7 Best Investments During a Recession: Strategies from Financial Advisors
As recession concerns mount and uncertainties surround the stability of U.S. Treasurys, investors are increasingly revisiting their portfolio strategies to minimize risk. Recent commentary from major financial institutions like Goldman Sachs and BlackRock highlights growing unease in the market. Goldman Sachs raised the probability of a recession to 30%, while BlackRock advised investors to seek alternatives to long-term Treasurys, traditionally considered a safe haven.
While panicking and wholesale portfolio changes are not advisable, financial experts suggest periodically reviewing portfolios to manage risk prudently. Here are seven investments that advisors commonly recommend to help mitigate risk during economic downturns:
1. Gold
Gold has long been viewed as a reliable hedge against stock market downturns and economic uncertainty. In 2026, the SPDR Gold Shares ETF (GLD) delivered a 10.3% return, significantly outperforming the S&P 500, which was down 0.42% as of early April.
According to Jon Lapp, CFP of Haven Financial Advisors, gold’s recent price surge is driven by record purchases by central banks worldwide and geopolitical instability. Unlike stocks, gold is not tied to corporate earnings or economic growth, allowing it to hold up well in recessions. However, Lapp cautions investors to be mindful of gold’s elevated price levels before jumping in.
2. Short-Duration Treasurys
Short-term U.S. government debt instruments—those maturing between one month and two years—offer a stable investment option with minimal risk. These securities carry essentially zero credit risk and are less vulnerable to interest rate fluctuations than their long-term counterparts.
Trevor Gunter, CFP and founder of Four Pines Financial, describes short-duration Treasurys as unexciting but effective for providing stability, liquidity, and reasonable returns during uncertain periods.
3. Defensive Sector ETFs
Certain sectors typically demonstrate resilience during economic slowdowns. Utilities, consumer staples, and healthcare are considered defensive because their products and services remain in demand regardless of economic conditions.
Dan O’Rourke, CFP of Strathmore Capital Advisors explains that these sectors generally experience smaller market downturns, helping investors maintain their positions without making emotionally driven decisions. Exchange-Traded Funds (ETFs) focused on these sectors offer diversified exposure and are considered smart recession plays.
4. Cash and Money Market Funds
Cash holdings, once derided as “dead money,” now earn attractive yields, with money market funds paying close to 4%. This makes keeping cash a viable strategy to provide liquidity, flexibility, and safety during volatile market environments.
O’Rourke notes that cash offers peace of mind during corrections, and investors can now earn reasonable returns on short-term liquid assets.
5. Investment-Grade Corporate Bonds
Higher-quality bonds, including investment-grade corporate bonds, Treasurys, and muni bonds, remain solid portfolio anchors during economic uncertainty. Despite rising Treasury yields, experts like Raymond James Chief Investment Officer Larry Adam remain optimistic about their role.
Lucas Fender, wealth advisor at Proper Planning & Wealth Management, warns against chasing high-yield “junk” bonds in a recession. Maintaining credit quality is critical since the spread between investment-grade and high-yield bonds tends to widen sharply when economic conditions deteriorate.
6. Income-Producing Real Estate and REITs
Real estate investment trusts (REITs) have outperformed the broader market in 2026, with the Vanguard Real Estate Index Fund ETF (VNQ) up 6.2% year-to-date, while the Vanguard S&P 500 ETF (VOO) was roughly flat.
In addition to price gains, REITs provide a higher yield—VNQ offers about 3.6% compared to VOO’s 1.2%. Factors such as high home prices and elevated mortgage rates have bolstered rental demand, supporting the underlying fundamentals of income-producing real estate.
REIT ETFs are also beneficial for inflation protection and typically suit tax-advantaged accounts, making them valuable portfolio diversifiers.
7. Dividend Aristocrats™
Companies classified as Dividend Aristocrats™—those with a history of increasing dividends for at least 25 consecutive years—are prized for their reliability and income generation during downturns. These firms often have stable cash flows and resilient business models, offering investors some security when markets turn rocky.
Key Takeaways for Investors
- Defensive assets like gold and real estate have trounced stocks in early 2026 amid recession fears.
- Central banks’ increased gold purchases and geopolitical tensions continue to support precious metal prices.
- Short-term government debt offers safety and liquidity during market volatility.
- Consumer staples, utilities, and healthcare sectors generally withstand economic contractions better than others.
- Cash and money market funds offer competitive yields and safeguard capital.
- Prioritize investment-grade bonds over riskier debt to manage credit risks.
- Income-focused investments such as REITs and Dividend Aristocrats™ provide steady returns even when growth slows.
Final Thoughts
While economic downturns bring challenges, they also present opportunities for investors to strengthen their portfolios with more resilient assets. By balancing exposure to defensive sectors, quality fixed income, precious metals, and income-generating investments, investors can navigate recessionary environments with greater confidence. As always, consulting with certified financial planners and advisors can help tailor strategies appropriate to individual risk tolerances and financial goals.
This summary is based on insights compiled by Kate Stalter, CFP, and reviewed by Rachel McVearry for U.S. News as of April 13, 2026.