7 Best Investments During a Recession: Strategies from Financial Advisors
As concerns about a potential recession rise, with Goldman Sachs recently increasing its recession probability forecast to 30%, investors are reassessing their portfolios to mitigate risk and protect their wealth. Similarly, BlackRock has cautioned against relying heavily on long-term U.S. Treasurys, signaling a need for a diversified approach. Certified financial planners and advisors recommend focusing on investments that typically hold up or even perform well during economic downturns. Here are seven investment options to consider amid recession fears.
1. Gold
Gold remains a classic hedge against economic uncertainty and stock market volatility. The SPDR Gold Shares ETF (GLD) has delivered a 10.3% return year-to-date as of early April 2026, outperforming the S&P 500, which slipped by about 0.42% in the same period. Central banks’ significant gold purchases combined with geopolitical tensions have driven gold prices higher, providing a safe haven. According to Jon Lapp, CFP at Haven Financial Advisors, gold tends to maintain its value during recessions because it is not directly tied to corporate earnings or economic growth. However, investors should be cautious when prices appear inflated.
2. Short-Duration Treasurys
Short-duration U.S. Treasury securities, which mature within one month to two years, offer investors stability and liquidity with minimal credit risk due to their government backing. These instruments are less sensitive to interest rate changes compared to long-term bonds, reducing duration risk. Trevor Gunter, CFP and founder of Four Pines Financial, emphasizes their role as a steady “safe space” for investors who want to await clearer economic signals without taking on too much risk.
3. Defensive Sector ETFs
Certain sectors traditionally withstand recessions better than others. Utilities, consumer staples, and healthcare sectors are considered defensive because demand for their products and services remains steady regardless of economic cycles. Exchange-traded funds (ETFs) that target these sectors provide diversification and potentially lower volatility. Dan O’Rourke, CFP of Strathmore Capital Advisors, notes these sectors experience smaller losses during downturns, which helps investors avoid panic selling.
4. Cash and Money Market Funds
Holding cash or investing in money market funds can offer peace of mind and flexibility during volatile times. While cash used to be dubbed "dead money" due to negligible interest rates, today’s money market funds yield near 4%, making cash a more attractive, liquid option. O’Rourke highlights that cash can serve as a tactical reserve, allowing investors to capitalize on future opportunities or cover expenses without selling assets at a loss.
5. Investment-Grade Corporate Bonds
High-quality corporate bonds deliver dependable income and act as a portfolio stabilizer during uncertain markets. With Treasury yields elevated but still attractive, investment-grade bonds remain preferable to riskier high-yield bonds. Lucas Fender, wealth advisor at Proper Planning & Wealth Management, advises against chasing higher yields in speculative bonds during recessions because credit risk rises significantly, and the spread between investment-grade and junk bonds typically widens when the economy weakens.
6. Income-Producing Real Estate and REITs
Real estate investment trusts (REITs) and income-producing property investments can offer secure income streams along with potential inflation protection. The Vanguard Real Estate Index Fund ETF (VNQ) has yielded 6.2% year-to-date as of April 2026, outperforming the Vanguard S&P 500 ETF (VOO), which declined slightly. Elevated mortgage rates and high home prices keep many potential buyers renting longer, sustaining rental demand. Jon Lapp points out that this dynamic supports real estate investments even amid broader economic softening. Investors often find REITs particularly suited for tax-advantaged accounts.
7. Dividend Aristocrats™
Dividend Aristocrats™ are companies in the S&P 500 that have increased their dividends for at least 25 consecutive years. These firms typically possess resilient business models and strong cash flows, enabling consistent dividend payments even during recessions. Investing in Dividend Aristocrat stocks or ETFs can provide steady income and relative stability when equity markets turn choppy.
Final Thoughts
While no investment is completely safe from market fluctuations during a recession, diversifying across these asset classes can help investors reduce volatility and preserve capital. Regular portfolio reviews with a financial advisor can ensure risk levels align with one’s goals and tolerance amid evolving economic conditions. Staying informed and disciplined will empower investors to navigate downturns with greater confidence.
Sources:
- Kate Stalter, CFP, U.S. News & World Report
- Financial advisors Jon Lapp, Trevor Gunter, Dan O’Rourke, Lucas Fender
- Market data as of April 2026