7 Best Investments During a Recession: Financial Advisors Weigh In
As concerns about a potential recession rise, investors are increasingly seeking strategies to safeguard their portfolios. Recent signals from Wall Street, including Goldman Sachs raising recession odds to 30% and BlackRock warning about long-term Treasury instability, have prompted calls for revisiting investment allocations. Financial advisors suggest diversifying holdings into assets that have historically weathered economic downturns better. Here we explore seven investments that may help mitigate risk during recessionary times.
1. Gold
Gold remains a traditional safe haven during periods of economic uncertainty. The SPDR Gold Shares ETF (GLD) has outperformed the S&P 500 year-to-date, returning 10.3% compared to the S&P’s 0.42% loss as of April 10, 2026. According to certified financial planner Jon Lapp from Haven Financial Advisors, gold’s appeal is bolstered by record central bank purchases globally and geopolitical tensions. Unlike stocks, gold is not tied to corporate earnings or economic growth, allowing it to hold value during recessions. However, investors should be cautious of gold’s current inflated prices before making significant allocations.
2. Short-Duration Treasurys
Short-term government debt securities, which mature within one month to two years, are among the most secure investments. Because of their short lifespan, they are less sensitive to rising interest rates than longer-term bonds, reducing duration risk. Backed by the full faith and credit of the U.S. government, these Treasurys carry negligible credit risk. Trevor Gunter, CFP and founder of Four Pines Financial, notes that short-duration Treasurys offer stability, liquidity, and a reasonable return, serving as a dependable investment during uncertain economic periods.
3. Defensive Sector ETFs
Certain sectors traditionally show resilience in economic downturns, including utilities, consumer staples, and health care. Exchange-traded funds (ETFs) targeting these defensive sectors provide diversified exposure that can soften portfolio drawdowns. Dan O’Rourke, CFP and director at Strathmore Capital Advisors, highlights these sectors’ steady demand regardless of economic cycles—people continually need food, medicine, and electricity—which can help investors avoid panic selling during market dips.
4. Cash and Money Market Funds
While cash may not generate high returns during bull markets, it offers safety and liquidity in recessions. Money market funds and high-yield savings accounts currently provide near 4% yields, making them attractive places to preserve capital with some income potential. O’Rourke points out that cash is no longer “dead money,” providing flexibility and peace of mind amidst market volatility.
5. Investment-Grade Corporate Bonds
High-quality bonds issued by companies with strong credit ratings remain an important portfolio anchor. Raymond James Chief Investment Officer Larry Adam favors investment-grade corporates, Treasurys, and municipals over riskier bonds, citing yields that still exceed historic averages. Lucas Fender, wealth advisor at Proper Planning & Wealth Management, cautions investors to avoid high-yield or “junk” bonds during slowdown periods as credit spreads tend to widen sharply, increasing default risk.
6. Income-Producing Real Estate and REITs
Real estate investment trusts (REITs) and related ETFs like the Vanguard Real Estate Index Fund (VNQ) offer a combination of inflation protection, steady income, and portfolio diversification. VNQ has returned 6.2% year-to-date, outperforming the broad stock market ETF Vanguard S&P 500 (VOO), which is down slightly. The 3.6% yield on VNQ versus VOO’s 1.2% yield underscores real estate’s income advantage. Market dynamics, such as high home prices and mortgage rates, are encouraging more renters, which supports demand and rental income even in economic slowdowns.
7. Dividend Aristocrats™
Dividend Aristocrats™ are companies that have consistently increased their dividends for 25 consecutive years or more. These firms often have strong balance sheets and resilient business models, allowing them to maintain payouts during recessions. Investing in these dividend-growing companies can provide steady income and potential capital appreciation, aiding portfolio stability in challenging market environments.
Final Thoughts
While no investment is completely recession-proof, diversifying across these assets can help investors reduce risk and potentially preserve capital during economic downturns. Regular portfolio reviews with a trusted financial advisor are advisable to ensure appropriate risk tolerance and alignment with individual financial goals.
Investors should avoid impulsive reactions to market forecasts and instead follow a disciplined strategy incorporating quality assets such as gold, short-term Treasurys, defensive sectors, cash, high-grade bonds, income-producing real estate, and dividend growth companies. This multi-faceted approach can help build resilience against the volatility and uncertainties of recessionary periods.