7 Best Investments to Consider During a Recession
As concerns about a potential recession rise, many investors are re-evaluating their portfolios to minimize risk and maintain stability. Wall Street’s sentiment is shifting, with Goldman Sachs recently increasing their recession probability projection to 30%, a five percent jump. Simultaneously, BlackRock has expressed caution regarding long-term U.S. Treasurys, traditionally a safe fixed-income investment, recommending alternative hedging strategies due to potential volatility in sentiment.
For investors aiming to weather economic downturns, certified financial planners and advisors suggest a variety of assets historically resilient during recessions. Below is an overview of seven investment types that often help safeguard portfolios when markets become turbulent.
1. Gold
Gold is widely regarded as a reliable hedge against stock market downturns. In 2026, the SPDR Gold Shares ETF (GLD) reported a year-to-date return of 10.3%, substantially outperforming the S&P 500, which showed a slight loss. Gold’s appeal in recessions stems from its regulatory demand by central banks and growing geopolitical uncertainty, factors that drive its price upwards independently of corporate earnings or economic growth. However, some caution is advised, as gold prices have reached elevated levels, which may impact future returns.
2. Short-Duration Treasurys
Short-duration U.S. Treasurys — bonds maturing between one month and two years — provide safety and liquidity with minimal exposure to interest rate fluctuations compared to longer-term bonds. These government-backed securities carry almost zero credit risk and can offer reasonable returns during economic uncertainty. Financial advisor Trevor Gunter notes that while not exciting, these instruments are valuable during recessions for stability, acting as a secure parking place for capital.
3. Defensive Sector ETFs
Certain sectors are less sensitive to economic cycles, making them attractive during downturns. Defensive sectors such as utilities, consumer staples, and healthcare consistently provide demand regardless of economic conditions — people need essential goods, medical care, and utilities no matter what. ETFs focused on these sectors allow investors to gain diversified exposure, helping reduce losses compared to broader market segments.
4. Cash and Money Market Funds
Holding cash is often underestimated during recessions. With money market fund yields and online bank savings rates now approaching 4%, cash has regained its role as a flexible, interest-earning asset. This provides investors peace of mind and quick access to funds without market risk, offering a safe haven until more stable investment opportunities arise.
5. Investment-Grade Corporate Bonds
High-quality, investment-grade corporate bonds remain a favored income source, especially when Treasury yields have risen. Such bonds offer reliable returns and are less risky compared to high-yield or “junk” bonds, which tend to widen credit spreads sharply during economic slowdowns. Choosing bonds with strong credit ratings can help maintain income streams without significantly increasing risk exposure.
6. Income-Producing Real Estate and REITs
Real estate investment trusts (REITs) have outperformed broader stock indexes this year, offering both price appreciation and a strong income yield. For example, the Vanguard Real Estate Index Fund ETF (VNQ) delivered a 6.2% return year-to-date alongside a 3.6% yield, versus the S&P 500’s marginal drop and 1.2% yield. Real estate tends to benefit from sustained rental demand, especially when home prices and mortgage rates discourage potential homebuyers, keeping occupancy rates and rents stable even during economic slowdowns.
7. Dividend Aristocrats™
While not detailed fully here, Dividend Aristocrats™, companies known for consistently increasing dividends for at least 25 consecutive years, historically offer more resilience during downturns by providing reliable income and stable business models.
Key Takeaways for Investors
- Defensive assets like gold and real estate have recently outperformed stocks amid increasing recession fears.
- Short-duration government debt remains a low-risk, liquid option.
- Sectors such as consumer staples, utilities, and healthcare hold up better during downturns.
- Holding cash and money market funds is attractive again due to competitive yields.
- Choosing investment-grade bonds over high-yield options reduces default risk during recessions.
- Income-generating real estate benefits from ongoing rental demand when homeownership declines.
Investors should regularly review their portfolios to ensure an appropriate balance of risk and diversification, considering these recession-resilient investments as part of a sound financial strategy. While no asset is completely recession-proof, combining these approaches may help preserve capital and generate steady income through economic uncertainty.
This article is informed by insights from certified financial planners and market experts as of April 2026. Individual investment decisions should consider personal goals, risk tolerance, and consult with a financial advisor.