Food and grocery items Food is on top of the necessities list. But obviously, not all food items will be popular during a downturn. The best-selling recession-proof food items are the grocery essentials – things necessary for meal preparation, such as cooking oils of flour and baking essentials.
The businesses that sell essential goods and services around common needs such as food, information technology (IT) services, or plumbing and electrical services will likely have steady demand during a recession because these are considered essential in good times and bad.
What are some examples of businesses that thrive in recession? Due to the elasticity of demand, recession-proof industries are usually in essential services, like health care, senior services, grocery stores, and maintenance, such as plumbing and electrical.
Historically, during times of recession, the value of gold has sometimes increased. For example, in 1973 and 1974, the stock market fell 17.37% and 29.72%, respectively. But during those same years, the price of gold increased 73.49% and 67.04%. Similar trends can be seen in 2002 and 2008.
When things are looking bleak, consider holding on to your investments. Selling during market lows can be one of the worst things you can do for your portfolio — it locks in losses.
During an economic downturn, it's crucial to control your spending. Try to avoid taking on new debt you don't need, like a house or car. Look critically at smaller expenses, too — there's no reason to keep paying for things you don't use.
And having cash handy is vital during a recession in case of a job loss or other reduction in income. And as rates rise your cash will earn more money in a savings account. Reduce debt: If you have high-interest debt, pay it down if you can.
Reduced business investment: Businesses tend to reduce their investment during a recession, reducing economic activities. The decline in asset prices: Asset prices such as housing and stock prices tend to decline during a recession.
Industries affected most include retail, restaurants, travel/tourism, leisure/hospitality, service purveyors, real estate, & manufacturing/warehouse.
Higher interest rates that often coincide with the early stages of a recession provide an advantage to savers, while lower interest rates moving out of a recession can benefit homebuyers. Investors may be able to find bargains on assets that have decreased in price during a recession.
5 types of businesses to avoid opening during a recession
While there are advantages and disadvantages to starting a business in a recession, luxury retail, hospitality, manufacturing, construction, and home services are known to be hit hard during tough economic times.
And because most consumers become more price sensitive and less brand loyal during recessions, they can be expected to seek out favorite products and brands at reduced prices or settle for less-preferred alternatives. For example, they may choose cheaper private labels or switch from organic to nonorganic foods.
Australia is moving closer towards a recession and its chances of experiencing one in the next year is sitting at around 50 per cent, according to economists.
In general, a recession lasts anywhere from six to 18 months. For example, the Great Recession that started in December 2007 lasted 18 months. But the recession prompted by the pandemic in 2020 only lasted two months. When a recession is on the horizon, it's impossible to know how long it will last.
This history may suggest that selling stocks before a recession arrives and buying them after it departs would be a smart strategy. But savvy investors know that it is extremely difficult to do this successfully and often a recipe for locking in losses instead.
In short, if you have less than $250,000 in your account at an FDIC-insured US bank, then you almost certainly have nothing to worry about. Each deposit account owner will be insured up to $250,000 - so, for example, if you have a joint account with your spouse, your money will be insured up to $500,000.
Pro: Cash means liquidity
One of the biggest risks to individuals in a recession is the threat of job loss or unaffordable bills. With a solid cash account behind you, it's easier to navigate uncertainty more confidently knowing that you're financially prepared.
GOBankingRates consulted quite a few finance experts and asked them this question and they all said basically the same thing: You need three to six months' worth of living expenses in an easily accessible savings account. The exact amount of cash needed depends on one's income tier and cost of living.
A recession is a situation in which something's gone terribly wrong with the economy. You'll see businesses closing down. Workers will be losing their jobs. Unemployment will rise.
Australia has been in a lengthy recession before, but it was a long time ago. The first recession, since the development of the United Nations' System of National Accounts, was recorded 1974-75, the second in 1982-83 and the most recent recession occurred in 1991-1992.
Gold might outperform other investments during recessions, but in the long run, it doesn't usually deliver as many returns as higher-risk assets. So if you're looking to maximize your earnings and really be aggressive with your investment portfolio, gold may not be the right choice.
Consumer staples, utilities, healthcare, streaming, discount store, and even fast food stocks all have a record of positive performance during recessions. Commodities like gold are yet another category of recession-proof stocks because when all else fails, gold stays up.