But with fears of a recession mounting due to runaway inflation and continued plans from the Federal Reserve to jack up interest rates, now may be the time for investors to find true “recession resistant” stocks.
Typically, shares of electric and water utilities, consumer staples like food and drinks (both booze and non-alcoholic) hold up better in a downturn, especially since many of those stocks pay steady dividends.
Analysts at Wells Fargo said in a midyear market report this week that they now “favor a full, market-weight allocation” of consumer staples and utilities stocks “due to their traditional resilience in a slowing economy.”
“Food staples are hard to substitute and the last items on which households tend to cut spending,” said analysts at BNP Paribas in a report this week, adding that “a fall in demand is unlikely” despite “the breadth of food price increases.”
The Wells Fargo analysts added in their report that food and staples retailers, i.e. supermarkets, are now on their list of “favorable sub-industries” within the broader consumer sector “because we expect this group to benefit from an increasingly value-conscious consumer.”
Energy stocks may keep gushing
And then there’s oil. Energy stocks have been big market winners this year, largely due to the spike in crude prices that’s taken place since Russia’s invasion of Ukraine.
Even though there are growing concerns about surging oil and gas prices potentially pushing the economy into recession, some experts still think energy stocks will hold up better than other parts of the market.
“Profits in the energy sector are rising much faster than the sector’s overall valuation, so there remains plenty of upside,” David Trainer, CEO of investment research firm New Constructs, said in a report.
“We believe energy prices will remain elevated for the foreseeable future, as demand for fossil fuels is not declining as fast as people think and alternative energy is not as available as people think,” Trainer added.
So with all due respect to Uber’s CEO, the recession resistant companies of old are likely to remain the best stocks to own now if you’re worried about a possible downturn and are looking for a safe haven.