The idea of a recession is enough to give most people the jitters - from consumers and job seekers to investors and business owners. These periods of low economic activity can drive prices up, lead to higher unemployment levels, and can turn into an ‘economic depression’ that could last years. Recessions are also known for sending stock prices plummeting.
Last month, low figures on the global stock markets, combined with high unemployment in the US, caused concern that we might soon see an economic slowdown in America - with some analysts and journalists saying it could turn into a recession.
On a global scale, while it’s not currently predicted that the world will experience any major recessions in the immediate future, UN Trade and Development (UNCTAD) did estimate in April this year that global economic growth would only reach 2.6% in 2024. 2.5% growth is typically indicative of a recession - only just below the UN’s prediction. It’s clear to see that after the worldwide recession caused by the pandemic at the start of the decade, we’re not quite out of the woods yet.
Even if a recession isn’t on the way, there’s no reason not to pad your investment portfolio with some stocks that could help you weather any eventualities.
Our Top Stocks for Recessions neme 📱
Here at Nemo, we like to make investing less complicated, and of the ways we do this is by gathering together available stocks into nemes or categories, where you can find investment opportunities that have something in common with each other.
One of these nemes is Top Stocks For Recessions, where we have collected stocks that have a history of staying strong during economic downturns. All these businesses have shown that they are adaptable in the face of difficult conditions, continuing to deliver profits through a variety of revenue streams. Here are just a few of the stocks listed in this neme.
Thermo Fisher Scientific: Thermo Fisher Scientific manufactures and sells laboratory equipment, and offers a range of pharmaceutical and biotechnology services, with customers including hospitals and commercial laboratories around the world. As we mentioned, the pharmaceutical industry and, more broadly, healthcare, is a sector that is generally able to withstand recessions. This life science and clinical research company’s stock is currently a ‘Buy’. In the next 12 months, its price is predicted to increase from $615.07 to $626.36. If you invested $1000, you might profit $18.35.
Microsoft Corporation: One of the Magnificent Seven, the most significant tech stocks in the US, Microsoft has been called ‘recession-resistant’ in the past by analysts. Part of the reason for this is the company has such a massive customer base, including many corporate clients. It also has a broad range of revenue streams, operating in spaces from gaming and AI to cloud computing, as well as offering Windows, one of the most popular operating systems. Microsoft is currently rated as a ‘Buy’ and is predicted to increase in value from $417.14 to $488.04 in the next 12 months - growth of 17%.
McDonald’s Corporation: During the Great Recession in the late 2000s, McDonalds actually outperformed the S&P 500 at times, the stock market index that tracks the 500 biggest companies on the US stock exchange. It’s thought by some analysts that the company may be able to withstand future recessions well, too. McDonald’s is the world’s most valuable fast food chain, with a brand value of $221.9 billion and it operates in over 120 countries and territories. Its stock is predicted to rise in value by 8.45% over the next 12 months.
Industries that typically struggle 🌧️
Retail is one industry that often experiences difficulty during recessions. With consumers having much less disposable income, they’re less likely to shop across many different categories. Food retail and other businesses that sell essential goods typically don't suffer as much, but businesses that sell clothing, furniture, electronics, luxury goods - and anything else that might be considered a discretionary expense - all see a drop in sales when economic times are hard.
Industries and sectors that could remain strong 🌤️
- Pharmaceuticals: The global pharmaceuticals industry was estimated to be worth US$1,559.53 billion in 2023. Spending on medicines does not usually significantly drop during economic downturns - health will always be a priority. However, even this stalwart industry does not come through a recession totally unaffected - pharmaceutical companies may lower their spending on R&D, and generic rather than brand name drugs may become more popular.
- Utilities: Like medicine, utilities are an everyday cost that don’t go away during a recession. Another reason why utilities stocks might be a good investment during an economic downturn is that they are more likely than some other types of stocks to offer dividends, helping investors build up an additional income stream.
Recent recessions 📉
We thought it might be helpful to give a simple overview of what took place during some of the most significant recent global economic downturns. These examples go to show how a complex network of factors can have a major impact on the world economy.
2020-2022
The Covid-19 Recession affected every advanced economy around the world, starting with the 2020 stock market crash in February of that year. The lockdowns which governments introduced to stop the spread of the virus led to a decline in many industries (especially tourism and hospitality). Resulting pressure on banks led to a stock market crash.
2007-2009
This period of time is known as the Great Recession, which followed the Global Financial Crisis. It was the most severe worldwide economic downturn since the Great Depression of the 1930s. In the US, it was linked to the subprime mortgage crisis, which was caused by mortgage lenders making loans that borrowers were unable to keep up with, as well as risk taking behaviour by banks.
1980-1982
This recession affected most of the world between 1980 and 1982. It was linked to high inflation in major economies as well as to the 1979 energy crisis, when a drop in oil production sent the price of crude oil soaring. Canada, Japan, the US, and the UK were particularly affected.
So there we have it. You can see that while recessions can have a huge effect on business, the stock market and daily life, it’s not a sure thing that every stock on the market will drop in value. Some companies can even continue to perform well, like the example of McDonald’s beating the S&P 500 during the Great Recession.
If you’re looking to get into investing, try Nemo today - we analyse hundreds of stocks, tracking their movements and predicting their changes over the coming months, to make sure that you don’t miss out.
All stock information is correct at the time of writing.
