Navigating a Downturn: 7 Smart Investments to Consider During a Recession

7 Best Investments During a Recession: Insights from Financial Advisors

As investors grow increasingly cautious amid rising recession fears and uncertainties in Treasury markets, reviewing investment strategies has become imperative. Recent analyses highlight seven types of assets that tend to perform well or offer safety during economic downturns, providing potential havens for investors seeking risk mitigation.

Rising Recession Concerns and Portfolio Risk Management

Wall Street has been sounding alarms about a looming recession, with Goldman Sachs recently raising the estimated chance to 30%, a notable increase signaling heightened concern. Simultaneously, BlackRock cautions about the reliability of long-term U.S. Treasurys, traditionally considered a cornerstone for fixed-income investors. Their strategists recommend exploring alternative portfolio hedges as Treasurys may no longer offer the same protection, especially amidst potential shifts in market sentiment.

Despite these warnings, experts advise against knee-jerk reactions or wholesale portfolio changes based solely on forecasts. Instead, regular portfolio reviews to assess risk exposure remain a prudent approach.

Seven Investment Options That Can Weather a Recession

1. Gold
   Gold is a classic hedge against stock market downturns. The metal has shown resilience recently, with the SPDR Gold Shares ETF (GLD) returning 10.3% year-to-date as of early April, outperforming the often-volatile S&P 500. This strength is underpinned by factors such as significant central bank purchases worldwide and ongoing geopolitical tensions. Gold typically holds value during recessions because its price is not directly tied to corporate earnings or economic growth. However, investors should be mindful of potentially inflated precious metal prices.

2. Short-Duration U.S. Treasurys
   Short-term government bonds, maturing within one month to two years, offer safety and liquidity without the interest rate risks associated with longer maturities. Backed by the U.S. government, these securities carry minimal credit risk, making them an appealing choice for those seeking stability during uncertain times.

3. Defensive Sector ETFs
   Certain industry sectors—utilities, consumer staples, and health care—generally withstand recessions better due to consistent demand for their products and services regardless of economic conditions. Exchange-traded funds (ETFs) focused on these defensive sectors provide diversified exposure and often experience smaller losses compared to broader markets during downturns, helping investors avoid panic selling.

4. Cash and Money Market Funds
   Holding cash might seem counterintuitive during inflationary periods, but recent increases in money market yields, nearing 4%, have revitalized cash’s role in portfolios. This allocation offers liquidity, capital preservation, and a modest return, allowing investors to deploy funds opportunistically as markets evolve.

5. Investment-Grade Corporate Bonds
   High-quality bonds continue to be a reliable source of income and stability amid volatility. Experts emphasize favoring top-tier bonds—Treasurys, investment-grade corporates, and municipals—over riskier high-yield options. Credit quality becomes especially critical in recessions, with spreads between investment-grade and junk bonds typically widening, exposing lower-quality bonds to greater risk.

6. Income-Producing Real Estate and REITs
   Real estate investment trusts (REITs) and real estate-focused ETFs have demonstrated robust performance, offering attractive yields and potential inflation protection. For instance, the Vanguard Real Estate Index Fund ETF (VNQ) has outperformed the broader market year-to-date while providing a higher dividend yield. Elevated home prices and mortgage rates often lead to prolonged renting periods, sustaining demand for rental properties even in softer economic environments.

7. Dividend Aristocrats™
   These are companies known for consistently increasing dividends over many years, signaling financial strength and stability. Dividend-paying stocks can provide steady income streams and may exhibit less price volatility during recessions compared to non-dividend-paying equities.

Conclusion

In uncertain economic climates, diversification into these recession-resilient assets can help investors manage risks while positioning for long-term growth. While no investment is entirely risk-free, incorporating gold, short-duration Treasurys, defensive sectors, cash equivalents, high-quality bonds, income-generating real estate, and reliable dividend payers can enhance portfolio stability. Regular consultation with financial advisors and tailoring strategies to individual goals and risk tolerance remain key to navigating challenging market cycles successfully.

For ongoing insights and personalized advice, consider engaging with certified financial planners or trusted investment professionals.

This article is based on insights compiled by Kate Stalter, CFP, and reviewed by Rachel McVearry, published on April 13, 2026, via U.S. News & World Report.