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“Things are slowing down. You're seeing layoffs in many many sectors of the economy.”
And that means you might want to tighten up your budget.
“If you're an individual considering purchasing a big-screen TV, you might want to wait, hold onto your money, and see what transpires,” the billionaire recommends. “The same is true with a new automobile, refrigerator, or whatever else. Just remove some risk from the equation.”
That’s not a good sign for investors.
But not all businesses are created equal. Some — like the three listed below — might be able to perform well even if the economy falls into a recession.
Utilities
The utility sector consists of companies that provide electricity, water, natural gas and other essential services to homes and businesses.
The sector isn’t a fascinating one, but it is recession-resistant: No matter what happens to the economy, people will still need to heat their homes in the winter and turn the lights on at night.
High barriers to entry protect the profits of existing utility companies. Building the infrastructure needed to deliver gas, water, or electricity is quite expensive, and the industry is highly regulated by the government.
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Thanks to the recurring nature of business, the sector is also known for paying reliable dividends.
If you are looking for the best utility stocks, names in the Utilities Select Sector SPDR Fund (XLU) provide a good starting point for further research.
More: 7 safe investments you might have overlooked in 2022
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Healthcare
Healthcare serves as a classic example of a defensive sector thanks to its lack of correlation with the ups and downs of the economy.
At the same time, the sector offers plenty of long-term growth potential due to favorable demographic tailwinds — particularly an aging population — and plenty of innovation.
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Average investors might find it difficult to pick out specific healthcare stocks. But healthcare ETFs can provide both a diversified and profitable way to gain exposure to the space.
Vanguard Health Care ETF (VHT) gives investors broad exposure to the healthcare sector.
To tap into specific segments within healthcare, investors can look into names like iShares Biotechnology ETF (IBB) and iShares U.S. Medical Devices ETF (IHI).
Real estate
It may seem counterintuitive to have real estate on this list.
While it’s true that mortgage rates have been on the rise, real estate has actually demonstrated its resilience in times of rising interest rates according to investment management company Invesco.
“Between 1978 and 2021, there were 10 distinct years where the Federal Funds rate increased,” Invesco says. “Within these 10 identified years, US private real estate outperformed equities and bonds seven times and US public real estate outperformed six times.”
Well-chosen properties can provide more than just price appreciation. Investors also get to earn a steady stream of rental income.
But you don’t need to be a landlord to start investing in real estate. There are plenty of real estate investment trusts (REITs) as well as crowdfunding platforms that can get you started on becoming a real estate mogul.
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Jing is an investment reporter for Moneywise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
