7 Best Investments During a Recession: Strategies from Financial Advisors
As concerns about a potential recession intensify, investors are being advised to carefully assess their portfolios and consider reallocating assets to reduce risk. Financial experts highlight several investment options that tend to hold up well during economic downturns. From gold to specialized ETFs, these assets may help investors weather market volatility.
Growing Recession Fears and Market Uncertainty
Wall Street sentiment is increasingly cautious, with Goldman Sachs recently raising its forecasted probability of a recession to 30%. Similarly, BlackRock has warned that long-term U.S. Treasury bonds, once a cornerstone of fixed-income portfolios, may no longer provide the traditional stability they once did. In response, financial advisors suggest preparing alternative strategies to protect investments in uncertain markets.
The 7 Best Investments to Consider in a Recession
1. Gold
Often viewed as a safe haven during stock market downturns, gold has delivered solid returns. The SPDR Gold Shares ETF (GLD) showed a 10.3% gain year to date by early April, contrasting with a slight loss in the S&P 500. Central banks buying gold in record amounts combined with geopolitical tensions have propelled prices higher. Because gold’s value is not tied to corporate earnings, it generally retains its worth during recessions. However, investors are cautioned against buying at inflated prices.
2. Short-Duration Treasurys
Short-term U.S. government debt—maturing anywhere from one month to two years—provides safety and liquidity. These instruments are less sensitive to interest rate changes than longer-term bonds, limiting risk. Their backing by the U.S. government effectively eliminates credit risk, making them a stable option for cautious investors waiting out economic turmoil.
3. Defensive Sector ETFs
Certain sectors consistently outperform during downturns due to steady demand. Utilities, consumer staples, and health care industries fall into this category. Exchange-traded funds (ETFs) targeting these sectors offer diversified exposure. Since everyday needs like electricity, food, and medicine remain consistent regardless of the economy, these sectors tend to experience smaller declines when broader markets falter.
4. Cash and Money Market Funds
While “cash is not king,” it is regaining appeal, especially with money market funds offering near 4% yields, a significant increase from recent years. Holding cash or cash-equivalent investments provides flexibility, safety, and yield without exposure to market losses. This can be particularly valuable during market corrections or volatility.
5. Investment-Grade Corporate Bonds
High-quality bonds, including Treasurys, investment-grade corporates, and municipals, are favored for their reliability and income generation. Despite rising Treasury yields, financial advisors remain positive on these bonds as anchors for balance in portfolios. Investors are advised to avoid lower-quality high-yield bonds in recessions, as risks of default increase and credit spreads widen.
6. Income-Producing Real Estate and REITs
Real estate investment trusts (REITs) have shown resilience, benefiting from strong rental demand amid high home prices and mortgage rates that discourage home buying. For instance, the Vanguard Real Estate Index Fund ETF (VNQ) has outperformed the S&P 500 year to date and offers a higher dividend yield. Investors should consider holding these income-producing assets in tax-advantaged accounts to manage the tax implications.
7. Dividend Aristocrats™
These are companies with a long track record of consistently increasing dividend payouts, providing a source of steady income even during economic downturns. Their solid business models and financial strength often make them more resistant to recessions, offering investors stability and potential for capital appreciation.
Key Takeaways for Investors
- Defensive assets like gold and real estate have outperformed stocks recently.
- Central bank gold purchases and geopolitical risks continue to support precious metals.
- Short-term Treasurys provide stability and liquidity.
- ETFs focusing on consumer staples, utilities, and health care tend to experience smaller declines.
- Cash and money market funds now yield attractive returns and provide flexibility.
- High-quality bonds remain a sound choice over riskier high-yield alternatives.
- Income-producing real estate benefits from persistent rental demand.
- Dividend-paying companies with strong track records help provide reliable income.
Conclusion
While no investment is completely immune to recession risks, strategically positioning portfolios toward these seven options can help mitigate losses and preserve capital. Consulting with a certified financial planner or advisor can provide personalized guidance tailored to individual goals and risk tolerances, ensuring a balanced approach through economic cycles.
This article was written by Kate Stalter, CFP, and reviewed by Rachel McVearry on April 13, 2026. It is based on insights and research from financial advisory experts and market observations.