Is The Recession Playbook Working? Array ( [cookie] => d25677-69e310-61ff7d-f7c303-94ab83 [current_usage] => 1 [max_usage] => 2 [current_usage_crypto] => 0 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 0 [user_id] => 0 [reason] => Usage under limits [method] => ) 1 and can accesss 1

“All these people see the same data, read the same material, and spend their time trying to guess what each other is going to say. [Their forecasts] will always be moderately right—and almost never of much use.” — Howard Marks

Chart of the Day

Good morning!

The usual market dynamics seem to no longer work. 

Treasurys, which are supposed to hedge portfolios against steeper declines posted by stocks, aren’t working the way they’re supposed to. And almost every day we hear a new superlative for the level of chaos reached in the market sell-off, raising questions about whether this is the new normal. 

Compounding those worries is the fact that many Wall Street strategists now see a greater chance of recession this year. As a result, investors have been forced to scramble their playbooks to find the handful of places that are left unscathed by the market carnage. (Hint: There’s not that many.). 

Let’s say we were to entertain the idea that the economy is in a recession. In that scenario, we’d be curious to see whether a few of the “best investments to own during a recession,” according to a Morningstar analysis, are behaving themselves. To be clear, Fundstrat’s Head of Research Tom Lee doesn’t believe we’re headed for a recession, and he remains bullish on the U.S. stock market this year.

• Gold has been a poster-child this year of the recession playbook. The haven metal has posted positive returns during the eight most recent recessions since 1993. In fact, gold had a total average return of 7.1%, data going back to 1980 shows. This year, gold has gained over 25%, while the S&P 500 has declined 10%. 

• Another tried and battle-hardened strategy of owning shares of healthcare and consumer staples has done decently this year. The idea is that it is easier for consumers to cut back spending from discretionary areas rather than health bills or food basics. Out of 11, the S&P 500’s consumer staples sector has been the best performer in 2025, up 5.8%. Healthcare is the third-best performer, down 1.6%. 

• Historical data show that during an economic downturn energy stocks decline an average of 20%, as demand goes down. Surprisingly, the S&P 500 energy sector has held strong this year, down 4.5%, posting smaller declines than the consumer discretionary and information technology’s 20% and 18% losses, respectively.

• Morningstar also said that financials stocks have suffered in the past during recessions because of a rising default rate and shrinking net interest margins. But the S&P 500’s financials are down 3.5% this year. 

• Looking at the analysis from a style perspective, growth stocks typically do better in recessionary periods because those companies have higher earnings growth, cleaner balance sheets, and better profitability. Value stocks, in comparison, lag, as they’re more overweight economically sensitive sectors. That reliable strategy has been upended this year. The Russell 1000 growth is down 15% this year, while the Russell 1000 value is down 5%. 

Sometimes past performance isn’t the best indicator of what’s going to happen in the future, especially if the megaforces moving the markets are different. 

Share your thoughts

What is the best recession play according to you and why? Click here to send us your response.

Here’s what a reader commented

Question: Is home ownership still central to your idea of the American dream?

Answer: Home ownership has always been a big part of my life and my dreams. Even now after being a homeowner for over 40 years and owning a wonderful home, I still think about improving my situation with a different combination of factors. Over the years I have gained more than I have lost, but I did sell a house at a loss once. There are no guarantees or sure things in life.  So let’s remember, there is a finite quantity of land tending to help home values rise over time.  Interest on a fixed rate mortgage will stay the same unless you refinance. Only taxes and insurance tend to rise over time. Renters always have to worry about what the landlord could do to them. To be in control of your dreams, be financially wise.

Catch up with Fundstrat

It has been 18 days since tariff “Liberation Day” and the global economy has hardly been liberated and is still strangulated by the vast uncertainty of the existing tariff negotiations.

Technical

At present, a mild rally has gotten underway that will need to eclipse 5386 to begin to show more upside acceleration. The burden of proof is clearly on the bulls at this point given an ongoing negative technical trend coupled with strong negative weekly momentum.

Crypto

We discuss Trump’s escalating feud with Powell, the market implications of a potential Fed shakeup, and why BTC’s strength during APAC hours may point to early signs of capital inflows from China.

News We’re Following

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Of Interest 

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