Defending Your Portfolio: Which Stocks Prove Resilient When Markets Contract

Economic uncertainty looms large as 2025 approaches. Wall Street’s heavyweight players—Goldman Sachs and JPMorgan among them—have significantly elevated their recession warnings. Goldman Sachs recently pushed its one-year recession probability to 45%, while JPMorgan estimates the odds at 60%, citing ongoing tariff tensions and their potential to destabilize global growth. With probabilities ranging from 40% to 60% according to major financial institutions, savvy investors are asking the same question: which stocks should anchor a recession-resistant portfolio?

The Anatomy of Stocks That Weather Economic Storms

When economies contract, not all equities suffer equally. History demonstrates that certain categories consistently perform better than others. The best stocks to invest in during a recession typically fall into what professionals call “defensive stocks”—companies whose products and services remain essential regardless of economic conditions.

Essential Services That Never Go Out of Style

Consumer staples dominate this category. Food and beverage manufacturers, personal hygiene product makers, and household goods producers continue generating revenue even when consumers tighten their belts. Utilities represent another cornerstone defensive position. Water, electricity, and gas providers maintain steady cash flows because these services are non-discretionary. Healthcare stocks similarly prove resilient—pharmaceutical companies and medical device manufacturers benefit from consistent demand for their products.

The “Small Treat” Strategy

Interestingly, recession-resistant stocks aren’t limited to bare necessities. When facing economic anxiety, many consumers reduce spending on major purchases—homes, vehicles, designer clothing—yet paradoxically increase spending on affordable comforts. Video streaming services, premium chocolates, fast-food restaurants, and budget-friendly entertainment become the go-to indulgences. This behavioral pattern creates investment opportunities in what analysts call “small indulgence” categories.

Precious Metals: The Inflation Insurance

Gold and silver mining stocks historically appreciate during contractions, serving as hedges against inflation and currency weakness. However, these cyclical investments are volatile and tend to underperform during expansions, making them better suited for tactical positioning rather than core holdings.

Learning from the 2007-2009 Great Recession

The most severe U.S. economic downturn since the 1930s offers crucial lessons for modern investors. From December 2007 through May 2009, the S&P 500 plummeted 35.6% including dividends. Yet within this landscape, certain best stocks to invest in during a recession demonstrated remarkable strength.

Stocks That Actually Gained Ground

Netflix stands out as a counterintuitive winner, returning 23.6% while the broader market collapsed. The iShares Gold Trust ETF appreciated 24.3%, reflecting precious metal demand. Walmart delivered 7.3% returns through its value positioning. McDonald’s contributed 4.7% despite economic headwinds. These gainers share common traits: they addressed consumer priorities during distress, either through affordability or temporary escape.

Stocks That Cushioned the Blow

Several equities declined but vastly outpaced the market’s 35.6% collapse. Newmont, the world’s largest gold producer, fell just 0.3%. Hershey dropped 7.2%—far better than the index. Church & Dwight, maker of Arm & Hammer products, fell 9.6%. American Water Works slid 12.7%, while NextEra Energy, the nation’s largest electric utility by market capitalization, retreated 15.7%. All substantially limited investor losses compared to broader equity declines.

Strategic Insights for Today’s Investors

Gold Plays Require Careful Timing

Precious metals investments and mining stocks can deliver exceptional returns during contractions but frequently underperform during expansions. They’re unsuitable for buy-and-hold strategies and better deployed tactically by experienced traders.

Utilities Outperform Expectations

American Water Works and NextEra Energy exemplify utilities’ long-term potential. Contrary to conventional “widow and orphan stock” characterizations, these positions beat the market substantially. Since American Water’s 2008 IPO, the stock returned 953%—nearly matching Alphabet’s 1,090% return over the same period.

Mainstream Coverage Doesn’t Guarantee Quality

Church & Dwight received minimal financial press attention yet delivered stellar recession-resistant performance. Media prominence shouldn’t drive investment decisions, particularly for long-term portfolios.

Tariff Dynamics Create New Opportunities

Unlike goods-based businesses vulnerable to import duties, service-oriented companies like Netflix remain largely insulated from trade war impacts. This distinction matters when evaluating recession-resistant stocks in today’s environment.

Building a Recession-Ready Portfolio

Reviewing your holdings makes sense given elevated recession probabilities. Consider tilting toward dividend-paying defensive stocks, consumer staples, utilities, and select entertainment platforms. However, abandoning growth positions entirely poses risks. Market timing historically fails for most investors, and missing bull market rallies—particularly early-stage recoveries—can permanently impair returns.

The S&P 500’s long-term trajectory points decisively upward. Extended time horizons diminish recession concerns. Rather than dramatic portfolio overhauls, implement measured adjustments: increase defensive allocations modestly, ensure dividend-paying stocks anchor positions, and maintain growth exposure for the recovery phase. This balanced approach protects against downside while preserving upside capture potential.

The best stocks to invest in during a recession aren’t flashy—they’re functional, consistent, and unsexy. Yet unsexy often translates to wealth preservation and, eventually, wealth creation when economic conditions improve.