Is a Recession Coming? Stay Away From These Stocks

The U.S. Bureau of Labor Statistics (BLS) released its February jobs report, showing a modest 151,000 jobs added and close to the 160,000 expected. The unemployment rate held steady at 4%. 

Though these figures suggest stability, a darker signal emerged from outplacement services firm Challenger Gray & Christmas, which released a report the day before revealing U.S. companies planned to cut 172,017 jobs. That is a 245% surge from January and the highest February total since 2009. 

This stark contrast hints at a labor market under strain, with federal layoffs and private-sector retrenchment potentially foreshadowing a broader economic slowdown. As recession fears loom, amplified by policy shifts like tariffs and government efficiency cuts, investors face uncertainty. Protecting a stock portfolio in this climate may require strategic moves: diversifying into defensive sectors, leaning on dividend-paying stocks for stability, or hedging with options to mitigate downside risk. 

You just might want to avoid the following three stocks if there is a recession on the horizon.

Ford (F)

Ford (NYSE:F) is the first stock you want to stay away from if a recession looms on the horizon. Given its recent financial struggles and business challenges, it could be a rough ride if the economy tanks. 

Despite revenue rising 5% to $48.2 billion in the fourth quarter, Ford’s profits have been hammered by ongoing, multi-billion-dollar operating losses in its Model E electric vehicle (EV) division. Although it had surprisingly strong sales with its Mustang Mach-E, that was likely the result of sales being pulled forward due to buyers anticipating President Trump would end EV subsidies and tax credits.

In a recession, consumer spending on big-ticket items like vehicles typically craters. For example, U.S. auto sales fell 37% in 2009, hitting Ford’s core business hard. Proposed 25% tariffs on Mexico and Canada, where Ford builds models like the Maverick, could add billions in costs, eroding margins further. With a shaky EV transition and exposure to cyclical downturns, Ford’s stock looks vulnerable if economic headwinds intensify.

DR Horton (DHI)

The second stock to avoid is DR Horton (NYSE:DHI), America’s largest homebuilder. Despite topping first-quarter expectations, it had to use incentives like mortgage rate buydowns to encourage homebuyers worried about high interest rates to buy new homes.

Worse, the homebuilder said it expects such incentive costs to increase over the next few months while home sales gross margin are forecast to fall sequentially. As home prices have yet to appreciably fall, affordability is still a concern. That might not be an issue in certain markets.

Housing could actually collapse in areas like the Washington D.C. metro area. As federal government layoffs surge, the number of homes going on the market are soaring. There was a 46% surge in weekly listings in Alexandria, Va., a 30% jump in Arlington, and a 33% surge in Prince William County.

Recessions hammer homebuilding as consumer confidence and financing dry up. During the financial crisis, housing starts fell 38%.  With elevated land and material costs squeezing margins and potential tariffs raising input prices, D.R. Horton’s cyclical exposure makes it risky. Investors might fare better with defensive stocks if economic clouds gather.

Expedia (EXPE)

Expedia (NASDAQ:EXPE) is the third stock to stay away from in a recession. Recessions crush leisure travel as households cut non-essential spending. Expedia’s reliance on hotel and flight bookings (70% of revenue) amplifies this risk, while its $1 billion tech overhaul to unify brands like Vrbo strains margins amid slowing growth. While its brands, including Vrbo, saw growth in the fourth quarter, management admits it still has a ways to go to bring it and Hotels.com fully back.

Expedia also faces intensifying competition from Booking Holdings (NASDAQ:BKNG), Airbnb (NASDAQ:ABNB), and other emerging players. That will on ly get worse in a downturn as more players chase fewer dollars.

If those job loss numbers do pan out in the months ahead, that will be a lot of discretionary spending being put on the shelf. Particularly if you’re a risk-averse investor, EXPE stock is one you will want to steer clear of.

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