Recession-Resistant Investments: The Safest Ventures for Your Money During Rocky Economic Times
With the multiple spikes in interest rates across the world to counteract inflation, the likelihood of recession still prevails, only that concerns are lower today compared to the beginning of the year. The United States has already raised interest rates 15 times to grapple with inflation, an action whose shockwaves prolonged the market, even though the Federal Reserve put the increases on hold for the time being.
As everyone can predict, the recession is sooner or later going to come, with some experts projecting it in the fourth quarter of the year, making it important to spot the industries that will come out of the harsh times untouched. As such, it can only make sense to seek out the industries that are going to thrive when looking into sectors to put your money in.
Several options are better suited to defensive investing, from the animal feed industry to the healthcare and makeup sectors. Historically, tried-and-true industries shined in challenging times instead of good economic periods, representing safe ventures for investors ranging from the average to the most experienced pundit.
Pet Industry
The pet industry is historically regarded as recession-resistant, demonstrating resilience during past economic meltdowns and recessions. Compared to other goods and services, this helps impressively well during downturns, with one of the most prominent examples being the market expansion despite the post-COVID recession starting in February 2020.
Despite the pause in global economic growth, the pet industry did well, with pet service and product sales continuing to grow, pet food processing reaching all-time highs, and households spending more on their pets than ever before.
Indeed, Gen Z is overspending on their beloved furry companions compared to previous generations, regarding them as important family members and putting their necessities and well-being at the top of their priority list. According to research from Morgan Stanley, another indicator supporting the theory that the pet industry will keep thriving is the market’s projected annual growth of 8%.
Suppose the past events taught us any lessons. In that case, pet owners’ expenditures on their companions stagnate or increase, regardless of whether spending on vacations, home renovations, and other discretionary investments is reduced. As such, experts predict that the pet industry thrives even in the rockiest economic times, proving to be among the most resilient sectors during downturns or economic stagnation, especially as pets are found in increasingly more households.
Makeup, beauty, and personal care
The beauty industry has long been lauded for its strength in economic meltdowns, given that shoppers still purchase cosmetics. Traditionally, shoppers wouldn’t put money into large investments like cars or houses, but they could still afford products like concealers and mascaras, even if the investments tended to be lower.
As a result, this spending behavior has even been given a name: the “Lipstick Effect.” This popular economic philosophy refers to an increase in cosmetic sales in harsh financial times, with the reasoning being that the desire to maintain personal care persists regardless of the economic situation. Needless to say, lipstick is a staple of the beauty industry.
Generally speaking, pick-me-up purchases like mascara or lipstick usually add up. The market’s growth expectancy of 3.53% stands as proof that the makeup, beauty, and personal care industries are still going strong in the foreseeable future.
Healthcare industry
Given its nature, healthcare has been and will always be cited as one of the most resilient industries in times of recession. Regardless of the economy, people will keep getting sick, needing treatments, and relying on this sector. Given this spending consistency, this sector often deals with price inelasticity.
One mention is important to make in this regard. A factor that makes the healthcare industry so resistant to recession is how people pay for their expenditures. For instance, insurance accounts for a part of the bill, protecting individuals from several costs regardless of the economy’s trajectory. On the other hand, with economic downturns come layoffs and job losses, which translate to lost employer-sponsored health insurance.
As such, healthcare will continue to secure its role as an effective recession-proof venture, even though it is not immune to economic downturns.
Food and grocery
Like the healthcare industry, food and groceries hold up well even in the toughest economic times. This is partly because restaurants and eating out are losing ground to grocery spending, as they are more expensive food alternatives, casting a recession-proof spell on supermarkets and related food-providing businesses.
On the other hand, it’s important to note that there are changes in consumer behavior during harsh economic times. More customers tend to gravitate towards more affordable options, even if it sometimes means sacrificing quality for quantity.
The food and grocery industries are among the most lucrative sectors during economic turbulence, as they’re indispensable and become better alternatives to restaurants and eateries.
Utilities
Utilities may not be the first thing that comes to an individual’s mind when seeking recession-proof ventures, yet they are traditionally regarded as great ways to weather economic downturns. However, they’re just as stable as they can get, as homeowners don’t have a habit of adjusting water, electricity, or other utility spending to impactful extents, regardless of what’s happening with the economy. This trend can translate to fewer surprises for investors, which is often exactly what a seasoned entrepreneur looks for.
Additionally, many companies give dividends, which may add up as income.
Summing up
As history proves, some sectors, like the pet industry, glow during unfavorable economic times, while others find themselves hitting bottom, like gaming. At the same time, some come out of the recession nearly intact. Other industries worth considering can be wholesale real estate and insurance.
However, it’s essential to note that nothing can guarantee the survival of an industry during a financial crisis. The industries above are historically known to hold well in times of economic downturns, representing consumer staples regardless of how the economy is going.
