7 Best Investments During a Recession: Insights from Financial Advisors
As concerns about a potential recession grow and Treasury market stability wavers, investors are increasingly seeking ways to safeguard their portfolios. Financial experts emphasize the importance of reviewing investment strategies to manage risk effectively during economic downturns.
Wall Street’s outlook reflects rising caution: Goldman Sachs has recently increased its recession probability forecast to 30%, marking a 5% rise. Simultaneously, investment giant BlackRock has issued warnings about the reliability of long-term U.S. Treasurys, traditionally regarded as a cornerstone for fixed-income investments. Their strategists recommend considering alternative portfolio hedges amid shifting market sentiment and diminished effectiveness of long-dated Treasurys.
Rather than reacting impulsively to forecasts, staying informed and periodically reassessing risk exposure remains a prudent approach. Certified financial planners and advisors suggest several asset types historically known to hold up well in a recessionary environment:
- Gold
Often viewed as a safe haven, gold tends to shine in times of market stress. The SPDR Gold Shares ETF (GLD) has outperformed the S&P 500 this year with a 10.3% gain compared to the index’s slight loss. This continued strength is driven by central banks buying gold at unprecedented levels and persistent geopolitical uncertainties. Since gold is not tied to corporate earnings or economic growth, it often maintains value when equities falter. However, caution is advised due to its elevated price levels in recent years.
- Short-Duration U.S. Treasurys
Short-term government bonds, maturing between one month and two years, offer stability and liquidity with minimal interest rate risk. Backed by the U.S. government, these instruments carry virtually no credit risk and can provide reasonable returns while waiting out economic turbulence. Although not offering excitement, they serve as dependable anchors in uncertain times.
- Defensive Sector ETFs
Certain industries—such as utilities, consumer staples, and healthcare—typically demonstrate resilience during downturns because demand for their products and services remains steady regardless of economic cycles. Exchange-traded funds (ETFs) targeting these defensive sectors allow investors to diversify within more recession-resistant areas, helping reduce volatility and emotional reactions in challenging markets.
- Cash and Money Market Funds
Holding cash or cash-equivalents provides flexibility and security during market corrections. With recent increases in money market yields nearing 4%, cash is regaining appeal as a portfolio component rather than "dead money." It offers peace of mind and readiness to capitalize on opportunities when markets stabilize.
- Investment-Grade Corporate Bonds
High-quality corporate bonds continue to serve as reliable income sources and portfolio stabilizers. Experts favor these over riskier high-yield bonds, especially during economic slowdowns where credit spreads tend to widen. Bonds from financially strong companies or municipal issuers can balance risk and return effectively amid prolonged uncertainty.
- Income-Producing Real Estate and REITs
Real estate investment trusts (REITs) and related ETFs, such as the Vanguard Real Estate Index Fund ETF (VNQ), have delivered notable returns, outperforming broad equity indexes this year. Offering attractive yields (around 3.6%) and potential inflation protection, they provide steady income streams. Elevated home prices and mortgage rates encourage renters to stay longer, sustaining demand that supports real estate investments even in weaker economies.
- Dividend Aristocrats™
Companies with a long-standing history of consistently increasing dividends—known as Dividend Aristocrats™—can offer defensive qualities and income during recessions. Their stable cash flows and shareholder commitment often make them more resilient compared to other stocks.
Key Takeaways for Investors
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Defensive assets like gold and real estate have outpaced broader equities amid growing economic concerns.
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Central bank purchases and geopolitical tensions continue to support gold prices.
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Short-term government debt brings safety and liquidity when markets experience volatility.
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Consumer staples, utilities, and healthcare sectors tend to retain demand regardless of economic conditions.
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Rising money market yields enhance the appeal of holding cash, which offers flexibility without significant risk.
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Prioritizing high credit quality in bonds helps mitigate heightened credit risk during downturns.
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Real estate investments benefit from demographic and economic trends sustaining rental demand.
While no investment guarantees success during a recession, incorporating these asset types may help manage portfolio risk and preserve capital through economic cycles. Investors should consult qualified financial advisors to tailor strategies to their individual goals and risk tolerances.
About the Authors
Kate Stalter, CFP, authored this analysis, with expert review by financial journalist Rachel McVearry. The piece was updated on April 13, 2026.