7 Best Investments During a Recession: Insights from Financial Advisors
As fears of a recession rise and concerns about Treasury market instability grow, investors are increasingly urged to reassess their portfolios to mitigate risk. According to financial experts, including certified financial planners (CFPs), there are specific asset classes that tend to perform better or provide more stability during economic downturns.
Why Review Investment Portfolios Now?
Recent analyses from leading firms like Goldman Sachs and BlackRock highlight a shifting economic landscape. Goldman Sachs recently raised the probability of a recession in the near term to 30%, reflecting growing market uncertainty. Meanwhile, BlackRock cautions investors about relying heavily on long-term U.S. Treasurys, which have traditionally been a safe fixed-income option. Their team recommends exploring alternative “plan B” portfolio strategies to hedge against potential volatility and shifts in market sentiment.
Top 7 Investments to Consider in a Recession
Based on expert advice and market trends, here are seven investment options that may help investors manage risk and preserve capital during challenging economic periods:
1. Gold
Gold remains a favored safe haven due to its historical ability to hold value when stock markets decline. The SPDR Gold Shares ETF (GLD), for example, has enjoyed a 10.3% gain year-to-date compared to a slight loss in the S&P 500 as of April 10. Factors bolstering gold prices include record purchases by central banks and ongoing geopolitical uncertainty. As a non-earning asset, gold is not tied directly to economic growth, which helps it maintain value during recessions. However, experts advise caution as precious metals currently trade at elevated prices.
2. Short-Duration Treasurys
Short-term U.S. government debt instruments—those maturing within one month to two years—are prized for their stability and liquidity. Because their maturities are brief, these Treasurys face less sensitivity to interest rate fluctuations, reducing duration risk. Moreover, backed by the full faith and credit of the U.S. government, they carry virtually no credit risk. Financial planners highlight the role of short-duration Treasurys as a conservative liquid asset to weather uncertain markets.
3. Defensive Sector ETFs
Sectors such as utilities, consumer staples, and health care typically hold up better than others when the economy slows, as demand for their goods and services remains relatively consistent. Investing through exchange-traded funds (ETFs) offers diversification within these stable sectors. These so-called “defensive sectors” experience smaller price declines during downturns, helping investors maintain exposure to the market and avoid hasty decisions driven by volatility.
4. Cash and Money Market Funds
With recent increases in money market yields nearing 4%, holding cash or cash equivalents is becoming an attractive strategy once again. Cash offers safety, liquidity, and flexibility, providing investors with peace of mind during market turbulence. While “cash is not king,” it is increasingly recognized as a viable component of a balanced portfolio, earning competitive returns without market risk.
5. Investment-Grade Corporate Bonds
High-quality bonds—those rated investment grade—deliver steady income and can serve as a solid anchor in uncertain markets. Experts recommend focusing on these bonds rather than venturing into high-yield or “junk” territory, where credit risk rises significantly during recessions. Historically, the spread between investment-grade and lower-quality bonds widens in economic downturns, underscoring the importance of credit quality.
6. Income-Producing Real Estate and REITs
Real estate investment trusts (REITs) and income-producing real estate holdings are notable for generating steady cash flow and providing some protection against inflation. For instance, the Vanguard Real Estate Index Fund ETF (VNQ) has outperformed the S&P 500 year-to-date, returning 6.2% compared to the S&P 500’s slight loss. Elevated mortgage rates and high home prices are leading many potential buyers to remain renters, keeping rental demand robust even amid broader economic weakness.
7. Dividend Aristocrats™
Companies dubbed “Dividend Aristocrats” are those that have consistently increased their dividends for 25 consecutive years or more. These firms tend to be large, financially stable, and less sensitive to cyclical downturns. Investing in Dividend Aristocrats can provide a reliable income stream and potential for capital appreciation during recessions.
Conclusion: Balancing Risk and Opportunity
While panicking and drastically shifting investment strategies based on recession predictions is not advised, regularly reviewing portfolio risk exposure remains a prudent practice. Diversifying across these defensive assets can help investors weather economic uncertainty while positioning themselves for recovery.
Investors should consider their individual risk tolerance, investment horizon, and financial goals before making changes and, whenever possible, consult with a certified financial planner to tailor strategies appropriately.
Key Takeaways:
- Gold and real estate have outpaced stocks amid current market fears and geopolitical tensions.
- Short-duration Treasurys and high-quality corporate bonds provide stability with low credit risk.
- Defensive sectors like consumer staples, healthcare, and utilities offer resilience through reduced volatility.
- Cash and money market funds are gaining yield appeal and provide flexibility.
- Dividend Aristocrats offer income and relative safety during downturns.
- Real estate benefits from sustained rental demand due to high mortgage rates and home prices.
By considering these options, investors can build a more recession-resilient portfolio aligned with their financial objectives.
Article by Kate Stalter, CFP. Reviewed by Rachel McVearry. Published April 13, 2026.