Stocks That Do Well in a Recession

Stocks and Sectors That Do Well in a Recession

Are there stocks that do well in a recession? That can seem like a statement 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. Knowing the technical details on a chart is important to know when to buy and sell these sectors.

  1. Here are the stocks that do well in a recession:
  2. $WMT: Walmart
  3. $TGT: Target
  4. Gold Stocks
  5. Silver Stocks
  6. Bonds
  7. $DLTR: Dollar Tree
  8. $MCD: McDonald’s
  9. $K: Kellogg’s
  10. $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 will 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 or day trading is fine if you have a strategy for a recession. 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. 

Stock Sectors That Do Well in a Recession

Motley Fool Website

Stock Market Indexes Stock Market Sectors List List of Stock Symbols
DESCRIPTION Stock indexes list that includes S&P 500, Dow Jones, Nasdaq 100, Russell 2000 and foreign indices
11 sectors, IT, healthcare, energy, real estate, financial, materials, utilities, industrials, consumers, communications
Stock symbols list that includes company name and ticker symbol. Non-listed companies are included

1. Healthcare Stocks

Healthcare stocks are stocks that do well in a recession. No matter how badly the economy is doing, people will always need healthcare. Look at stocks or a healthcare ETF 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 sector’s strength. 

Medical treatments will still be performed. The constant influx of money allows the healthcare sector to make money, regardless of the economy.

The sad reality is that people still get sick. They still need the treatments and medicine to help them. Hence, the healthcare sector is viewed as a defensive one. There will always be money there.

2. Precious Metals

Precious metals like gold, silver, and platinum will always be seen as a haven in a 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.

Gold is seen as the safest bet when uncertainty hits with the political climate or the dollar. People always seem to turn to gold, whether it’s 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 a crash. They’ll be stocks that show strength in a market that is showing panic. Remember not to jump the gun and wait for this sector to trend. Be wary of this sector’s weekly, monthly, and multi-year resistance levels. And don’t expect it to run up too fast overnight. Gold and other precious metals tend 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, certain materials are still heavily used for tech or military applications.

3. Utilities Stocks

Utility stocks are stocks that do well in a recession. However, these stocks are more of a slow grind than a rocket. That can be a good thing, though.

They won’t make you rich. They’re not looking to double overnight or over a few 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 tortuous.

They’ll consistently pay dividends, hold their value, and stay resilient in a crashed economy. This makes them good stocks to trade. While others are losing value, in keeping theirs, the value increases. Think cell phone companies, cable companies, and power makers. Ideally, those with a dividend will be popular!

Stock Sectors That Do Well in a Recession

It can be much like that when the market is in a recession phase. Stocks are either falling in price or not moving much at all. Hence, it is important to know the sectors that do well in a recession or the different strategies to profit from price falls. 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 see if stocks are trading underneath their 50-day moving averages and 200-day moving averages. What is the trend of the stock? Are people fearful of “something” 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 standpoint…They sell.

You should do these things if you’re swing trading or investing longer term. If you 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 of a 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. 

Save Your Money and Shop Smart

In a time of financial difficulty, cost-effective companies are better. When money is tight, people 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 to save money. Where will they stock up on things versus paying top dollar at a premium, more expensive-to-shop stores?

You’ll go to McDonald’s, Wendy’s, or something comparable instead of a more expensive restaurant. Another thing is you may be shopping at less expensive places. 

It’s possible that, at this point, name-brand things aren’t feasible. Hence, there is a need for companies to have their brands. This is why companies like these are stocks that do well in a recession.

Also, consider auto parts stocks. People will fix their vehicles, not purchase new cars and trucks. If so, those auto parts stores should see increased activity and earnings. That’s 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, fixing it up, and stretching those extra miles until the economy is booming again (which will inevitably happen). 

Final Thoughts

Stocks that do well in a recession will always be the companies that are always producing an income. Some sectors 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.

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