Recession chatter has been building in 2024, and Fred Hubler notes that Former Federal Reserve Chairman Alan Greenspan has called a recession the likely outcome of the Fed’s aggressive rate hikes meant to curb inflation, joining a growing number of economists expecting an economic downturn. Since a recession is generally defined as two consecutive quarters of negative GDP growth, Hubler explains what that actually means for a portfolio.
His rule of thumb for finding recession-resilient investments: figure out whether the underlying company provides a “must have” or just a “like to have” for the end consumer, since people always need food, basic consumer staples, and energy. He notes recessions can also expose weaknesses in companies that expanded too aggressively or were overexposed to shifts in consumer spending. On the flip side, he flags highly leveraged, cyclical, or speculative assets, including high-yield bonds, along with “nice to have” businesses, as the most vulnerable during a downturn.
The framework is simple: ask whether a business sells something people can live without, and you’ll have a good sense of how it performs when the economy slows.
Get Hubler’s full recession article on Forbes, Top Alt Strategies For A Recession.