7 Best Investments During a Recession: Financial Advisors Weigh In
As recession fears rise and the stability of traditional safe-haven assets like U.S. Treasurys come into question, investors are searching for strategies to reduce risk and preserve capital. According to financial experts, the key during economic downturns is to adopt a balanced approach focusing on assets that tend to hold value or provide steady income even in turbulent markets.
Certified financial planner Kate Stalter, CFP, highlights seven investments that historically perform well or offer protection during recessions. Reviewed by Rachel McVearry and published on April 13, 2026, these insights provide practical guidance for individual investors looking to shield their portfolios.
1. Gold
Gold is frequently used as a hedge against stock market declines. Year-to-date, the SPDR Gold Shares ETF (GLD) has gained 10.3%, outperforming the S&P 500, which has experienced a slight loss. The precious metal benefits from central banks buying at record levels and geopolitical tensions, which increases demand irrespective of corporate earnings or broader economic growth.
Jon Lapp, CFP at Haven Financial Advisors, notes that while gold typically maintains value during recessions, investors should be cautious when prices appear inflated. Gold’s appeal lies in its non-correlation with economic cycles.
2. Short-Duration U.S. Treasurys
Short-term government debt instruments that mature within one month to two years carry minimal credit risk and lower duration risk compared to long-term bonds. This makes them resilient against rising interest rates and a reliable place to preserve capital and maintain liquidity.
Trevor Gunter, CFP and founder of Four Pines Financial, emphasizes that although these securities might not deliver exciting returns, their stability and safety make them valuable during uncertain times.
3. Defensive Sector ETFs
Certain sectors such as utilities, consumer staples, and healthcare are considered defensive because demand for their products and services remains relatively constant regardless of economic conditions.
Exchange-traded funds (ETFs) focusing on these sectors provide diversification and can experience smaller declines than the broader market in recessions. Dan O’Rourke, CFP from Strathmore Capital Advisors, explains, “People still eat, take medicine and keep the lights on,” which supports the relative stability of these sectors.
4. Cash and Money Market Funds
With current money market yields approaching 4%, cash is no longer “dead money.” Holding liquid cash or equivalent investments gives investors flexibility to weather downturns and seize opportunities without risking principal.
O’Rourke highlights the renewed importance of cash for income and safety in volatile markets, ensuring investors can avoid forced selling during equity declines.
5. Investment-Grade Corporate Bonds
High-quality bonds provide steady income and a degree of protection from stock market volatility. Investment-grade corporates, U.S. Treasurys, and municipal bonds remain preferable over high-yield or junk bonds during recessions due to the increased risk of defaults when economic conditions deteriorate.
Larry Adam, Chief Investment Officer at Raymond James, maintains a positive outlook on bonds as portfolio anchors, noting yields remain favorable relative to historical norms.
6. Income-Producing Real Estate and REITs
Real estate investment trusts (REITs) and real estate ETFs like Vanguard Real Estate Index Fund ETF (VNQ) offer attractive yields—in VNQ’s case, 3.6% compared to 1.2% for the S&P 500 ETF (VOO). They also provide some inflation protection and tend to benefit from rental demand, especially when home affordability declines owing to higher prices and mortgage rates.
Jon Lapp explains that elevated mortgage rates keep renters in place longer, supporting steady rental income even in a softened economy.
7. Dividend Aristocrats™
Dividend Aristocrats™ are companies known for consistently increasing their dividends for 25 consecutive years or more. These stocks often belong to stable, high-quality businesses with resilient cash flows, making them potentially safer equity investments during downturns. They offer income and the chance for capital appreciation with less volatility than the broader market.
Final Thoughts
While no investment is recession-proof, spreading risk across these defensive and income-producing assets can help investors navigate uncertain economic times. Regular portfolio reviews and a clear understanding of risk tolerance remain crucial.
Investors should resist the urge to panic or make drastic portfolio shifts based solely on short-term forecasts. Instead, a thoughtful approach featuring gold, high-quality bonds, defensive sectors, cash, real estate, and strong dividend payers can provide both protection and opportunity as the economy evolves.
For further insights and personalized advice, consult a certified financial advisor to tailor an investment strategy that suits your unique goals and risk profile.