PFE), Johnson %26 Johnson (NJ), Kraft Heinz Co. With stocks falling in a bear market this year amid fears that aggressive Federal Reserve rate hikes will drive the economy into an imminent recession, major Wall Street firms are advising investors to stick with stocks that have historically performed well during recent recessions, such as consumer and health companies. A final reminder is that stocks and industries that are doing well during a recession may not always perform well when the economy recovers. Wells Fargo analysts said in a recent report that investors should “favor a full and weighted allocation of basic consumer and utility stocks in the market” because of their “traditional resilience” in a slowing economy.
The key to creating a diversified portfolio is not to have several stocks, but to invest in companies from various sectors, including those that are recession-resistant. My theory is that these stocks are already trading for a severe recession and could hit bottom before the rest. They offer investors somewhat recession-proof stocks that they can hold on to when economic turmoil arises. Any diversified portfolio must include a combination of financially sound front-line stocks that have the financial strength needed to withstand a recession.
The stock has a price-benefit ratio, based on estimated earnings for next year, of 13 and yields 3.0%. Cyclical stocks (companies in sectors that are very sensitive to the economic cycle) tend to be the most affected during a recession. While personal vacation travel decreases during recessions, there is still a need to move products to store shelves. There are many reasons why these particular stocks increased, and the impact of each economic recession is different.
A sharp decline in the stock market is usually an indicator of an impending recession, that is, a temporary period of economic decline. Many investors found it easy to create a portfolio that would lean towards these growth-focused sectors by buying stocks related to megatrends such as 5G, streaming services, cloud computing and social media. Therefore, my recommendation is that investors strive to achieve a balance between traditional defensive actions and exceptionally growing companies that have taken a big hit. That's why it's important to diversify your portfolio to better withstand a recession by adding some defensive or countercyclical actions in the consumer commodities, public services, bargain retail and health care industries.
Advisors also point out that securities stocks and commercial real estate are potentially advantageous investments during recessions.