Investors are eyeing everything from the U.S. healthcare sector to UK stocks and gold as potential havens during a recession, as worries grow that the Federal Reserve’s interest rate increases will bring on an economic downturn next year.
Gloomy year-ahead forecasts from Wall Street banks have piled up in the past week, although a strong November jobs report released on Friday undercut the case for an imminent slowdown in the U.S. economy.
JPMorgan, Citi and BlackRock are among those who believe a recession is likely in 2023. While a downturn is not assured, strategists point to the Fed’s hefty monetary tightening, a steep slowdown in the housing market and the inverted Treasury yield curve as reasons to expect that growth will stall.
Recessions are usually bad news for stocks, though some investors believe 2022’s sharp decline in equities suggests a degree of slowdown has already been factored in.
The S&P 500 has fallen as much as 25.2% from its all-time high this year, compared to an average decline of 28% the index has recorded in recessions since World War Two, according to data from CFRA Research. The index is down 14.6% year-to-date.
Nevertheless, many on Wall Street are increasing allocations to areas of the market that have a reputation for outperforming during uncertain economic times.
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