Why do some industries cope better in recessions than others?

Certain industries tend to have more stable cash flow than others, and some sell products people need rather than things people want. Utilities and healthcare businesses are good examples.

Are bonds better than stocks during recessions?

The short answer is "it depends." In some recessions, stocks have actually produced positive returns. However, in most recessions, market crashes, and turbulent environments, bonds tend to hold up well and exhibit much lower volatility.

How long do recessions last?

Recessions can last from a few months to a few years and can vary significantly in severity. Despite what you might hear and see in the financial media, it's important for investors to realize that there is no such thing as a "typical" recession.

Is cash king during a recession?

Having cash when a recession hits is certainly a valuable asset. It gives you the financial flexibility to take advantage of investment opportunities as they arise and provides peace of mind in your personal finances.

Should I sell my stocks when economists predict a recession?

No, you shouldn't sell when economists predict a recession. For one thing, economists cannot accurately predict when a recession will start. Trying to time the market is a losing battle. Plus, stocks often react just as much to recession fears as they do to a recession itself. Recessions can last for a couple of months or years. By selling stocks in anticipation of a recession, you'll give up more upside potential than you'll gain in downside protection.

Is it possible to invest during a recession without taking on excessive risk?

There's a broad spectrum of risk in the stock market, and some companies are far more recession-resistant than others. Companies that sell things people need, such as utilities or grocery stores, tend to hold up quite well and could be strong investments if you're worried about a recession.

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Here's your guide to navigating recessions the right way.

By Matthew Frankel, CFP – Updated Sep 4, 2026 at 12:38 PM EST | Fact-checked by Frank Bass

Key Points

S&P 500 index funds offer stable long-term growth even when purchased at market peaks.
Consumer staples and utilities remain profitable during recessions, ensuring consistent dividends.
Investing consistently through dollar-cost averaging minimizes risks during volatile markets.

A recession is a period of declining gross domestic product (GDP), generally defined as a sustained decline in GDP over two or more consecutive quarters. But what should you invest in during a recession?

Recessions aren't just about poor economic growth. They are often accompanied by several other characteristics. These can include widespread job losses, fewer available jobs, and more government relief (think stimulus payments and increased unemployment benefits).

A recession doesn't have to mean losses. While stock prices often fall, economic downturns historically create some of the best buying opportunities for long-term investors. The key is knowing where to put your money and, just as importantly, what to avoid.

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What to invest in during a recession

The best recession investments generally share a common trait: they hold their value because demand for what they sell doesn't disappear when the economy contracts. Here's where to focus:

Index funds
Consumer staples stocks
Utilities stocks
Healthcare stocks
Dividend stocks
U.S. Treasuries

Here's a little more about why each of these can be a good recession investment.

Index funds

S&P 500 index funds are one of the most reliable recession investments for long-term investors. By buying an index fund, you're effectively betting on the long-term success of American business, and over any extended period, that's been a bet that paid off.

Consumer staples stocks

Companies that sell everyday essentials -- groceries, household goods, personal care products -- tend to maintain revenue during recessions because demand for these products is largely non-negotiable. Procter & Gamble (PG -0.59%), Costco (COST -0.61%), and Kroger (KR -2.37%) are well-known examples of consumer staples stocks that have weathered the storm before.

Utilities stocks

Electric, water, and gas utilities are among the most defensive investments available. Consumers don't stop paying their power bills during a recession, so revenue remains relatively predictable. Utilities stocks also tend to pay consistent dividends, providing income even when share prices dip.

Healthcare stocks

People get sick regardless of economic conditions. Pharmaceutical companies, medical device makers, and health insurers all benefit from this non-discretionary demand. Johnson & Johnson, UnitedHealth Group, and Abbott Laboratories are among the sector's most financially durable names.

Dividend stocks

High-quality dividend stocks deserve special attention during recessions. Even when a stock's price falls, the dividend keeps paying, which cushions paper losses and reduces the pressure to sell at the wrong time. Companies that have maintained and grown their dividends through multiple recessions tend to be among the most financially resilient businesses available.

U.S. Treasury bonds

When economic uncertainty rises, investors flood into government bonds, pushing prices up. Treasuries, particularly longer-duration ones, have historically delivered strong returns during recessions, even as stocks fell. For most individual investors, a Treasury bond ETF is the simplest way to get this exposure.

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What to avoid during a recession

A recession is a good time to avoid speculating, especially on stocks that have taken the worst beating. Weaker companies often go bankrupt during recessions, and while stocks that have fallen by 80%, 90%, or even more might seem like bargains, they are usually cheap for a reason. Just remember -- a broken business at an excellent price is still a broken business.

That said, the most important thing isn't necessarily what not to invest in, but rather which behaviors to avoid. Specifically:

Don't try to time the bottom. As previously mentioned, trying to time the market is a losing battle. Wouldn't it have been great if you had invested as much as you possibly could on March 9, 2009, when the S&P 500 was at the lowest levels of the financial crisis? Sure, but it would also be great if you knew tomorrow's lottery numbers in advance. Nobody knows when the market will hit bottom.
Don't try to day trade. Long-term investing is a far more certain path to wealth in the stock market. Day trading as an investment strategy is generally best left to professionals at major investment firms.
Don't sell just because your stock price has gone down. Last but certainly not least, one thing that's extremely important to avoid during recessions is panic selling when stocks fall. The goal of investing is to buy low and sell high, but panic selling is the exact opposite.

How to invest during a recession

Knowing what to buy is only half the equation. During recessions, stocks can be highly volatile, which makes the way you invest just as important as what you choose.

Rather than putting a large sum to work all at once, consider dollar-cost averaging -- investing fixed amounts at regular intervals regardless of where prices are. This approach means you'll naturally buy more shares when prices are lower and fewer when they're higher, reducing the risk of poor timing without requiring you to predict the market's direction.

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Real-world results of investing in recessions

Long-term investors who put money to work during a recession have done pretty well over time. Looking at data from three modern recessions -- the Great Recession from 2008-09, the recession in 2001 fueled by the dot-com crash and the 9/11 attacks, and the 1990-91 recession that followed a long economic expansion in the 1980s -- you might be surprised at the long-term results, even if investors' timing wasn't perfect.

Obviously, if you invest at the market's lowest point during a recession, you're likely going to do quite well over time. However, one thing investors should realize is that there's no way to know when the market will reach an inflection point. There's no crystal ball that can tell you when the market will bottom. In other words, you are probably not going to invest at the absolutely perfect time.

But you don't have to. Even if you had invested in an S&P 500 index fund at the worst possible moment in 2007 -- the market's peak before the financial crisis began -- you would have achieved a 524% total return in the roughly 18-year period through the end of 2025. The same can be said for those who invested at the worst points during the dot-com boom and before the other recessions mentioned.

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The role of diversification during a recession

Not all recessions hit every sector equally. The 2008-2009 downturn devastated bank stocks while utilities held up relatively well. A genuinely diversified portfolio, spread across defensive sectors, bonds, and potentially international holdings, limits the damage any single area can do to your overall returns.

Maintaining a mix of stocks and bonds is particularly important here, since bonds tend to appreciate as investors seek safety, often offsetting equity losses during the worst of a downturn.

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The bottom line

The best approach to recession investing isn't dramatically different from good investing in any environment: focus on quality businesses, hold for the long term, and don't let short-term volatility push you into bad decisions. The difference during a recession is that opportunities to buy strong businesses at favorable prices tend to be more abundant and more fleeting.

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Investing in recessions FAQ

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About the Author

Matt Frankel, CFP®, is a contributing Motley Fool stock market analyst specializing in the real estate and financial sectors. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, Globe St, The National Desk, and other TV networks and publications for his real estate, financial, stock market, and investing expertise.

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@MattFrankelUSC

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What to Invest In During a Recession

Here's your guide to navigating recessions the right way.

Key Points