The US economy has recovered strongly from the COVID-19 pandemic. But according to Tesla CEO and billionaire Elon Musk, the good times may be over soon.
“I think a recession is inevitable at some point,” he said at the Qatar Economic Forum on Tuesday.
“Whether there will be a recession in the near term is more likely than not. It’s not a certainty, but it seems more likely than not.”
This is not Musk’s first economic warning.
In an email to Tesla executives earlier this month, Musk said he has “a super bad feeling” about the state of the economy and that he wants to cut 10% of the company’s workforce.
We are already in a bear market. If the economy enters a recession, many stocks could fall further.
The good news? Some sectors are more recession-proof than others. Here you see three.
Consumer goods are essential products such as food and drink, household items and hygiene products.
We need these things no matter how the economy is doing.
If a recession hits the US economy, many companies are likely to see their business deteriorate. However, we’ll probably still see Quaker Oats and Tropicana orange juice — made by PepsiCo (PEP) — on families’ breakfast tables. Meanwhile, Tide and Bounty — well-known Procter & Gamble (PG) brands — are likely to remain on coast-to-coast lists.
You can access the group through ETFs such as the Consumer Staples Select Sector SPDR Fund (XLP) and the Vanguard Consumer Staples ETF (VDC).
The utility sector is made up of companies that provide electricity, water, natural gas and other essential services to homes and businesses.
The sector is not fascinating, but it is recession-proof: no matter what happens to the economy, people will have to heat their homes in the winter and turn on the lights at night.
Meanwhile, high barriers to entry protect the profits of existing utilities. Building the infrastructure needed to provide gas, water or electricity is quite expensive and the industry is highly regulated by the government.
Thanks to the recurring nature of the business, the sector is also known for paying reliable dividends.
If you’re looking for the best utility stocks, names in the Utilities Select Sector SPDR Fund (XLU) provide a good starting point for further research.
Healthcare is a classic example of a defensive sector due to its lack of correlation with the ups and downs of the economy.
At the same time, the sector offers great long-term growth potential thanks to favorable demographic tailwinds – in particular an aging population – and a lot of innovation.
Average investors may find it difficult to pick specific healthcare stocks. But healthcare ETFs can be both a diversified and profitable way to gain exposure to the space.
Vanguard Health Care ETF (VHT) gives investors broad exposure to the healthcare industry.
To tap into specific segments within the healthcare industry, investors can look to names such as iShares Biotechnology ETF (IBB) and iShares US Medical Devices ETF (IHI).
This article provides information only and should not be construed as advice. It comes without any kind of warranty.