As economists raise alarms about the possibility of a global economic recession looming in 2024, concerns are mounting over various factors, including the current real funds rate, the widening yield curve, and other specific federal policy changes.
During periods of economic turmoil, risk assets such as stocks, notably those in growth sectors like technology, often face headwinds driven by bearish sentiment.
To help investors safeguard their capital and make strategic financial decisions, Finbold turned to the power of artificial intelligence (AI). Namely, we asked ChatGPT to identify two stocks that could offer a robust defensive position in the event of a recession.
Picks for you
ChatGPT’s recommendations
Given that its knowledge of the outside world’s developments is up to date only until September 2021, ChatGPT did not make specific stock suggestions right off the bat.
However, OpenAI’s chatbot recommended two particular sectors that were historically less sensitive to economic downturns – consumer staples and utility.
The consumer staples sector includes companies that manufacture and sell essential products like food, beverages, and personal care items, among others. Because people buy such products even during tough periods, such stocks are usually better positioned to weather an economic recession, ChatGPT said.
Two such stocks, which have also proven their resilience in previous market downturns, are Procter & Gamble (NYSE: PG) and Coca-Cola Company (NYSE: KO).
“Consumer staples companies have relatively stable revenue streams, and their products are less affected by economic downturns. People still need to eat, drink, and maintain personal hygiene regardless of the economic climate.”
– ChatGPT added.
Another category that demonstrated endurance during previous recessions and periods of commotion is utility. Similar to consumer staples, companies within the utility sector are also considered a good defensive play because they offer essential services and products such as gas, water, and electricity.
Good examples of two proven utility stocks are Dominion Energy (NYSE: D) and Duke (NYSE: DUK).
“Utility companies often have regulated business models, which can provide a steady stream of income. Additionally, the demand for utilities tends to be inelastic, meaning people still need these services even when budgets are tight.”
– the bot wrote.
It’s important to note that while these stocks may be more resilient during economic downturns, they are not immune to market volatility.
Additionally, the performance of any stock during a recession can be influenced by various factors, including the severity and duration of the recession, company-specific factors, and changes in market sentiment.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
