How to protect your portfolio against the recession

Malagigi BoutotJune 17, 2022


This may or may not be true, but Wall Street clearly disagrees. Uber’s (UBER) the stock has lost more than half its value this year.

But with fears of a recession due to runaway inflation and the Federal Reserve’s continued plans to raise interest rates, now may be the time for investors to find genuine “recession-proof” stocks. recession”.

Generally, stocks of electric and water utilities, consumer staples like food and beverages (alcoholic and non-alcoholic) hold up better in downturns, especially since many these stocks pay regular dividends.

Wells Fargo analysts said this week in a mid-year market report that they “now favor a full, market-weighted allocation to ‘consumer staples and utilities’ stocks because of their traditional resilience in a slowing economy”.

Electricity and natural gas company stocks sempra (ERS), ConEd (OF), Exelon (EXC) and American Electric Power (AEP) are all up slightly for the year.
Utilities and staples are considered essential items. You can’t go on expensive vacations or go out to dinner as often during a recession. But you still gon’ foot the bill to keep the lights on and buy Coke (KO)some General Mills (GIS) cereals and kraft (KHC)mac and cheese in the supermarket.

“Staples are hard to replace and last items on which households tend to cut back,” BNP Paribas analysts said in a report this week, adding that “a drop in demand is unlikely “despite”the magnitude of the rise in food prices”. “

Wells Fargo analysts added in their report that food and staples retailers, i.e. supermarkets, are now on their list of “favorable sub-industries” within the consumer sector in the United States. broadly “because we expect this group to benefit from an increasingly value-conscious consumer.”

To this end, the grocery giant Kroger (KR) reported better-than-expected sales and earnings on Thursday morning and also provided an optimistic outlook. The stock fell with the wider market on Thursday, but stocks are still up 9% this year. The S&P 500 is down 23%.
Several other food and beverage companies are also resisting the downward trend in the broader market. Shares of Molson Coors (FAUCET), Hershey (HSY), Kellogg (K) and Campbell’s Soup (pcb) are all green this year.

Energy stocks could continue to surge

And then there is oil. Energy stocks have been the big market winners this year, largely due to the surge in crude prices that has occurred since Russia invaded Ukraine.

Herringbone (CLC) stock, which is now one of Warren Buffett’s biggest holdings Berkshire Hathaway (BRKB), has climbed more than 30% this year, making it Dow’s top performer. Backed by Buffett western oil (OXY) is the first stock in the S&P 500. It has almost doubled.

Despite growing fears that soaring oil and gas prices could push the economy into recession, some experts still believe energy stocks will hold up better than other parts of the market.

“Earnings in the energy sector are growing much faster than the overall valuation of the sector, so there is still plenty of potential,” David Trainer, CEO of investment research firm New Constructs, said in a report.

Trainer said he was ‘particularly bullish’ on Brazil Petrobras (ACB)hull and Phillips 66 (PSX)due to “superior profitability” and “very attractive valuations”.

“We believe energy prices will remain high for the foreseeable future because demand for fossil fuels is not declining as fast as people think and alternative energy is not as available as people think,” he said. added Trainer.

So, with all due respect to the CEO of Uber, the recession-proof companies of yesteryear are likely to remain the best stocks to hold if you’re worried about a potential downturn and looking for a safe haven.


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Malagigi BoutotJune 17, 2022
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