"Ask five economists and you'll get five different answers -- six if one went to Harvard."
That old saw somewhat helps explain the market confusion. But there's another famous maxim: "Hope for the best and prepare for the worst." Given that nugget of wisdom, let's look at some stocks that have survived the worst of times in the past.
With a slogan like "Everyday low prices," it's easy to understand why Wal-Mart (NYSE: WMT ) should do well when the economy doesn't. But low prices aren't enough. The retail giant's strong balance sheet and brand recognition also give the company a key advantage during tough times.
During the subprime crisis, while the Dow plummeted over 50%, Wal-Mart's stock remained relatively flat. Investors got paid a dividend while they weathered the storm. Ironically, it's during the supposed recovery that Wal-Mart has had more trouble, with nine straight quarters of falling same-store sales.
Another seemingly recession-proof retailer is Family Dollar Stores (NYSE: FDO ) . Again, I'll leave it to the imagination of the reader to ascertain why Family Dollar Stores would thrive in an economic downturn. During the subprime crisis, not only did the company survive but it actually thrived. Family Dollar's stock saw strong positive returns even as the Dow got cut in half.
On the food front, there's McDonald's (NYSE: MCD ) . McDonald's CEO says the company is "recession resistant." Apparently so, as McDonald's stock rose in 2008 compared to the S&P 500's 37% drop. For the sake of comparison, during the same time frame, Wendy's (NYSE: WEN ) stock lost more than 40%. Apparently, a McFlurry is a better way to cope with financial despair than a Frosty.
The bottom line
Don't stash your savings under the mattress just yet. There are still ways to make or preserve cash in a bear market. And it's possible another recession will be averted, but you should always make room for some safety stocks in your portfolio.