Grand Rapids Business Daily

What are good sectors to invest in during a recession?

The economy may be heading into a recession, and I was wondering what sectors would safe plays? Should I invest in CD's and Bonds? I think Energy has made a great run, but will it go higher? Looking for some advice and help. Thanks in advance.

Public Comments

1. Are you talking a US recession or a broader one?
2. Alcohol. Stays up even during a recession.
3. I just asked this yesterday
4. During a recession your two options are t-bills and long government bonds. The second has some risk, especially if we were to have stagflation as during the 80s when interest rates went to 14% to 16%. Maybe you should stick with t-bills.
5. Generally, when the stock market is down, U.S. government and safe municipal bonds, CDs, and money market funds outperform the market. This is because government bonds, CDs, and money market funds offer a low, but constant, rate of return, so they underperform the market when stocks are up, but outperform it when stocks are down.
6. Energy demand growth is linked to economic growth, so energy would probably not be a good sector. Lower your risk profile overall by picking safer things to invest in such as US treasuries and so forth. Commonly held wisdom is to invest in things that do well in recessions, such as discount retailers (people go there as opposed to more expensive shops), health care (when you are sick, it doesn't matter what the economy is doing), etc. But keep in mind the market knows this too, so your there is little opportunity there for a lot of money.
7. Defensive stock sectors like utilities and consumer staples usually hold up well in a recession. Bonds may also do well if this is a typical recession.