Predictions Markets Are Pointing to a Potential Recession. 3 Stocks to Buy.
The world's largest predictions market, Polymarket, has been putting the odds of recession in the U.S. this year at around 30% for much of this month. With recession fears growing, let's look at three stocks that could perform well in this environment.
Walmart
Historically, one of the best stocks to own during a recession has been retailer Walmart (NASDAQ: WMT). The stock has nicely outperformed the market during the last three big recessions, including the COVID-19 crash of 2020, where it was up 21% that year; the Great Recession in 2007 and 2008, where its stock rose 3% and 18%, respectively; and the bursting of the dot-com bubble in 2001, where it climbed 8%.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Notably, the company is perhaps better positioned today to withstand a recession than in the past. The reason for this is that the retailer has transformed itself to become the world's largest grocer, with about 60% of its sales now coming from this category. Meanwhile, as the low-cost leader, consumers tend to flock to it during these periods.
The company has already been drawing in more affluent customers to its stores over the past few years, as it has leaned not only into low prices but also into convenience by offering free same-store delivery through its Walmart+ subscription plan. That should set the company up to see solid growth even if the U.S. is hit by a recession this year.
Netflix
When a recession hits, people often turn to cheaper forms of entertainment, which helps benefit Netflix (NASDAQ: NFLX). During the Great Recession, the company's stock rose 3% in 2007 and 12% in 2008, before surging 84% in 2009. The stock also soared 67% in 2020, the year of the COVID-19 recession.
Meanwhile, losing out on its bid for Warner Bros Discovery could be the best thing for the company in the event of a recession. First, it keeps its balance sheet in better shape, and second, it doesn't add theatrical releases, which can struggle during these periods. At the same time, its ad business is so nascent that it should continue to grow even during a weaker economic period.
Overall, Netflix should continue to see solid revenue growth even during a recession. Its addition of lower-priced ad-supported tiers positions it well to add subscribers during this period, while it should still have solid pricing power given its relative value to other forms of entertainment.
