7 Best Investments During a Recession According to Financial Advisors
As fears of a recession grow and instability surrounds U.S. Treasury securities, many investors are reassessing their portfolios to reduce risk. Financial advisors recommend focusing on assets that tend to hold up well when markets turn volatile. Here are seven investment options experts suggest for navigating a recessionary environment, based on insights from financial planners and market analysts.
1. Gold
Gold is traditionally viewed as a safe haven during economic downturns. Year-to-date, the SPDR Gold Shares ETF (GLD) has provided positive returns, outperforming the S&P 500, which has experienced a slight decline. According to Jon Lapp, CFP at Haven Financial Advisors, gold benefits from central banks’ record-level purchases and ongoing geopolitical uncertainty. Because gold’s value is not directly linked to corporate earnings or GDP growth, it typically maintains its worth during recessions. However, Lapp cautions investors to be mindful of potentially inflated prices.
2. Short-Duration U.S. Treasurys
Short-duration Treasury securities, which mature within one month to two years, offer safety with minimal interest rate risk. These government-backed debts are considered nearly risk-free regarding credit, providing stability and liquidity during turbulent times. Trevor Gunter, CFP and founder of Four Pines Financial, describes short Treasurys as stable and reasonably yielding instruments that allow investors to "wait out uncertainty" without taking on undue risk.
3. Defensive Sector ETFs
Certain sectors traditionally fare better in economic downturns, making them attractive recession-resistant investments. Defensive sectors such as utilities, consumer staples, and healthcare provide essential goods and services that people continue to need regardless of economic conditions. Dan O’Rourke, CFP of Strathmore Capital Advisors, notes that these sectors typically experience smaller drawdowns, helping investors avoid rash decisions based on market swings. Investors can access these sectors diversely via Exchange-Traded Funds (ETFs) focused on defensive industries.
4. Cash and Money Market Funds
Holding cash has gained appeal as money market fund yields approach 4%, offering a competitive return while preserving liquidity. Contrary to the old saying “cash is king,” experts now view cash as “no longer dead money.” Keeping some portfolio portion in cash or cash equivalents can provide flexibility and reduce anxiety about potential losses in other asset classes during recessions.
5. Investment-Grade Corporate Bonds
High-quality corporate bonds remain a key fixed-income option that delivers steady income and capital preservation. Larry Adam, Chief Investment Officer at Raymond James, supports maintaining allocations in investment-grade bonds, including Treasurys and municipals, especially given the attractive yields relative to historical averages. Lucas Fender, founder of Proper Planning & Wealth Management, advises against chasing higher yields offered by junk bonds because lower credit quality increases risk substantially during economic slowdowns.
6. Income-Producing Real Estate and REITs
Real estate investment trusts (REITs), such as those tracked by the Vanguard Real Estate Index Fund ETF (VNQ), have shown resilience and income generation amidst market turbulence. The VNQ has generated a positive return and higher yield compared to the broad stock market ETF VOO. According to Jon Lapp, elevated home prices and mortgage rates are prompting more people to rent longer, boosting rental demand. REITs provide inflation protection and stable income streams, making them suitable holdings for diversified portfolios, particularly in tax-advantaged accounts. However, investors should be mindful of economic factors that can affect real estate performance.
7. Dividend Aristocrats™
Dividend Aristocrats are companies with a long history of consistent dividend increases, which often indicates strong financial health and shareholder commitment. These stocks can offer a reliable income stream and tend to be less volatile during recessions. While not discussed in detail here, Dividend Aristocrats ETFs are frequently recommended to investors seeking a combination of income and relative safety during economic uncertainty.
Final Thoughts
With Wall Street preparing for a possible recession—Goldman Sachs recently raised the recession probability forecast to 30%—investors are encouraged to evaluate portfolio risks and adjust accordingly. Holding a combination of gold, stable government debt, income-producing assets, and defensive stocks can provide protection and steady returns during challenging economic periods. Consulting a certified financial planner to tailor these recommendations to individual goals and risk tolerance is advised.
This article was written by Kate Stalter, CFP, and reviewed by Rachel McVearry for U.S. News on April 13, 2026.