7 Best Investments During a Recession | Financial Advisors

Wall Street is growing increasingly concerned about recession. Goldman Sachs Group Inc. (ticker: GS) recently raised its recession probability to 30%, up five percentage points.

Meanwhile, BlackRock Inc. (BLK) is sounding an alarm about long-term Treasurys, often considered a pillar of the fixed-income side of a portfolio. “We suggest looking for a ‘plan B’ portfolio hedge as long-dated U.S. Treasurys no longer provide portfolio ballast, and to mind potential sentiment shifts,” wrote a team of BlackRock investment strategists in their April 6 weekly market commentary.

Panicking and trading your entire portfolio because of some analysts’ forecasts is not an investment philosophy. However, investors may want to review their portfolios at regular intervals to determine whether they’re taking on too much risk.

Here are some investments that could help mitigate risk in a recession:

Investors frequently use the yellow metal as a hedge against a downturn in stocks. Year to date, the SPDR Gold Shares ETF (GLD) has returned 10.3% versus the S&P 500’s loss of 0.42% as of April 10.

That follows a strong performance in 2025 as investors fretted about the economy, even as equity markets also rallied.

“Gold’s 61% run in 2025 is hard to ignore, but it’s worth understanding what’s actually driving it,” says Jon Lapp, a certified financial planner at Haven Financial Advisors in Manheim, Pennsylvania.

“Central banks around the world have been buying gold at record levels, and geopolitical uncertainty has only added fuel. In a recession, gold tends to hold up well because it’s not tied to corporate earnings or economic growth,” he adds.

However, Lapp notes, investors may want to use caution with precious metals trading at inflated prices.  

These instruments are government debts that mature quickly, generally between one month and two years. Because they don’t stick around long, they aren’t affected by rising rates in the same way as longer-term bonds.

That reduces duration risk, and because they’re backed by the U.S. government, credit risk is essentially zero.

“Short Treasurys are not exciting, but that is often exactly the point,” says Trevor Gunter, CFP, founder and lead advisor at Four Pines Financial in Atlanta.

“In a recession, investors usually look for stability, liquidity and a reasonable return while they wait out uncertainty. Short-duration Treasurys can play that role very well,” he adds.

Some industries and broad sectors fare better than others in an economic downturn. That makes those investments more attractive when other areas of the market may underperform. Exchange-traded funds, or ETFs, can be a more diversified way to target specific sectors.

Traditional defensive sectors are utilities, consumer staples and health care. They share a common trait: Demand for what they sell doesn’t depend much on whether the economy is booming or contracting.

“People still eat, take medicine and keep the lights on,” says Dan O’Rourke, CFP, director of multifamily office solutions at Strathmore Capital Advisors, headquartered in Charlotte, North Carolina.

“These sectors often experience smaller drawdowns than the broader market, which can help investors stay invested and avoid emotional decisions at the wrong time,” he says.

Plenty of investors appreciate the peace of mind that comes with holding cash when the market is correcting.

“Cash is not king, but it is no longer dead money,” O’Rourke says.

Online banks are currently offering rates in the neighborhood of 4%. That makes parking cash a more attractive prospect. Now that money market rates have moved meaningfully higher, O’Rourke says, cash is earning its place in portfolios again by offering yield and flexibility, along with reduced worries about losing money in a market downturn.

High‑quality bonds offer reliable income in calmer markets and help investors navigate more volatile cycles.

Even with the recent rise in Treasury yields, Raymond James says its outlook hasn’t changed. In an April 10 “Markets and Investing” report, Chief Investment Officer Larry Adam wrote that he’s upbeat about bonds as a portfolio anchor.

“We continue to favor higher‑quality bonds – Treasurys, investment‑grade corporates and municipals – over riskier sectors, especially with yields still above historical averages,” he wrote.

Investors should be choosy about the kinds of bonds they buy, says Lucas Fender, founder and wealth advisor at Proper Planning & Wealth Management in Overland Park, Kansas.

“Now is not the time to go into high-yield territory chasing an extra percentage point,” he says. “In a recession, credit quality matters, and the spread between investment grade and junk tends to widen fast when the economy slows.”

Year to date, the Vanguard Real Estate Index Fund ETF (VNQ) has returned 6.2%, while the Vanguard S&P 500 ETF (VOO) is down 0.1%. That difference is due not only to VNQ’s better price performance, but also to its yield of 3.6%, versus VOO’s yield of 1.2%. Real estate investment trust, or REIT, ETFs like VNQ can provide inflation protection, regular income and are particularly well‑suited for tax‑advantaged accounts.

There are also some specific economic factors buoying the real estate sector. “When home prices are high and mortgage rates are elevated, many would-be buyers stay renters longer than they planned,” Lapp says. “That dynamic keeps rental demand strong even when the broader economy softens.”

Investors should keep in mind that real estate investments can kick off a good chunk of taxable income. Holding these investments in a tax-advantaged account, such as an individual retirement account, allows income to compound without the annual tax drag. Over time, that can make a big difference in what you actually keep.

These are companies with a track record of boosting their shareholder payouts for at least 25 years.

That unbroken streak of raises, through market downturns, recessions and the full range of world events, is an indicator of a company’s financial strength and the resilience of its business. Dividend Aristocrats™ include Coca-Cola Co. (KO), Johnson & Johnson (JNJ) and Procter & Gamble Co. (PG).

“Companies with long histories of raising dividends can be attractive in recessions because consistent dividend growth can signal durable cash flows and disciplined management,” says Jeff Judge, managing partner of Chesapeake Financial Planners in Forest Hill, Maryland.

“When stock prices are choppy, part of the return comes from income rather than price appreciation,” he says.

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