7 Stocks for a ‘Hard Landing’ Recession, According to Goldman (2024)

FAQs

What are the best stocks to buy in a recession? ›

Consumer staples, utilities, healthcare, streaming, discount store, and even fast food stocks all have a record of positive performance during recessions. Commodities like gold are yet another category of recession-proof stocks because when all else fails, gold stays up.

Goldman Sachs Research analysts expect global growth of just 1.8% in 2023, as US resilience contrasts with a European recession and a bumpy reopening in China.

Consumer staples, including toothpaste, soap, and shampoo, enjoy a steady demand for their products during recessions and other emergencies, such as pandemics. Discount stores often do incredibly well during recessions because their staple products are cheaper.

A recession is “a significant decline in economic activity spread across the economy, lasting more than a few months.” Industries affected most include retail, restaurants, travel/tourism, leisure/hospitality, service purveyors, real estate, & manufacturing/warehouse.

Bonds and cash have historically outperformed most stocks during recessions. Selling stocks in favor of bonds and cash before a recession may leave you unprepared if stocks bounce back before the economy does, which has happened historically during many recessions.

Is cash King during a recession? ›

For investors, “cash is king during a recession” sums up the advantages of keeping liquid assets on hand when the economy turns south. From weathering rough markets to going all-in on discounted investments, investors can leverage cash to improve their financial positions.

Goldman Sachs Finds Bitcoin Tops Gold, S&P 500, And Nasdaq As The Best-Performing Asset Of 2023.

10% Return for S&P 500 a Real Possibility by End of 2023

And in today's market, with its newfound emphasis on fundamentals, earnings really matter. Short of a recession — a very real possibility — consensus estimates are for about 5% earnings growth for S&P 500 companies in 2023.

Cash, large-cap stocks and gold can be good investments during a recession. Stocks that tend to fluctuate with the economy and cryptocurrencies can be unstable during a recession.

Companies that make basic necessities like consumer staples and food will always have demand, even during an economic downturn - as people need to prepare meals, wash, clean, and so on. Discount stores often do relatively better during recessions because their staple products are cheaper.

While it's tempting to sell your investments due to fears of an economic downturn, this is usually a bad idea. In fact, it's generally better to stay the course, maintain your investments, and even consider increasing the amount of money that you put into the stock market.

Should I hold my stocks during a recession? ›

When things are looking bleak, consider holding on to your investments. Selling during market lows can be one of the worst things you can do for your portfolio — it locks in losses. When the market evens out down the road, rebalancing may be in order.

Bonds: Investing in bonds is a popular way to hedge stock investments. Bonds provide a steady income stream, and their prices tend to move in the opposite direction of stocks. Investing in bonds can help to protect your stock investments from drops in the stock market.

While most of the effects of a recession are negative, one positive is that gold prices tend to increase. For example, according to Reuters, gold spot prices climbed to $2,042.49 per ounce after the Fed's minutes were released. That's almost as high as the record in the 2020 recession.

On the other side of the equation, three of the worst-performing stocks in the S&P 500 in 2008 were American International Group Inc (NYSE: AIG), XL Group plc (NYSE: XL) and Genworth Financial Inc (NYSE: GNW), each of which declined between 88 and 97 percent in 2008.

Worst of 2008: 1) American International Group (AIG) (financials), down 97%. The insurer, once the world's largest, was bailed out by the government to the tune of $150 billion after nearly collapsing due to its exposure to derivatives linked to bad home loans. 2) XL Capital (XL) (financials), down 93.54%.

Retail, restaurants, hotels and real estate are some of the businesses often hurt during a recession. While such services “may enhance our quality of life, they're not necessary to maintain our basic standard of living,” Kantenga says.

Michael Burry from “The Big Short” took a big bet when he shorted the American housing market. After the housing bubble crashed in 2008, he made $100 million for himself, with investors in his fund making a further $700 million.

Who makes the most money during recession? ›

(NYSE:WMT) are often considered to be money-makers in times of recession. According to McKinsey report published in 2009, recession-resistant industries include consumer staples, healthcare, telecommunication services, and utilities, among more.

Recessions typically go hand in hand with higher unemployment, and finding a new job may not happen quickly. Catherine Valega, a CFP and wealth consultant at Green Bee Advisory in Winchester, Massachusetts, suggests keeping 12 to 24 months of expenses in cash.

What can happen to your 401(k) in a recession? Unfortunately, a recession can hurt asset prices, and therefore your 401(k) balance. According to CFRA Research, an investment research firm, the S&P 500 has lost an average of 8.8% of its value during the four recessions since 1990.

The Great Recession lasted from roughly 2007 to 2009 in the U.S., although the contagion spread around the world, affecting some economies longer. The root cause was excessive mortgage lending to borrowers who normally would not qualify for a home loan, which greatly increased risk to the lender.

Lights are on at the world headquarters of Goldman Sachs in New York on Tuesday, Jan. 24, 2023.

Goldman Sachs main competitors are BNP Paribas, Credit Suisse, and Deutsche Bank.

What are the best stocks for the next 10 years? ›

Some stock market sectors, like health care and consumer staples, generally perform better than others in a recession. Healthy large cap stocks also tend to hold up relatively well during downturns. Investing in broad funds can help reduce recession risk through diversification.

Liquidity. Your biggest risk in a recession is the loss of your job, if you're still employed or semi-employed. If you need to tap your savings for living expenses, a cash account is your best bet. Stocks tend to suffer in a recession, and you don't want to have to sell stocks in a falling market.

Buy More Stocks, if you can

If you have saved enough and have other assets that generate income for you, this is the right time to buy more stocks. The reason for this is simple, a stock market crash signifies all the prices are down and this is the perfect opportunity to buy low and sell high.

Stocks: Prices for stocks tend to fall before the downturn begins and almost always before a recession is called. If you're trying to make use of lower prices, you'll likely benefit most if you buy before the recession starts or during its early phase.

When things are looking bleak, consider holding on to your investments. Selling during market lows can be one of the worst things you can do for your portfolio — it locks in losses. When the market evens out down the road, rebalancing may be in order.

GOBankingRates consulted quite a few finance experts and asked them this question and they all said basically the same thing: You need three to six months' worth of living expenses in an easily accessible savings account. The exact amount of cash needed depends on one's income tier and cost of living.

Is cash King during recession? ›

For investors, “cash is king during a recession” sums up the advantages of keeping liquid assets on hand when the economy turns south. From weathering rough markets to going all-in on discounted investments, investors can leverage cash to improve their financial positions.

"In the first half of 2023, the S&P 500 is expected to re-test the lows of 2022, but a pivot from the Federal Reserve could drive an asset recovery later in the year, pushing the S&P 500 to 4,200 by year-end," the investment bank said in a research note.

2008: In response to the housing bubble and subprime mortgage crisis, the S&P 500 lost nearly half its value and took two years to recover.

For calendar-year 2023, the consensus earnings estimate is for a 2% contraction. But that estimate is still coming down, and based on historical patterns, could continue to do so. I could imagine it turning out to be a 10%-contraction year. Sign up for Fidelity Viewpoints weekly email for our latest insights.