Three stocks that outperformed the S&P 500 during the 2007-09 Great Recession were Gilead Sciences (GILD -0.18%), McDonald's (MCD 0.37%), and Walmart (WMT -1.40%).
The best recession stocks include consumer staples, utilities and healthcare companies, all of which produce goods and services that consumers can't do without, no matter how bad the economy gets.
The best performing assets were hedge funds, US treasuries and gold. The worst performing assets were stocks, junk bonds and listed property investments. These returns do also need to be viewed in the context of long-term returns.
2008: In response to the housing bubble and subprime mortgage crisis, the S&P 500 lost nearly half its value and took two years to recover.
"In the first half of 2023, the S&P 500 is expected to re-test the lows of 2022, but a pivot from the Federal Reserve could drive an asset recovery later in the year, pushing the S&P 500 to 4,200 by year-end," the investment bank said in a research note.
Looking ahead to second-quarter reports, analysts are calling for S&P 500 earnings to fall 6.4% compared to a year ago. Fortunately, analysts are projecting S&P 500 earnings growth will rebound back into positive territory in the second half of 2023.
A recession is “a significant decline in economic activity spread across the economy, lasting more than a few months.” Industries affected most include retail, restaurants, travel/tourism, leisure/hospitality, service purveyors, real estate, & manufacturing/warehouse.
Consumer staples, including toothpaste, soap, and shampoo, enjoy a steady demand for their products during recessions and other emergencies, such as pandemics. Discount stores often do incredibly well during recessions because their staple products are cheaper.
While gold prices may rise through a coming recession, there are a few different reasons why gold makes a good choice for investors during periods of economic downturn. For one, it's a great way to diversify.
— Some of the first stocks to rebound from a recession are those in highly cyclical industries such as steel, mining, and industrial fabrication. As such, U.S. Steel stock will start to reflect investors' expectations of an inflection point in economic activity well before the end of a recession.
Contrary to investor expectations, several growth stocks including Apple Inc. (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN), and Netflix Inc. (NASDAQ:NFLX) grew during the 2008 recession, so investors don't have to ignore growth stocks to be conservative.
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.
Michael Burry rose to fame after he predicted the 2008 U.S. housing crash and managed to net $100 million in personal profits, and another $700 million for his investors with a few lucrative, out-of-consensus bets.
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. When the market evens out down the road, rebalancing may be in order.
(NYSE:WMT) are often considered to be money-makers in times of recession. According to McKinsey report published in 2009, recession-resistant industries include consumer staples, healthcare, telecommunication services, and utilities, among more.
While no investment is guaranteed to be recession-proof, some tend to perform better than others during downturns. These include health care and consumer staples stocks (or funds tracking those sectors), large-cap stocks and income investments.
Defensive Industries
Historically, the industries considered to be the most defensive and better placed to fare reasonably during recessions are utilities, health care, and consumer staples.
The stock market is poised for a strong rally in 2024 as corporate earnings impress and trillions of dollars of sidelined cash gets invested, according to a Monday note from Bank of America.
For calendar-year 2023, the consensus earnings estimate is for a 2% contraction. But that estimate is still coming down, and based on historical patterns, could continue to do so.
Stocks expected to rise over next year
Through the first quarter of 2024, analysts expect the S&P 500 to climb 8 percent, to 4,289 from 3,970.99 when the survey closed on March 24. That follows a year of optimism in 2022, when each quarterly survey predicted that the market would be higher in a year.