With the impending global recession, more and more investors are seeking out recession-resistant companies that can weather the recession storm.

On 1 January 2023, Kristalina Georgieva, managing director of the International Monetary Fund (IMF), warned that the impending economic recession is likely to be the worst since the main global economic growth engines – the US, Europe, and China – are experiencing contractions in their economy. Georgieva expects “one-third of the world economy to be in recession”. And she warns that even for countries that are not in recession, “it would feel like recession for hundreds of millions of people.” (Source: MarketWatch)

In October 2022, the IMF forecasted a downward trend in global economic growth for the year 2023, citing the ongoing conflict in Ukraine, inflation concerns, and the use of high-interest rates by central banks such as the US Federal Reserve to combat inflation as contributing factors. (Click here to find out how FED decide on interest rates increment)

Additionally, China is expected to have a growth rate that is at or below the global average for the first time in 40 years due to the spike in Covid-19 cases following the scrapping of its zero-Covid policy.

The US is still the most resilient economy. However, if the US labour market remains tight, the Federal Reserve may continue keeping interest rates high to tame inflation rates, which may cause the situation to worsen.

Traits of Recession-Resistant Companies

With economic challenges up ahead, investors need to prepare themselves for the worst and seek out companies that can withstand the recession. Large companies with a track record of profitability can weather economic downturns and difficult times. On top of that, companies with strong finances and steady cash flow will perform better than those with high levels of debt or a low demand for their products. Certain industries like consumer staples and healthcare also tend to have consistent demand throughout the annual economic cycle, making them especially recession-resistant.

Consumer Staples Sector

Consumer staples include essential products like food, household goods, and personal care items. The sector has performed consistently well even during economic downturns as these products are purchased regardless of economic conditions or financial situations.
Costco (Nasdaq:COST)is a membership-based warehouse club that provides a wide selection of merchandise, including groceries, electronics, and home appliances. The company operates many outlets around the world and offers its members discounted prices on its products. Costco is known for its large store size and products in bulk quantities. And it offers products at low prices to its customers.

Performance Food Group (NYSE:PFGC) is a food service distribution company that provides a myriad of food selections to restaurants, schools, hospitals, and other food service establishments. It operates through a network of distribution centres. And it offers a variety of products, including fresh and frozen meats, seafood, produce, dairy products, and non-perishable goods.

Healthcare Sector

Healthcare stocks are considered to be recession-resistant. It is because healthcare expenses are a necessity and cannot be cut out from consumer budgets. Examples of healthcare companies include Pfizer and Vertex Pharmaceuticals.

Pfizer (NYSE:PFE) is a pharmaceutical company that develops and manufactures a wide range of healthcare products. It is one of the largest pharmaceutical companies in the world. It has a diverse product portfolio that includes prescription drugs, vaccines, and consumer healthcare products.

Vertex Pharmaceuticals (NASDAQ:VRTX) is a biotechnology company. They focus on the development and commercialisation of innovative medicines for the treatment of serious and life-threatening diseases. Some diseases that the company focuses on include cystic fibrosis, Alpha-1 antitrypsin deficiency, and sickle cell disease.

Diversifying your investment portfolio with counter-cyclical stocks can help to balance it out and better withstand an economic recession.

With VI App’s screener function, easily filter companies in the consumer staples and healthcare industry. Visit vi.app to search for recession-resistant companies to start your year on a financially firm footing today!

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