Are there stocks that do well in a recession? That can seem like a statement that’s counter to common sense, however it’s not. Gold and silver, consumer staples and defense stocks are sectors that still profit, week after week, even in a recession. It’s important to know the techncials on a chart to know when to buy and sell these sectors.
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What Are the Stocks That Do Well in a Recession?
- Here are the stocks that do well in a recession:
- $WMT: Walmart
- $TGT: Target
- Gold Stocks
- Silver Stocks
- Bonds
- $DLTR: Dollar Tree
- $MCD: McDonald’s
- $K: Kellogg’s
- $LMT & $GD during times of war
Traders can be wary of downward trending markets. This is because they either don’t know the stocks that do well in a recession or they don’t know how to trade a bear market. If you’re trying to master the stock market, you’re going to want to focus on learning how to adapt and improvise during these trend changes.
There are different ways to trade a market in recession; whether trading options for a living or shorting stocks. Swing trading or day trading, either is fine to do during a recession, as long as you have a strategy. Have you ever traded during a bearish day? If you’re more of a long trader, those down days can be very difficult to trade. They make you want to toss your trading computer out the window.
Sectors
When the market is in a recession phase, it can be a lot like that. Stocks are either falling in price or not moving much at all. Hence the importance of knowing the sectors that do well in a recession or the different strategies to profit on price falling. Education and research is the key.
Make sure you’re checking the charts. You don’t want a recession to come as a surprise. I look to see if stocks are trading underneath their 50 day moving average, and 200 day moving averages. What is the trend of the stock? Are people fearful of “something” that’s causing them to sell stocks? The markets are technical. When traders and high frequency algorithms see things they don’t like, from a technical chart stand point…They sell.
These are things you should do if you’re swing trading or investing longer term. If you just look at the charts of the stocks you’re trading, you can miss the imminent fall. As a result, make sure you look at charts like the S&P Futures. Come into our trade rooms and learn technical analysis. A few weeks of learning the technicals could be a game changer for your portfolio.
Then what happens? All the sudden you’re losing in your brokerage account. Depending on the strategy you’re using, you can either weather the storm or you’re taking a loss.
Healthcare Stocks
Healthcare stocks are stocks that do well in a recession. No matter how badly the economy is doing, there are always going to be people that need healthcare. Look at stocks or a healthcare ETF to be trading above their 50 and 200 day moving averages.
Pharmaceutical companies are a great investment during a recession. The reason for this is because people need their medicine. No matter the economic climate people will find a way to get the medicine they need. XLV is a healthcare ETF that I monitor to look at the strength of the sector.
Medical treatments will still be performed. The constant influx of money allows the healthcare sector to make money no matter the economy.
That sad reality is that people still get sick. They still need the treatments and medicine to help them. Hence the healthcare sector being viewed as a defensive one. There will always be money there.
Precious Metals
Precious metals like gold, silver and platinum are always going to be seen as a safe haven in a time of recession. Mining companies are stocks that do well in a recession. GLD is a staple ETF that I check the trend to see where this sector might be headed, or check gold futures.
When uncertainty hits with the political climate or the dollar, gold is seen as the safest bet. People always seem to turn to gold whether its the miners or physical gold.
Silver and platinum have many practical uses in everyday life. In light of this, they can be more volatile. Volatility is good though; especially when you are good at trading the patterns formed by it.
Precious metals are seen as insulation from world chaos, weak markets and ultimately a crash. They’ll be stocks that show strength in a market that is showing panic. Remember to not jump the gun, wait for this sector to be trending. Be wary of weekly, monthly, and mutli-year resistance levels in this sector. And don’t expect it to run up too fast overnight. Gold, and other precious metals have a tendency to move slowly.
I also look at lithium and other metals used to make batteries. People always need power, electricity, and materials for goods and services, even in recessions, there are certain materials that are still heavily used for tech or military applications.
Utilities
Utility stocks are stocks that do well in a recession. However, these stocks are more of a slow grind then a rocket. That can be a good thing though.
They won’t make you rich. They’re not looking to double overnight or even over the course of a couple years. However, it’s like the story of the tortuous and the hare.
The tortuous wasn’t flashy. He didn’t take off like a rocket but who won the race? Slow and steady won the race. In this case, utilities are the tortuous.
They’ll consistently pay dividends, hold their value and stay resilient in an economy that has crashed. This makes them good stocks to trade. While others are losing value, in keeping theirs, the value increases. Think cell phone companies, cable companies, power makers. Ideally those with a dividend will be popular!
Save Your Money and Shop Smart
In a time of financial difficulty, the companies that are cost effective to better. When money is tight people are going to shop and eat at places that don’t cost as much.
Stores like Walmart or fast food companies will see an increase in profit. You don’t want to cook but money is tight in a recession so what do you do? Think of what people need to buy, and how they need to save money. Where are they going to go to stock up on things versus paying top dollar at premium, more expensive to shop stores?
You’re going to go to McDonald’s, Wendy’s or something comparable instead of a more expensive restaurant. Another thing is you may be shopping at places that are less expensive.
It’s possible that at this point in time, name brand things aren’t feasible. Hence the need for companies that have their off brands. This is why companies like these are stocks that do well in a recession.
Also consider auto parts stocks. People will be fixing their vehicles, not purchasing brand new cars and trucks. Those auto parts stores should see increase activity, and earnings, if this is the case. Thing what the middle america is thinking. They will not be out buying a brand new ford truck for 75 grand. They’ll be buying a used vehicle and fixing it up. Stretching those extra miles until the economy is booming again (which will inevitably happen).
Bottom Line
Stocks that do well in a recession are going to be the companies that are always producing an income. There are sectors that will always do business even in a recession. These will be the stocks to look at when you’re looking to make a profit. Take our online courses to learn how to make money in a recession.
