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Which Stocks Are Safest in a Recession?


Article by David Scheller

Photography by Luebeck Geisler Hamm Wealth Management

Bad fiscal policy. A crash in the housing market. A sudden drop in supply of essential commodities. Any of these can cause a recession. Any combination of them can spell even worse.

Anyone who predicts a recession should be taken with a grain of salt. Such predictions are perennial, as they reliably attract the spotlight to whomever offers them. 

That said, the United States has weathered 14 recessions since the Great Depression. Investing around the possibility of an imminent recession isn’t necessarily the same as adopting a doom-and-gloom mentality. It merely acknowledges that recessions, like expansions, are inevitable.

Which stocks are safest during a recession – or, to frame it in a broader way, which industries are safest to have invested in before a recession arrives? History has shown that certain industries are indeed safer during economic downturn. Let’s examine a few.


The American healthcare industry has long proven stable during eras of inflation and recession alike. During the past seven recessions, healthcare outperformed the broader market by an average of 10%. The reasoning behind this phenomenon is simple: even when they are struggling financially, people are unwilling to spend less on something they need in order to live. It’s a textbook demonstration of price inelasticity.

Consumer Staples

Like healthcare, consumer staples aren’t impulse purchases. However financially destitute the general population becomes, people will still need to eat, bathe, and clean their homes. They also show a reluctance to abstain from tobacco and alcohol. (Unsurprisingly, hard times drive higher demand for those substances.) This may sound too obvious to beg repeating, but people truly cannot live without the things they need to live.


By now you have noticed a theme: if it produces a requisite for everyday life, an industry offers a reasonably safe haven for your money during a recession. No other industry exemplifies this fact as evidently as utilities, which provide indispensable services to the private and public sectors alike. The government will never deem your local electricity provider “nonessential.” 

Utility companies may not represent glowing opportunities for long-term growth, but they offset that shortcoming by offering attractive dividends – the reason why their stocks are popular inclusions in retirement portfolios.

Information Technology

Several of the top-performing S&P 500 stocks during 2020 were in the information technology (IT) sector. That was partly due to the unique nature of the event that precipitated the 2020 recession, which was accompanied by a worldwide lockdown. 

Cyber security, video games, and video streaming services were all in high demand while people were stuck in their homes. But thanks to their diverse revenue streams and increasing capacity to remain productive with fewer employees, IT companies are poised to offer safer investment opportunities during upcoming recessions as well, regardless of their catalysts.

There Are No Straight Roads to Investing

Companies with low debt-to-equity ratios have a great advantage during an economic downturn. Even so, no single stock is a sure bet during a recession. Therein lies the necessity of diversification: it shields the investor against catastrophic losses. Whoever coined the phrase “Don’t put all your eggs in one basket” may very well have been a wealth management advisor.

Are you looking for ways to preserve your net worth during the next recession? Then you would do well to partner with an expert. If you live in the greater Twin Cities area and would like to stay secure when the economy isn’t, then we welcome you to contact Luebeck Geisler Hamm Wealth Management today.

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