Companies that make basic necessities like consumer staples and food will always have demand, even during an economic downturn - as people need to prepare meals, wash, clean, and so on. Discount stores often do relatively better during recessions because their staple products are cheaper.
The Home Depot, Inc. (NYSE:HD), like The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and Walmart Inc. (NYSE:WMT), is a company that has managed to beat the odds during recessions in the past, making it a safe option for investors as well.
Fewer jobs and higher unemployment abound
One unfortunate truth of recessions is that millions of people often lose their jobs. As spending slows and the economy shrinks, business profits go down, too. To keep their profit margins afloat, they often slow hiring and start firing to trim the budget.
Food and drink
Food and drink continue to be essentials during economic downturns. You may think that consumers turn to rice, potatoes, and tap water when money is tight, but this isn't always this case! Many times, luxury food and drink products perform well for a few reasons: People need comfort (like with candy).
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.
What would a recession mean for Australia? If Australia enters a recession, many people will have a tough time, whether through job loss, home loss, or even just a struggle to pay the bills. Whole markets will tank or lose significant value and many businesses will likely go bankrupt.
In June, Commsec chief economist Craig James told Canstar that Australia has a 33% chance of falling into recession in 2023, and that if it did, it would likely be a short-lived contraction. “The sharp rise in interest rates means that the chances of a recession have risen. Perhaps a one-in-three chance.
Corporate America (especially banks), the super-rich and the index-investing concept benefited greatly from the financial crisis. Savers, low-skilled workers, troubled homeowners and stock exchanges fared the worst. Never let a crisis go to waste, says an old rule of politics.
The jobs that are the “first to go” when a recession hits are the ones that depend on consumer spending and people having copious disposable income, says Kory Kantenga, a senior economist at LinkedIn. Retail, restaurants, hotels and real estate are some of the businesses often hurt during a recession.
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.
Having an emergency fund, strong credit, multiple sources of income, and living within your means are all important tools that can help you get through a rough patch in the economy in one piece financially.
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.
If you're young and still a while away from retirement, generally the best thing to do with your super before or during a recession is to leave it alone. If you've got your super in a balanced or growth fund (which the majority of Australians do), your super will already be diversified across a range of assets.
Australia's economy was buoyed by large resource exports to China, whose economy rebounded quickly after the initial GFC shock (mainly due to expansionary fiscal policy).
One way to make it easier to not sell during the next recession is to put a portion of your portfolio in low-volatility investments, such as bonds. The difference between shares and bonds is that with shares, you are part owner of a company, while a bond is a loan.
Your money will not be lost. It is usually transferred to another bank with FDIC insurance, or you'll receive a check. Savings accounts, checking accounts, money market accounts, and CDs are examples of federally insured bank accounts.
It's normal to feel nervous when you hear about a possible recession or rising inflation—they're phenomena out of our control. And if you weren't raised with good money-saving and spending habits, they can catch you off-guard. That's why saving is so important.
For one thing, recessions are generally accompanied by rising unemployment, and more people out of work means more people are likely to have trouble keeping up with their bills. As a result, banks often see a significant rise in loan defaults (and, therefore, losses) during a recession.
Historically, gold prices have remained stable — or even experienced an upswing — during recessionary periods. According to data from Schroders, a global investment manager, both gold and gold equities have performed well through five of the past seven recessions going back to the early 1970s.
Stockpiling food items, first aid supplies, and other survival equipment is a fantastic place to start preparing for a potential economic depression, given likely grocery store shortages. However, there are other important tasks to consider that don't revolve around stocking up on certain things.