What Does Recession Resistant Mean?

An entity that is not significantly affected by recessions is recess🌄ion resistant. Recession resistance can apply to products, companies, jobs, or industries.

For example, products such as gasoline and basic food items may be considered recession resistant because people will continue to consume them whether or not there's an economic downturn.

How Recession Resistance Works

Many investors include assets in their 澳洲幸运5官方开奖结果体彩网:portfolios that are expected to perform well in hard economic times. Industries thought to be recession resistant include 澳洲幸运5官方开奖结果体彩网:consumer staples, alcoholic beverage🍎 manufactur🌱ers, discount retailers, and funeral service providers.

These industries supply goods and services that economists describe as either income inelastic or inferior goods. Income-澳洲幸运5官方开奖结果体彩网:inelastic demand is when the demand for a good doesn’t change much when incomes change. People tend to keep buying basic staples, for example, even when their incomes fall during a recession. Inferior goods are those where demand🌱 actually increases when incomes fall. Lower-c🐲ost consumer goods from discount retailers fall into this category.

In addition to belonging to recession-resistant industries, resilient companies are likely to have strong 澳洲幸运5官方开奖结果体彩网:balance sheets. This is especially true if the company has little debt and healthy 澳洲幸运5官方开奖结果体彩网:cash flows—this will allow them to maintain operations and even take advantage of the depressed market to make new investments more cheaply. By contrast, companies with a lot of debt may fall behind as a growing share of their revenue is absorbed by debt payments.

澳洲幸运5官方开奖结果体彩网:Dividend-paying stocks are another good place to invest when times are tough. Companies that pay dividends tend to be in 澳洲幸运5官方开奖结果体彩网:mature industries. Look for companies that have maintained and expanded their dividends, including through past recessions, and that have ample resourc�ℱ�es to continue making payments.

R🐎ecession-Resistant Stocks During the Great Recession (2007–2009)

The S&P 500 Index declined by more than 40% from January 2008 to January 2009, one of its worst-ever annual declines. The years around this event have come to be known as the 澳洲幸运5官方开奖结果体彩网:Great Recession.

But recession-resistant securities did far better than the stock market as a whole. During that same time frame, shares in 澳洲幸运5官方开奖结果体彩网:Walmart Inc. (WMT) declined by only 3.7%, while shares in 澳洲幸运5官方开奖结果体彩网:McDonald’s Corp. (MCD) virtually broke even. Holders of fixed-income securities did even better than investors in these stocks, with 澳洲幸运5官方开奖结果体彩网:10-year Treasury securities starting at 5.65% in 1999 and falling to 3.26% in 2009.

Recession-Re🦄sistant Stocks During the Most Recent Recession (2020)

The latest recession in early 2020 was caused by the COVID-19 pandemic, which devastated populations and economies around the world. While the recession technically only lasted two months, its impact extended for several months ♏afterward.

However, as in prior recessions, not every stock suffered as much as others. In particular, low-cost retailers like Walmart outperformed the S&P 500 by 5.5%, according to CFRA, a stock research and rating company. Other stocks in recession-resistant sectors, such as consumer staples, home improvement, and Big Pharma, also outperformed the S&P 500, according to CFRA.

Among other recession-r𓆏esilient com🐷panies that outperformed the S&P 500 in the 2020 recession, according to CFRA, were:

• Abbott Laboratories (ABT), at 9.8% over the S&P 500
• The Home Depot Inc. (HD), at 5.3%
• Synopsis Inc. (SNPS), a semiconductor/software testing firm, at 70%
• Accenture PLC (ACN), at 7.8%
• T-Mobile US Inc. (TMUS), at 55.7%
• 澳洲幸运5官方开奖结果体彩网:The Walt Disney Co. (DIS), at 9%

The Bottom Line

Recession-resistant sto🍌cks are those shares that do not fall as much as the market or post positive gains during a recession. The key sectors to focus on when trying to buy recession-resistant stocks are typically those that provide necessary goods and services no matter what stage the business cycle is in.

Key sectors to follow are consumer staples, utilities, discount retailers, and pharmaceuticals. These sectors will likely not be immune to overall stock market declines, but they may represent a good buying opportunity at a discounte🎀d price courtesy of the recession.