If you’re thinking about what to invest in during a recession, you’re asking the right question at the right time. Gold is trading at record highs around $5,000 per ounce as investors worry about the Federal Reserve’s decision on interest rates, the value of the dollar, and the impact of tariffs.
Every investment carries risk. You can still make choices that limit how much damage a downturn does to your portfolio. It’s a good idea to plan before markets force you to.
Understanding recessions
A recession is defined as two consecutive quarters of negative GDP growth. The National Bureau of Economic Research also looks at employment, income, and spending patterns when making that call. During a recession, unemployment rises, consumer spending drops, business investment slows, and market volatility picks up.
Investors who go in without a plan tend to make reactive decisions that lock in losses and are hard to recover from. To avoid making bad decisions, key components for a recession investment strategy usually include:
- Capital preservation: Protect your principal from large losses. The goal is to avoid deep drawdowns so you still have capital when the recovery starts.
- Risk tolerance assessment: This requires an honest evaluation of your comfort with volatility during economic stress. Recessions have a way of revealing whether your portfolio matches your risk tolerance.
- Diversification: Spread your exposure across asset classes, defensive sectors, and safe-haven investments.
Historical lessons from past economic slowdowns
History gives us a picture of past performance. During the 2008 financial crisis, defensive sectors and the treasury bond market held up while equities dropped. Then, the 2020 pandemic shock reinforced the value of diversification.
With GDP growth projected at 2.2% and the Fed signaling up to 75 basis points in rate cuts, now is a good time to take a look at your overall investment plan.
5 Investments for economic downturns
Here are five options for spreading investments across different asset classes to reduce the impacts of market declines:
| Asset type | Primary role | Volatility |
| Gold | Hedge / diversification | Moderate |
| Treasury Bonds | Capital preservation + income | Low |
| Cash / CDs | Emergency reserve | Very Low |
| Defensive Stocks | Stability + dividends | Moderate |
| Blue Chip Stocks | Long-term growth + income | Moderate |
Details on each of these asset classes:
1) Gold and precious metals
Gold is considered a safe-haven asset because its value isn’t tied to any single government, currency, or institution. No one can print more of it, and no government can default on it. That independence is what makes it hold up when other assets don’t. Silver offers a similar quality with the added benefit of strong industrial demand.
Most experts recommend keeping 5% to 15% of your portfolio in precious metals. Gold protects against inflation, currency devaluation, and systemic risk in ways that other asset classes don’t.
2) Treasury bonds
U.S. Treasury bonds are issued by the federal government and they’re considered a safe place to put money. The government has never defaulted on its debt, which is what gives them their reputation for reliability.
In 2026, Treasury yields are averaging 4.1%, with 10-year rates expected around 4%+ by year-end.
3) Fixed income investments
For shorter-term capital preservation, FDIC-insured CDs, money market funds, and high-yield savings accounts are options. Most financial advisors recommend keeping three to six months of expenses in liquid, low-risk vehicles like these.
Fixed income won’t generate big returns, but that’s the point. It protects your principal when markets get rough.
4) Defensive stocks
Some sectors hold up better than others when markets get volatile. These industries include:
- Consumer staples: People buy essential goods regardless of what the economy is doing.
- Utilities: Electricity and water are services people need no matter what, which translates to consistent cash flows and dividend yields typically in the 3% to 4% range.
- Healthcare: Medical services don’t go away during a recession, which keeps volatility low and dividend income steady.
5) Dividend & blue chip stocks
Dividend-paying stocks generate income when growth investments stall. The ones worth owning in a recession share a few common traits:
- Strong balance sheets: Low debt levels give companies staying power when revenue slows.
- Consistent earnings: Look for companies with a track record of earnings growth across different market cycles.
- Dividend growth history: Companies that have increased dividends for decades tend to keep doing so.
- Competitive advantages: A strong market position helps protect revenue when conditions get tough.
Blue-chip stocks check most of these boxes. These are large, established companies with strong cash flows and low volatility that have held up through downturns before. Recessions also tend to create opportunties for value investors, where quality companies trade below what they’re worth.
Managing your portfolio
The best investment advice is to make a plan for a down economic cycles and manage your portfolio to that plan. This includes:
Asset diversification
You reduce risk by spreading investments across different asset classes. During market downturns, adjust your allocation based on your risk tolerance and economic conditions. Make only minor tweaks, staying within 5% of your target allocation to avoid reactive decisions.
Consider increasing defensive sector exposure with gold while maintaining your long-term diversification strategy. This balanced approach protects your wealth across economic cycles.
Dollar cost averaging
Dollar cost averaging means investing a fixed amount at regular intervals regardless of what the market is doing. If you invest $500 a month, you buy more of an investment when prices are low and fewer when prices are high. Over time that averages out your cost per share and removes the pressure of trying to time the market.
The easiest way to stick to this is to automate it. Setting up automatic contributions means you’re consistently buying through good markets and bad ones without having to think about it.
Rebalancing strategy
Rebalancing can bring your portfolio back to its target allocation when market movements throw it off. In a down market that often means buying assets that have dropped in value, which feels counterintuitive but keeps you disciplined.
Use a quarterly or semi-annual review schedule to help take emotion out of the process.
Liquidity and emergency reserves
Keep 3-6 months of expenses in liquid accounts. This emergency fund prevents forced selling during market lows when prices are depressed.
Cash doesn’t give you much of a return but it gives you flexibility. High-yield savings accounts or money market funds are good options to make some income without liquidity risk.
Your recession-ready action plan
Recessions are part of the economic cycle. How your portfolio holds up in difficult financial markets depends on how prepared you are going in.
| Action step | Description | Purpose |
| Make sure gold is in your portfolio | Include precious metals as part of your allocation strategy. | Inflation protection, currency hedge, systemic risk diversification. |
| Assess and reallocate to defensive assets | Increase exposure to sectors that hold up in downturns. | Reduce volatility during economic stress. |
| Build your safety net | Keep reserves for emergencies. | Avoid forced selling during market declines. |
| Prioritize quality over growth | Focus on financially strong companies and bonds. | Stable income and capital preservation. |
| Stay disciplined | Stick to your allocation and rebalance during downturns. | Remove emotion from investment decisions. |
| Document your buy rules | Set predefined price levels to add positions. | Prevent reactive decision-making. |
Additional details on each of these steps to help you build a diversified portfolio and protection from less than ideal market conditions include:
- Make sure gold is in your portfolio: Most experts recommend 5% to 15% in precious metals. Gold is completely independent from other asset classes and gives you immediate diversification.
- Assess and reallocate to defensive assets: Consumer staples, utilities, and healthcare all hold up better in downturns than growth-oriented investments.
- Build your safety net: Keep three to six months of expenses in cash equivalents so you’re not forced to sell investments at the wrong time.
- Prioritize quality over growth: Focus on dividend-growth stocks and investment-grade bonds for stability and income.
- Stay disciplined: Avoid panic selling and stick to your investment objectives. Use downturns to rebalance and add to positions at better prices.
- Document your buy rules: Decide in advance at what price points you’d add to positions in a down market. Having that written down makes it easier to apply this decision when the time comes.
Final thoughts for a recession investment strategy
Economic expansion and down markets are part of the cycle. Planning for both helps you make investment decisions for the best future results.
To learn more about gold, silver, and other precious metals investing, connect with the Swiss America team today!
What to invest in during a recession: FAQs
What is the best investment during a recession?
There isn’t one asset that works for everyone. The investments that tend to hold up best in a recession are the ones that don’t rely on strong economic growth to keep their value.
- Gold: Protects against inflation, currency devaluation, and systemic risk with no counterparty risk.
- Treasury bonds: Backed by the U.S. government and generating reliable income even when markets drop.
- Defensive stocks: Consumer staples, utilities, and healthcare tend to hold steady since demand for these doesn’t disappear in a downturn.
What is the $10,000 bank rule?
The $10,000 rule refers to a federal requirement that banks report cash transactions of $10,000 or more to the government. It’s part of the Bank Secrecy Act to prevent money laundering and other financial crimes.
- What triggers it: Any cash transaction of $10,000 or more at a bank, including deposits, withdrawals, and transfers.
- Who files it: The bank files a Currency Transaction Report with the Financial Crimes Enforcement Network. You don’t have to do anything.
- What it means for gold: Gold dealers like Swiss America have a similar requirement. Cash purchases of $10,000 or more require the dealer to file IRS Form 8300 and collect identification from the buyer.
What should you stock up on during a recession?
A recession can be a good time to add to assets that tend to hold their value when the economy weakens.
- Gold and precious metals: A tangible asset with no counterparty risk that has historically held up during economic downturns.
- Defensive stocks: Consumer staples, utilities, and healthcare tend to be stable since demand for these doesn’t drop in a recession.
- Cash reserves: Having three to six months of expenses in a liquid, low-risk account gives you options without forcing you to sell investments at the wrong time.
Why is gold a good option outside the stock market?
Gold’s value isn’t tied to corporate earnings, interest rates, or economic growth, which is exactly what makes it useful when those things are working against you.
- No counterparty risk: Physical gold can’t default, go bankrupt, or be devalued by a government printing more of it.
- Inflation protection: Gold has historically held its purchasing power over time while paper currency loses value.
- Low correlation to stocks: When equity markets drop, gold often moves in the opposite direction, which is what makes it a way to diversify your holdings.
What resources does Swiss America provide on gold investing?
Swiss America has been educating investors on precious metals for over 40 years. The resources cover everything from the basics of buying gold to more complex strategies like retirement accounts.
- Educational guides: In-depth articles covering gold investing, Gold IRAs, taxes, and market conditions.
- Market updates: Regular updates on gold prices and economic conditions that affect precious metals, including Swiss America’s own product sales data.
- One-on-one guidance: A dedicated account executive who understands your goals and can help you understand options.
The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals before making any decisions or taking action based on this information.
