7 Best Investments During a Recession: Insights from Financial Advisors
As concerns about a potential recession rise and questions loom over the stability of Treasury securities, investors are increasingly looking to reassess their portfolios to manage risk effectively. Recent analysis by leading financial firms like Goldman Sachs and BlackRock highlight growing caution in the market. Goldman Sachs recently increased the probability of a recession to 30%, while BlackRock warned that long-term U.S. Treasurys might no longer serve as reliable portfolio anchors amid changing market sentiment.
Rather than panicking and making drastic portfolio changes based on forecasts alone, financial experts recommend a thoughtful review of investment holdings to ensure appropriate risk exposure. Here are seven types of investments that financial advisors say can help investors weather a recession:
1. Gold
Gold is a classic hedge against market downturns. This year, the SPDR Gold Shares ETF (GLD) has returned approximately 10.3%, compared to the S&P 500’s slight loss of 0.42% as of early April 2026. The precious metal has benefited from record purchases by central banks worldwide and persistent geopolitical uncertainties, which tend to boost its appeal during economic slowdowns.
Jon Lapp, CFP at Haven Financial Advisors, notes that gold’s appeal during recessions lies in its detachment from corporate earnings and economic growth metrics. However, he also cautions investors to be mindful of gold’s current elevated prices and suggests a balanced approach when adding precious metals to portfolios.
2. Short-Duration Treasurys
Short-duration Treasury securities, maturing between one month and two years, offer a stable and liquid investment option with minimal credit risk since they are backed by the U.S. government. Unlike longer-term bonds, these short-term instruments are less sensitive to interest rate fluctuations, reducing duration risk.
Trevor Gunter, CFP and founder of Four Pines Financial, describes short-dated Treasurys as unexciting but effective instruments that provide security and reasonable returns, making them well-suited for investors seeking refuge during uncertain market phases.
3. Defensive Sector ETFs
Certain sectors traditionally hold up better during recessions because their products and services have consistent demand regardless of economic cycles. These “defensive sectors” include utilities, consumer staples, and health care. Exchange-traded funds (ETFs) targeting these sectors can provide sector-specific diversification.
Dan O’Rourke, CFP at Strathmore Capital Advisors, points out that these sectors experience smaller declines during downturns, helping investors maintain exposure to equities while reducing the temptation to sell amid market volatility.
4. Cash and Money Market Funds
Contrary to the old adage that “cash is king,” the recent rise in money market rates – near 4% in some online banks – has made holding cash investments attractive once more. Cash and money market funds provide liquidity, capital preservation, and a competitive yield compared to recent years.
O’Rourke emphasizes that cash now offers yield alongside flexibility and reduced market risk, making it an important component in recession-resistant portfolios.
5. Investment-Grade Corporate Bonds
Investment-grade bonds from highly rated corporations provide reliable income and act as portfolio ballast during turbulent times. Despite rising Treasury yields, financial advisor Larry Adam of Raymond James remains optimistic about bonds, particularly higher-quality issues such as Treasurys, municipal bonds, and investment-grade corporates.
Lucas Fender, founder of Proper Planning & Wealth Management, advises against seeking higher yields by venturing into junk bond territory during economic downturns. He highlights that credit quality becomes critical in recessions as the spread between investment-grade and high-yield bonds often widens sharply.
6. Income-Producing Real Estate and REITs
Real estate investment trusts (REITs) and income-producing real estate offer inflation protection and consistent income streams. For example, the Vanguard Real Estate Index Fund ETF (VNQ) returned about 6.2% year-to-date, outperforming broad market ETFs such as the Vanguard S&P 500 ETF (VOO), which was nearly flat.
According to Jon Lapp, elevated home prices and mortgage rates encourage many potential buyers to continue renting, sustaining demand for rental properties. This environment supports steady cash flows for REITs, especially in tax-advantaged accounts.
7. Dividend Aristocrats™
Dividend Aristocrats™ are companies in the S&P 500 that have consistently increased their dividends for 25 consecutive years or more. These stocks are often financially stable, with resilient business models that can endure economic downturns while providing steady income through dividends.
Dividend-focused investments can offer both downside protection and income generation, helping investors navigate recessionary periods without giving up exposure to equity growth potential.
Key Takeaways
- Defensive assets like gold and real estate have outperformed the broader stock market amid recent volatility.
- Central bank gold buying and geopolitical tension continue to boost gold prices.
- Short-duration Treasurys provide liquidity and safety during market uncertainty.
- Consumer staples, utilities, and health care usually fare better in recessions.
- Higher money market yields restore the value of cash holdings in portfolios.
- Maintaining credit quality in bond investments is vital to managing downturn risks.
- Income-producing real estate benefits from strong rental demand in a high-mortgage-rate environment.
In summary, while no single investment guarantees protection during a recession, a diversified strategy emphasizing these assets can help investors manage risk and preserve capital through economic cycles. Regular portfolio reviews, guided by professional advice, remain essential in adapting to changing market conditions.
About the Author:
Kate Stalter, CFP, is a certified financial planner who specializes in helping individuals build resilient portfolios. This article was reviewed by Rachel McVearry and updated as of April 13, 2026. For ongoing market insights and investment strategies, consider following U.S. News’s Advisor’s Corner and subscribing to their Invested newsletter.