. This includes anything from an HVAC company to an auto shop. You’re still going to need an oil change done on your car, and you’re going to have to take action if the heating or cooling in your home needs maintenance. Even when consumers are looking to save money, they still have to rely on repair services to complete tasks that they couldn’t do on their own.

Accounting/Payroll services

You still have to file taxes and pay your employees during a recession. Any kind of accounting or payroll service will continue to bring in money since people will still have to manage their finances.

Transportation services

Transportation services will still be needed on two fronts: moving people aroundtheir daily lives, and transporting consumer goods. While people may have less money for luxury travel, they’ll still have to get to work. This means that anything involving trucking or moving passengers should stay fairly stable.

Since we looked at recession-resistance industries, consider also the possibility of making a career switch.

Should You Switch to a Recession-Proof Career?

One of the worst aspects of a recession is seeing hard working folks lose good jobs through no fault of their own. While this article is designed to help you find industries worth investing in, it’s also important to consider the effects of a recession on your employment prospects.

A recent study conducted by Insight Global found that 78% of workers were worried about losing their jobs due to the possibility of a recession. Hopefully, these fears of job loss don’t turn into a reality, but it’s important to be prepared. If you’ve been thinking of making a career change, this could be the sign that you finally need to take action.

Should You Only Invest in Recession Proof Industries?

During a recession, it’s no secret that stocks take a tumble as investors panic and the markets are filled with volatility. Does this mean that you should invest in companies that are believed to be recession-proof or should you continue putting your money into companies that you believe in?

While we took the time to highlight recession-proof industries in this article, we can’t deny that they won’t always guarantee success, as there’s no telling how the stock market will react to the recession overall.

The truth is that you can never be fully insulated from the effects of a recession. During a stock market sell-off, even the best-performing companies are impacted by investor panic. All you can do is focus on investing in companies with strong financial fundamentals while keeping your eye on the long-term. We should expect plenty of market volatility during a recession because investors may want to liquidate their assets.

Bottom line

Investing in the stock market will always come with some level of risk. There are no guarantees when attempting to make a return on your money. The goal is to become knowledgeable about different market conditions, to identify recession-proof industries and continue to invest in companies you believe in.

For a simpler approach, you can review Q.ai’s Inflation Kit and protect your investments from dropping in value. Better still, you can activate Portfolio Protection at any time to protect your gains and reduce your losses, no matter what industry you invest in.

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