7 Best Investments During a Recession: Insights from Financial Advisors
As concerns about a potential recession rise and Treasury market instability persists, investors are increasingly seeking strategies to safeguard their portfolios. Leading financial advisors outline seven key investments that typically perform well during economic downturns, offering a way to mitigate risk and maintain portfolio stability.
Rising Recession Risks and Market Volatility
The likelihood of a recession is garnering more attention on Wall Street, with Goldman Sachs recently increasing its recession probability estimate to 30%, up by five percentage points. Additionally, BlackRock has cautioned investors against relying solely on long-term U.S. Treasurys for portfolio protection, highlighting the need to consider alternative hedges.
In this environment, panicking or overhauling portfolios based on forecasts is not advisable. Instead, regular portfolio reviews to assess risk exposure are crucial. Below are seven recommended investment options during a recession, according to certified financial planners and seasoned advisors.
1. Gold
Gold remains a classic hedge during stock market downturns. The SPDR Gold Shares ETF (GLD) has demonstrated resilience, returning 10.3% year to date compared to a 0.42% loss for the S&P 500 as of early April 2026. This follows gold’s strong performance in 2025, fueled by central bank purchases at record levels and ongoing geopolitical uncertainty.
Certified financial planner Jon Lapp from Haven Financial Advisors notes that gold typically holds value during recessions because it is not tied to corporate earnings or economic growth. However, he cautions that inflated precious metal prices require investors to proceed carefully.
2. Short-Duration Treasurys
Short-term government debt securities, maturing in one month to two years, provide stability and liquidity without the vulnerability to rising interest rates faced by longer-term bonds. Given they are backed by the U.S. government, they carry minimal credit risk.
Trevor Gunter, CFP and founder of Four Pines Financial, emphasizes that short-duration Treasurys offer a safe harbor during recessions, providing reasonable returns while investors wait for uncertainty to subside.
3. Defensive Sector ETFs
Certain sectors tend to weather economic downturns better than others. ETFs focused on defensive sectors such as utilities, consumer staples, and healthcare are often favored because demand for these essentials remains stable regardless of economic conditions.
Dan O’Rourke, CFP and director at Strathmore Capital Advisors, explains that these sectors usually experience smaller market drawdowns, helping investors avoid emotionally driven decisions during a recession.
4. Cash and Money Market Funds
Cash holdings have regained importance as money market fund yields approach 4%, making cash more attractive for yield and flexibility. Holding cash offers peace of mind during market corrections, serving as a buffer against volatility.
O’Rourke highlights that while cash may not be “king,” it is no longer dead money, proving valuable for portfolio stability and readiness to capitalize on market opportunities.
5. Investment-Grade Corporate Bonds
High-quality bonds continue to be a reliable source of income and a defensive investment in volatile markets. Larry Adam, Chief Investment Officer at Raymond James, remains positive on bonds like Treasurys, investment-grade corporate bonds, and municipal bonds due to yields remaining above historical averages.
Wealth advisor Lucas Fender advises investors to avoid high-yield "junk" bonds during a recession, favoring investment-grade credit quality since risk spreads tend to widen sharply when the economy slows.
6. Income-Producing Real Estate and REITs
Real estate investment trusts (REITs) and income-producing real estate can provide inflation protection and consistent yield. For example, the Vanguard Real Estate Index Fund ETF (VNQ) has returned 6.2% year to date while the Vanguard S&P 500 ETF (VOO) is slightly down by 0.1%.
Jon Lapp points out that elevated home prices and mortgage rates lead many potential homebuyers to continue renting, maintaining strong rental demand even in a softening economy, thereby supporting real estate investments.
7. Dividend Aristocrats™
Companies classified as Dividend Aristocrats™, those that have increased dividends consecutively for 25 years or more, often demonstrate financial stability and resilience during recessions. These companies tend to generate steady cash flow, making their dividend payments more reliable.
Dividend Aristocrat stocks can offer investors both income and some growth potential, contributing to overall portfolio stability during economic downturns.
Summary: Balancing Stability and Yield in Turbulent Times
As market uncertainty mounts, a diversified recession-resistant portfolio can help investors navigate potential downturns. Assets such as gold, short-duration Treasurys, defensive sector ETFs, cash, investment-grade bonds, income-producing real estate, and Dividend Aristocrats provide a blend of safety, income, and inflation protection.
Regular portfolio assessments to ensure appropriate risk levels, coupled with a focus on defensive investments, can position investors to weather recessionary periods more effectively.
For investors interested in exploring these options further, consulting with a certified financial planner can help tailor strategies to individual financial goals and risk tolerance.
This article is part of U.S. News’ Advisor’s Corner, providing expert insights for everyday investors.