7 Best Investments During a Recession: Insights from Financial Advisors
As concerns about a potential recession grow, investors are increasingly looking to safeguard their portfolios against market volatility. With a recent uptick in recession probability and shifting stability in Treasury bonds, financial advisors recommend reviewing investment strategies to manage risk effectively. Below are seven investment options that experts suggest can provide resilience during economic downturns.
1. Gold
Gold has long been viewed as a safe haven during economic uncertainty. Year to date, the SPDR Gold Shares ETF (GLD) has returned 10.3%, outperforming the S&P 500, which saw a slight decline of 0.42% as of early April 2026. Central banks’ record-level gold purchases and ongoing geopolitical tensions have fueled its price gains.
According to Jon Lapp, Certified Financial Planner at Haven Financial Advisors, gold tends to hold value well in recessions because its price is not directly tied to corporate earnings or economic growth. However, he advises caution, noting that precious metals are currently trading at elevated prices, which may affect future returns.
2. Short-Duration U.S. Treasurys
Short-duration Treasury securities, maturing within one month to two years, offer safety and liquidity. Unlike long-term bonds, they are less sensitive to interest rate changes, reducing duration risk. Backed by the U.S. government, they carry virtually no credit risk.
Trevor Gunter, CFP and founder of Four Pines Financial, highlights that short-duration Treasurys may seem unexciting, but their stability and liquidity make them suitable for investors seeking to weather uncertain economic times with reasonable returns.
3. Defensive Sector ETFs
Certain sectors are considered defensive because their products and services maintain steady demand regardless of economic cycles. These sectors include utilities, consumer staples, and health care. ETFs focused on these sectors offer diversified exposure, which can mitigate losses during a downturn.
Dan O’Rourke, CFP at Strathmore Capital Advisors, emphasizes that the consistent need for food, medicine, and utilities generally results in smaller drawdowns in these sectors. This reduces emotional selling and helps investors stay the course.
4. Cash and Money Market Funds
Holding cash is often viewed as a way to avoid market risks, but low yields have historically made it less attractive. Recently, however, money market fund yields approaching 4% have revived interest in cash holdings as part of a balanced portfolio.
O’Rourke notes that cash now offers both yield and flexibility, providing investors a tool to manage risk without sacrificing potential income or liquidity during volatile periods.
5. Investment-Grade Corporate Bonds
High-quality corporate bonds are valued for reliable income and risk mitigation during market fluctuations. Despite higher yields on Treasurys, investment-grade bonds maintain strong appeal because of their credit quality.
Larry Adam, Chief Investment Officer at Raymond James, remains positive about bonds as portfolio anchors. Lucas Fender, wealth advisor at Proper Planning & Wealth Management, advises against chasing high-yield bonds in recessions, as credit risk increases and spreads between investment-grade and junk bonds tend to widen.
6. Income-Producing Real Estate and REITs
The Vanguard Real Estate Index Fund ETF (VNQ) has yielded 6.2% this year, outperforming the S&P 500’s Vanguard S&P 500 ETF (VOO), which is slightly down. VNQ’s 3.6% yield compared to VOO’s 1.2% highlights the income benefits of real estate investments.
Jon Lapp points out that elevated home prices and mortgage rates keep many potential buyers renting longer, sustaining demand for rental properties. This dynamic can make income-producing real estate and REITs a solid choice during economic slowdowns, offering inflation protection and regular income, especially within tax-advantaged accounts.
7. Dividend Aristocratsâ„¢
While this particular category wasn’t fully detailed in the available summary, Dividend Aristocrats™ are typically companies with a long history of increasing dividends annually. Their consistent payouts can provide reliable income and potential stability, even as markets fluctuate.
Conclusion
Investors facing recession concerns should consider diversifying their portfolios with a mix of defensive assets. From precious metals and high-quality bonds to defensive sector ETFs and income-generating real estate, these investments provide varying degrees of stability, income, and growth potential during economic uncertainty. Regular portfolio reviews with a financial advisor can help tailor a strategy suited to individual risk tolerances and goals.
For more insights on managing your investments during economic downturns, consult with a certified financial planner or investment advisor.