By August 2023 it will be the middle of a recession! It’s already here, but you aren’t feeling it. YET. 72% of economists expect a US recession by the middle of next year. In this article we will learn about 15 Investments That Are in Recession Proof.
With US elections coming up in November the government is trying really really hard to make things seem it’s business as usual, while everyone with half a brain is already feeling the pain and anxiety.
World had a pandemic, a war, highest inflation rate in recent history, the fall of China’s biggest real-estate developer and supply chain issues all around. The bill is due. Your mortgage or your grocery basket has almost doubled in the past 2 years while your salary barely saw 5% bump.
Read until the end for this is your opportunity to get ready. If you don’t feel like reading the article here’s the video version:
1
Consumer staples
No matter what the economic climate is there are some things people will keep on buying. When they say consumer staples think of: Procter & Gamble, Colgate-Palmolive, PepsiCo, Nestle, L’Oreal, Unilever and everything else you use day to day.
Look at what you purchase out of necessity not because you want to. No matter how bad the economy gets, you’re still going to buy toilet paper. Find the companies that make those kinds of products and buy some stocks.
Here’s a snapshot of the consumer staples vs the S&P500 in terms of returns after the 2008 crash.
2
Telecom
If there’s one thing this generation has taught is this: you may go without food for a few days and call it extended fasting, but don’t touch my internet.
Telecom is growing at an almost 10% year over year rate and it is more dependant on it than ever
When the recession hits, many people in traditional roles will be left out of a job and will try to shift to other job prospects. Work from home is becoming the norm.
In a recession companies will be downsizing, cutting down the number of offices they maintain because rents will be too expensive so even more people will work from home and as a result the telecom sector will continue to grow.
3
Cheap Fast Food
Fast food consumption is reversly correlated with the economy. When people have more money, they try to eat at fancier restaurants. When the disposable income drops, it’s back dining with the clown and the king.
McDonalds, BurgerKing, Subway, KFC, Dominos, TacoBell etc. will do well in a recession. You know what won’t do well? The fast food joints selling $15 burgers. Delivery services will also be affected.
People will still order in, but at a much lower rate because postmates and the likes have gotten really expensive, so it will make more sense for people to go to a drive-through on their way home than to sit on the couch and order in.
? These businesses have solid fundamentals. Here’s a list of 20 ast food franchises in the US ranked by annual revenue:
4
Grocery Stores
Especially price conscious stores, historically do really well. Walmart, Costco, Kroger, Aldi, Sam’s Club,Lidl, Dollar Store etc.Here’s Walmart’s and Costco’s performance compared to 3 popular consumer staples.
Chains like Wholefoods usually get hurt the most as consumers become price conscious.
5
Self-Education or Mastery
As a great rule in life: Nobody can take away anything that you’ve already learned! Which is why investing in yourself is recession proof.
The more financially educated you are the less of an impact a recession has on your both your financials and your mental state.
This investment is split into two because you can either.
? Acquire a new skill – that will allow you to access new opportunities that you didn’t have access before.
or
? Master a current skill so that because of your ability you are more in demand than
This recession is quite different than the previous ones because for the first time remote work has been embraced to this extent. Outside of your current job, many individuals will behave as consultants or freelancers in respect to other projects.
If you have a job and wish to upgrade your skill-set so you no longer act as an employee but as a business, you’ll be thrilled to hear this.
Later this year there will be releasing our new course called: FREELANCE MASTERY
Where everything you need to know from moving from employee to freelancer and acquiring clients from all over the world is mentioned.
Go to alux.com/freelance and sign up to the waiting list so you get notified when it is launched. It assures; If you don’t earn the money you paid for the course from freelancing, it’ll give you your money back, no questions asked.
This is the course some of you have been waiting for and, can’t wait for you to try experience it.
6
Gold & Precious Metals
Gold is a hedge against inflation and economic downturns. It is actually the favorite hedge of the unsophisticated investor. Silver is a close second and you’ll see more and more old money voices talking about diversifying into metals in the next few months.
Why? In order for countries to get our of recessions, governments need to stimulate the economy. Their favorite way of doing that is by throwing money at it, which increases the financial supply and since gold is a fairly scarce asset, it’s value goes up.
The problem with printing more money, is that they’ve been doing it already for the past few years which lead to record numbers inflation. If you’re young, maybe look at Bitcoin as an alternative play as we see it as gold 2.0.
7
Technology Stocks
Tech stocks have taken a beating this year with many worrying that tech companies are becoming too big, but look towards the future: Will Google still be around 10 years from now? Probably!
Will Amazon keep thriving even in a recession? Probably! Will people still buy Tesla cars? With the price of gas right now… it’s likely. Look at the tech companies that you use every day, because if you use them, it means others are doing so as well.
In terms of massive returns, every recession will be a great opportunity for new companies to be born.
The 2008 Crisis they gave airbnb, uber, Venmo, Whatsapp, Groupon, Slack and more. Keep your eyes open
8
P Stocks
Recession are a thriving ground for pharma companies, especially with the bump they’ve had during the pandemic. You can go straight pharma and invest in the likes of Pfizer or you could go the retail route with Walgreens, CVS, Rite-Aid
The entire pharma sector is up for disruption. Mark Cuban’s Cost Plus has caught our eye. It’s an online pharmacy that sells the generic version of popular drugs at a fraction of the cost. Like him, there will be others.
9
Utility Stocks
No matter how bad things get you still need to turn your lights on. There’s an entire investing strategy into holding utility stocks in your portfolio.
One of the best performing stocks in our portfolio is NextEra Energy (NEE), one of the largest electricity suppliers in Florida.
Over the last 5 years it returned 21% per year
And over the past 10 years, the annualized return sits at 19.2%
Basically, you want to look at
Raw Prices might fluctuate, but the demand is only growing.
10
Blue Chip Art
This might come as a surprise to most of you, but art, especially good art, is one of the best ways to protect yourself during recessions. Blue chip art is scarce and has demand from people who aren’t affected by recessions.
It’s actually the other way around as Rich people get even richer during recessions.The art market has been consistently outperforming the S&P500, real-estate or gold for the past 25 years:
Not only that, art is a good performer even in inflationary periods.
You might be thinking: “But Alux, what do I know about fine art or how am I supposed to afford a Picasso or a Warhol?” That’s where our friends at Masterworks come in. Masterworks is a platform that allows everyone to invest in high end art.
Instead of buying the painting on your own, they break the ownership of a piece in shares – the same way a company does with stocks – and you can buy shares in it.
You can sell or buy shares at any time.
Fractional ownership is one of the biggest trends we’re seeing and the way masterworks has executed it in the art space is really inspiring, especially considering there are no minimum investment amounts.
On the last 6 paintings that they’ve sold the average investor saw a 29% return.
The platform has allowed you to learn about the trends in the art space and see just how profitable the art market can be. It is mentioned Masterworks in the past, so when they reached out looking to sponsor this article it was a perfect match.
There’s actually a waiting list to get on the platform, but since you’re an aluxer you can skip it.Go to masterworks.io/cd and see for yourself how investing in art might be your way out of the upcoming recession.
11
Evergreen businesses
Evergreen businesses are businesses that have been around forever and will still be around 20-40-60 years from now.
Home depot will probably survive a 1 to 3 year recession.
Think about your kids: although in a recession you might tighten the belt, you’d still have your child go to day-care or school.
If one of your grandparents passes away, you’d still use the services of a funeral home.
Some businesses will never go away because the demand for them is continuous.
12
Commodities & Raw Materials
If you’re familiar with the commodities market then you’re in luck.
They might not be as sexy as cool art, but wheat, soybeans and corn remain strong investments. The same goes for cotton as the textile industry will still thrive.
But be careful as not all commodities are created equal.
Coffee for example, vanilla and species usually get hurt as the demand for them drops in a recession.
13
Life Insurance
Insurance, but even more importantly: life insurance is one of the booming plays of a recession.
You might not realize this, but rich people use life insurance very differently than you’d expect, because for them life insurance is a vehicle to build wealth, it’s like a tax-free personal bank
Basically, instead of putting their money in the bank, they put it in life insurance policies then borrow against it tax free. Stress, financial hardships are common in recessions. Insurance companies do really well so they might fit your portfolio nicely.
14
Hedge Funds
For those of you in this community who are already well off, ask your financial advisor for a list of local hedge funds that did well in the past 2 recessions and start taking meetings. Basically these entities are looking for any opportunity to make as much money as possible in the shortest time frame.
Hedge funds get their names because they’re betting strategically against the market.Some of you have seen the movies: The Big Short.
Well there were several hedge funds that foresaw the fall of the housing market and made sure to capitalize on it.
Michael Burry, Carl Icahn, John Paulson and Ray Dalio are just of the few hedge fund managers who we’ve learned plenty from.
15
Automation
The last one on our list is automation. It is believed that automation – very much like Thanos – is inevitable.
Recession periods only accelerate the adoption of automation as businesses are doing all they can to efficientize so that they can stay in business.
There are plenty of new automation companies out there doing incredible things. Software will eat the world and robots will do all the heavy lifting!
Think about it.
Prices have gone up but wages haven’t. People will soon stop working and demand higher wages. This creates an incentive for companies to invest even more in automation.
When you think about it, objectively, does it make sense for a chain like McDonalds to increase their minimum wage to $25 so they have people taking your order – or do they install 2 more of those touch-screen kyiosks that get the same job done?
The only way you make sure you thrive in a recession is to expand your time horizon! Recessions are cyclical. There’s always a new one coming. They’re a natural part of the economic cycle.
