There have been economic shocks around the world in the last six months and a resulting cost of living crisis that’s affecting most sectors and industries. Food prices have skyrocketed across the continents, energy and supply chains are being impacted by the Ukraine invasion by Russia, and inflation rates in Australia are set to hit 5.9% this year.
With such uncertainty around where we’re headed, the International Monetary Fund has revisited its initial predictions for global growth at 4.4%. Instead, falling economies are signifying the prospect of another global recession.
But what does knowing this information mean? Are there any industries that could potentially ride out another recession at this point?
Are there any industries that wouldn’t suffer the effects of a recession?
We’ve already seen in the last 15 years how some industries manage to resist the negative fallout of a recession. As the prospect of another financial crash looms, it’s worth looking at the sectors that do well no matter what the economy is doing. These sectors are:
- Healthcare
Our health takes priority, recession or not. That’s why healthcare-related businesses remain largely unaffected by a fluctuating economy. From drugs companies to related businesses such a residential care, these are vital things to spend our money on so they tend to keep steady.
- Funeral services
Funeral directors, casket providers, and other funeral-related companies are always needed. Therefore, they tend to keep a steady business through economic peaks and troughs.
- Vices
People continue to smoke, drink, and gamble whether it’s a good or bleak economic forecast. This makes these industries that tap into our vices resistant to any financial woes. In fact, at times of upheaval, like a global recession or pandemic, we’ve seen a boost in sales as we try to escape what’s happening.
- Household staples
We’ll always need toothpaste, soap, shampoo, and bleach. These household staples will always be on the list, so companies that make them like Colgate-Palmolive and Proctor & Gamble will always do well.
While no business is totally resistant to a recession, the ones that supply these types of evergreen industries are more likely to come out the other side relatively unscathed.
How could people use these industries as hedges against recession/ inflation?
If you’re thinking of investing in shares – or maybe you already have some shares – in the industries mentioned above, you could be well-placed financially. This is because some of these are examples of counter-cyclical stock. This stock is shares in a company that performs well as the rest of the economy is failing.
By investing here, you could find that you have an opportunity to capitalise. Something like CFD trading could work in your favour as you’d be closing on a price that’s likely to be higher during times of recession.
As with any type of investment, you’d need to do your research and be prepared to lose the amount you put in as there’s always a risk that things don’t go to plan in these situations. However, following trends and patterns based on previous recessions can be highly beneficial.
