When the Fed announced the biggest interest rate hike since 1994, the market did not take the news well.
On Thursday, the day after the announcement, the S&P 500 fell 3.2%. Since the start of the year, the benchmark has plunged more than 23%.
But a slowdown in the stock market isn’t the only thing to worry about, as Wells Fargo now sees the US economy slipping into a mild recession in mid-2023.
“In our view, the recession will be more or less equivalent in magnitude and duration to the slowdown of 1990-1991. This recession lasted two quarters with real GDP falling 1.4%,” the bank’s chief economist, Jay Bryson, wrote in a note on Wednesday.
The good news? Wells Fargo recently unveiled a portfolio of recession-proof stocks — here are three to help you play defense.
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Eager to escape the dreary stock market? Unfortunately, “Silver is not a safe investment”, says Ray Dalio, founder of the largest hedge fund in the world. “It’s not a safe place because it will be taxed by inflation.” With the consumer price index hitting a 40-year high of 8.6% in May, you’ll need to be creative to find strong returns.
Colgate Palmolive (CL)
It’s easy to see why Colgate-Palmolive belongs in a recession-proof portfolio.
The company is deeply rooted in its operating markets, including oral care, personal care, pet nutrition and home care.
Notably, its leading brand Colgate has by far the largest share of the global toothpaste market. And thanks to brands like Softsoap and Palmolive, the company is also a dominant player in the liquid soap market.
No one will stop buying soap or toothpaste in difficult times. This simple truth has led to a long and consistent track record of returning money to investors.
The company has increased its payments for 60 consecutive years.
The business continues to grow: in the first quarter, Colgate-Palmolive organic sales increased 4% year-over-year.
Paying quarterly dividends of 47 cents per share, CL stock offers an annual return of 2.5%.
Formerly known as Waste Management, WM is North America’s largest provider of comprehensive environmental waste management solutions. It claims to provide collection, recycling and disposal services to more than 20 million residential, commercial, industrial and municipal customers.
Waste management is not an exciting activity, but it is essential: whether the economy is booming or in recession, people always need someone to come and pick up their trash.
The company was founded in 1968 and is still cleaning today.
In the first quarter, WM’s revenue grew 13% year-over-year to $4.66 billion. Adjusted earnings per share were $1.29 for the quarter, up 22% from the same period last year.
WM currently pays quarterly dividends of 65 cents per share, 13% more than it paid a year ago. This makes 2022 the 19th consecutive year the company has increased its payout.
The stock offers an annual return of 1.9%.
Johnson & Johnson (JNJ)
With well-established positions in the consumer healthcare, pharmaceuticals and medical devices markets, healthcare giant Johnson & Johnson has provided consistent returns for investors throughout economic cycles.
Many of the company’s consumer health brands, such as Tylenol, Band-Aid and Listerine, are so ubiquitous that they’re used as shorthand for their entire product category. In total, JNJ offers 29 products each capable of generating over $1 billion in annual sales.
Not only does Johnson & Johnson post recurring annual profits, but it also steadily increases them: over the past 20 years, Johnson & Johnson’s adjusted profits have grown at an average annual rate of 8%.
The stock has been trending up for decades. And it demonstrates its resilience again in 2022: as the broad market entered bearish territory, JNJ is down just 1.2% year-to-date.
JNJ also announced its 60th consecutive annual dividend increase in April and is now yielding 2.7%.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.