7 Best Investments During a Recession
As concerns about a potential recession grow and instability in Treasury markets rises, investors are advised to reevaluate their portfolios to mitigate risk. Financial experts highlight several investment options historically resilient during economic downturns, offering safety, income, and portfolio diversification.
Rising Recession Risks and Market Concerns
According to recent reports, Goldman Sachs has increased the probability of a recession to 30%, reflecting growing caution among market participants. Meanwhile, BlackRock has urged investors to reconsider reliance on long-term U.S. Treasurys, warning that these traditionally stable assets may no longer provide adequate protection or balance due to shifting market dynamics. Experts emphasize the importance of regular portfolio reviews rather than panic-driven trading amid such forecasts.
Top Investments to Consider in a Recession
- Gold
Gold continues to be a favored hedge in times of economic uncertainty. This year, the SPDR Gold Shares ETF (GLD) has delivered a 10.3% return compared to a slight loss in the S&P 500, reflecting investor demand for safe-haven assets. Central banks worldwide have been purchasing gold at record levels, further underpinning its value. Unlike stocks, gold is not tied to corporate earnings or economic growth, which helps preserve its value when other markets are volatile. However, investors should exercise caution due to potentially inflated prices.
- Short-Duration Treasurys
Short-duration U.S. Treasury securities, with maturities between one month and two years, offer low credit risk backed by the government and reduced sensitivity to rising interest rates. These instruments provide stability, liquidity, and modest returns, making them a practical choice during recessions when investors seek capital preservation.
- Defensive Sector ETFs
Some sectors historically perform better in downturns due to consistent demand for their products and services. Utilities, consumer staples, and healthcare sectors fall into this defensive category, as people continue to use electricity, purchase essential goods, and seek medical care regardless of economic conditions. Exchange-traded funds (ETFs) focusing on these sectors enable diversified exposure and tend to experience smaller losses during recessions.
- Cash and Money Market Funds
In the current environment, cash holdings and money market funds have regained appeal. With money market yields nearing 4%, cash is no longer "dead money." Holding cash provides flexibility, ease of access, and peace of mind during market corrections, enabling investors to deploy funds opportunistically or cushion against losses.
- Investment-Grade Corporate Bonds
High-quality corporate bonds remain a stable income source amid market volatility. Despite rising Treasury yields, investment-grade bonds are favored over riskier high-yield options, as credit quality becomes critical during economic slowdowns. Investors should avoid chasing higher yields in lower-rated bonds, which tend to carry more default risk in recessions.
- Income-Producing Real Estate and REITs
Real estate investment trusts (REITs) have offered solid returns and income, outperforming broader stock indices year to date. For instance, the Vanguard Real Estate Index Fund ETF (VNQ) has returned 6.2%, compared to a slight dip in the S&P 500. High home prices and elevated mortgage rates encourage renters to stay in place longer, maintaining demand for rental properties. REITs can provide inflation protection and are well-suited for tax-advantaged accounts, though investors should remain aware of real estate market nuances during recessions.
- Dividend Aristocrats™
Dividend Aristocrats™, companies recognized for consistently increasing dividends for 25+ years, can offer reliable income and relative stability. These firms often have strong balance sheets and resilient business models that help them navigate economic downturns, making them attractive for income-focused investors during recessions.
Conclusion
Investors facing potential recession conditions should consider diversifying their portfolios with assets that historically provide safety, income, and resilience. Gold, short-duration Treasurys, defensive sector ETFs, cash equivalents, investment-grade bonds, income-producing real estate, and Dividend Aristocrats™ represent prudent options. Regular portfolio reviews with a financial advisor can help ensure risk levels align with individual goals and market conditions.
This article was written by Kate Stalter, CFP, and reviewed by Rachel McVearry, published on April 13, 2026, by U.S. News.