Time to Buy These 2 Cheap Auto Stocks Now Before the Economy Roars Back to Speed? (2024)

FAQs

What are the best defensive stocks during a recession? ›

Historically, the industries considered to be the most defensive and better placed to fare reasonably during recessions are utilities, health care, and consumer staples.

If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall. Understanding supply and demand is easy.

Bull markets generally take place when the economy is strengthening or when it is already strong. They tend to happen in line with strong gross domestic product (GDP) and a drop in unemployment and will often coincide with a rise in corporate profits.

The best recession stocks include consumer staples, utilities and healthcare companies, all of which produce goods and services that consumers can't do without, no matter how bad the economy gets.

You should consider buying economically resilient or defensive stocks before a recession. These include healthcare, consumer staples, utilities, and cost-conscious retail companies. Demand for the products and services provided by these companies tends to hold up relatively well during a recession.

March 24, 2020 saw the largest one-day gain in the history of the Dow Jones Industrial Average (DJIA), with the index increasing 2,112.98 points.

Some of the common indicators that predict stock prices include Moving Averages, Relative Strength Index (RSI), Bollinger Bands, and MACD (Moving Average Convergence Divergence). These indicators help traders and investors gauge trends, momentum, and potential reversal points in stock prices.

If you feel the stock has fallen because the market has overreacted to something, then buying more shares may be a good thing. Likewise, if you feel there has been no fundamental change to the company, then a lower share price may be a great opportunity to scoop up some more stock at a bargain.

Stock market crashes wipe out equity-investment values and are most harmful to those who rely on investment returns for retirement. Although the collapse of equity prices can occur over a day or a year, crashes are often followed by a recession or depression.

Who benefits most from the stock market? ›

But the booming markets are likely to benefit White families more than families from other racial and ethnic groups. That's because White families are the most likely to own publicly traded stocks, either directly or indirectly – for example, through a retirement account or mutual fund.

If a stock falls to or close to zero, it means that the company is effectively bankrupt and has no value to shareholders. “A company typically goes to zero when it becomes bankrupt or is technically insolvent, such as Silicon Valley Bank,” says Darren Sissons, partner and portfolio manager at Campbell, Lee & Ross.

It's no surprise that discount retailer Walmart outperformed during each of the past two recession years.

Defensive stocks will come with a steady dividend payment and a more constant share price. During an expected recession, investors usually add defensive stock to their portfolios, as they are expected to perform well despite the economic downturn.

Minimized Risk

However, these types of stocks have comparatively less risk than aggressive stocks. They're less likely to drop in value when there are events that trigger an economic downturn thanks to their steady nature and low volatility. In a recession, defensive stocks can protect you from further losses.

Costco Wholesale (COST)

Speaking of stocks that have done well over the last five years, Costco Wholesale's (NASDAQ:COST) stock is up 212% in the last five years. And the stock is already up 16% in 2024. Analysts indicate that the stock may be due for a pullback.