Financial Tunes

What asset classes have historically done well in recesions?

I can't think of anything better than cash. But, maybe there are some long term holds (companies, industries, businesses, etc)that run opposite to most asset classes during recesions; it could be any asset class. Thanks liorio, i was trying to seperate the ideas of falling dollar, and think more about historical patterns with recesions. All your ideas sound familiar. Later I will combine this train of thought with falling dollar scenarios. Their conflicting in some ways (inflation/deflation).

Public Comments

1. Gold.
2. For the security minded, bank CD's will pay a decent return and are insured. Food and tobacco stocks are counter cyclical and usually pay a dividend similar to a CD rate and there is always the potential for cap gains. High Tech, on a very selective basis, that is if a company's products are truly innovative, profitable and ramping up. Buying gold depends more on the status of the dollar and interest rates than economic conditions. Gold has been a traditional hedge against the dollar.
3. BONDS out perform CDs because of the lower rates that usually acompany recessions. A good Bond fund. Unless you get your cds tied up for a year before the rate cuts happen. Large cap stocks that are not endanger of going out of business and pay high Dividends. LIke say (CMA) ..Right now with the housing crunch you just cant know. Bond fund recover quicker than Stock funds during rate cuts because the old bonds pay higher interest than the new ones after a rate cut so their value increases. Thus so does the bond funds holding the higher interest bearing bonds... Hope this answers your question turn to Large Cap High dividend Value STocks and Bonds funds to play it safe
4. In stocks, look at consumer staples such as companies that manufacture or sell grocery items etc. Regardless of how the economy performs, you still have to buy food, toothpaste, etc. Bonds can also be a good class to look at because when the economy is expected to go into a recession, interest rates typically decline and when that happens, the value of bonds increases. Also, you make want to look at real estate, specifically investor properties. This may be a great buying opportunity with the slowing housing market and the demand for renting may be increasing versus buying a home.
5. It's easier to go with the tide. In an expansion, most stocks go up - so you go long. In a recession most stocks go down - so you go short. There will always be an occasional maverick that bucks the trend but it is more likely to be a small cap with some hot product or solution of the moment.