Recession-proof investments: Sectors that thrive during downturns
Here are the top recession-proof sectors that tend to thrive during economic downturns.
With recession fears on the rise, investors are looking for ways to safeguard their portfolios. Art Hogan, chief market strategist at B. Riley Wealth, joined TheStreet to break down the sectors that historically perform well during economic downturns.
Related: Why the economy may defy recession predictions — for now
Full Video Transcript Below:
ART HOGAN: Well, I would tell you this any given year, there's always a chance for a recession. Let's call it 10% in any given year. Typically, it's from something that's exogenous, that comes in, disrupts the economy or a major change in fiscal and monetary policy that can disrupt economic activity. I would say that that percentage is probably closer to 25% so it's certainly not a prediction that we're going to have a recession, but the chances of a recession certainly are higher, especially if the uncertainty about new policy drags on throughout the summer and we head into the fall. We still haven't landed on a place where the administration is happy with where they are on trade policy, and if they if they drag their feet that long, they don't pass a bill to get corporate taxes made permanent. And we haven't really heard about any big regulatory changes. We could certainly see this economy going to a into a recession, but that's certainly not our base case right now.
If you're contemplating a recession coming up, it's certainly wise to look at your asset allocation. And if you're a typical, you know, call it 6040 or 8020, where you have 80% of your equities, your your assets and equities and 20% in fixed income, you may want to look at that equity allocation and say, is it defensive or is it aggressively speculative meaning am I overweight? Technology versus things that can actually be a little more recession proof, like health care. And if that's the choice that you need to make, I would say that, you know, you should be rebalancing on a regular basis anyway. But the best thing to do is perhaps raise a little bit of cash so you can be, you know, call it 60% equities and 4,035% fixed income and have 5% cash allocation for some of those opportunities that come along as that recession recedes. But again, recession is not our base case, but it's always important to look at your portfolio and make sure your your asset allocation is something that helps you sleep at night. So if you're if you're way overexposed and this market volatility has been making you crazy, you're probably overallocated equities. And you might want to go from 80% down to 60% depending on your investment time time horizon.
The things that hold up best in a recession and uncertain times, oddly enough, are the things that we need versus the things that we want, right? That's why health care is doing so well right now. We're always going to need health care. We always want a new TV or a new iPhone, but we always need health care. The same thing is true with utilities. We need, you know, that in our daily life. I would argue that the apple phone or your iPhone has become a utility, but certainly the things you need fall into that category of things like health care, things like utilities, consumer staples. And oddly enough, those are three of the best performing sectors in the S&P 500 so far on a year to date basis.
