Three Safe Trades for a Potential Recession

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FILE PHOTO: A Wall Street sign is pictured outside the New York Stock Exchange in New York

Fears of a recession are on the rise.

In fact, Bank of America is warning that higher inflation is posting a major threat to the economy.  “‘Inflation shock’ worsening, ‘rate shock’ just beginning, ‘recession shock’ coming,” Bank of America chief investment strategist Michael Hartnett says.

Inflation causes recessions, he added.

In addition, according to CNBC, “After two years of the coronavirus pandemic, a recession and a rapid recovery, Americans are worried that the economy may swiftly decline once again.  Some 81% of adults said they think the U.S. economy is likely to experience a recession in 2022, according to the CNBC + Acorns Invest in You survey, conducted by Momentive.”

If a recession really is nearing – again, where do we invest?

One of the best ways to protect your portfolio is with dividend stocks, such as NextEra Energy (NEE), for example.  For one, the company provides a basic need service –electricity.  Two, since demand for electricity doesn’t a lot from one year to the next, the company is insulated. Two, the company has generated a positive total for investor in 19 of the last 20 years.  Three, the stock carries a dividend yield of 1.92%.

A second one is Costco Wholesale (COST).

With a dividend yield of 0.67%, COST sells needed products that consumers must have no matter how well or how poorly the economy is doing.  In fact, no matter how steep of a downturn, consumers still need soap, detergent, toothpaste, toilet paper, food, etc.  All can help provide a steadier and far more predictable cash flow for COST.

Or, look at Waste Management (WM), which carries a yield of 1.53%.

The trash collection and recycling company is another safe stock to consider.  For one, garbage hauling is a necessary service.  Two, It’s also recession resistant.  Three, Waste Management does more than pick up trash.  It also sorts, transfers, stores, and recycles, giving it access to multiple income streams.  Four, the company’s market share of landfill volume in the U.S. is now up to about 30%, which is the industry’s highest.