6 ETFs to Fight Your Recession Jitters (2024)

If you’re worried about the stock market correcting, or eventually heading into bear market territory, then you will want to consider the exchange traded funds (ETF) covered below. They will all give you more downside protection than the vast majority of ETFs throughout the ETF universe. However, there are some common misconceptions about these ETFs that you need to know about.

For your convenience, the ETFs belowhave been broken into two groups: top-tier and second-tier. We provide key data on each ETF and indicate its 2009 low following the market crash associated with the Great Recession compared to its 2008 top.

Key Takeaways

  • Investors looking to weather a recession can use exchange-traded funds (ETFs) as one way to reduce risk through diversification.
  • ETFs that specialize in consumer staples and non-cyclicals outperformed the broader market during the Great Recession and are likely to persevere in future downturns.
  • Here, we look at just six of the best-performing ETFs as measured from their 2008 market highs to 2009 lows.

The Top-Tier

Top-tier ETFs are defined as having a large amount of assets under management and a great deal of liquidity in the market.

The Consumer Staples Select Sector SPDR ETF (XLP)

  • Purpose: Tracks the performance of the Consumer Staples Select Sector Index
  • Total assets: $14.2 billion (as of April 26, 2024)
  • Inception date: December 16, 1998
  • Average daily volume: 4.5 million
  • Dividend yield: 2.56%
  • Expense ratio: 0.09%
  • Top three holdings:
  • The Procter & Gamble Co. (PG): 14.58%
  • The Coca-Cola Co. (COST): 12.43%
  • Walmart Inc. (WMT): 9.89%
  • April 2008 high (pre-crash): $28.49
  • February 2009 low (bottom of market crash): $20.36


XLF outperformed its peers on a relative basis in the selloff between 2008-09. It remains the most liquid and actively-traded consumer staples exchange traded fund.

The iShares US Healthcare Providers (IHF)

  • Purpose: Tracks the performance of the Dow Jones U.S. Select Health Care Providers Index
  • Total assets: $799.5 billion (as of April 26, 2024)
  • Inception date: May 1, 2006
  • Average daily volume: 56,915
  • Dividend yield: 1.14%
  • Expense ratio: 0.40%
  • Top three holdings:
  • UnitedHealth Group, Inc. (UNH): 23.90%
  • Elevance Health Inc. (ELV): 14.46%
  • Cigna Corp. (CI): 9.61%
  • April 2008 high: $49.69
  • February 2009 low: $30.13


IHF didn’t hold up exceptionally well during the last crisis, and it’s not likely to appreciate if there's another crisis. However, it’s likely to hold up better than last time since Baby Boomers are entering an age where they will require a great deal of healthcare-related products and services.

The Vanguard Dividend Appreciation ETF (VIG)

  • Total assets: $93.7 billion (as of March 31, 2024)
  • Inception date: April 21, 2006
  • Average daily volume: 587,454
  • Dividend yield: 1.72%
  • Expense ratio: 0.06%
  • Top three holdings:
  • Microsoft Corp. (MSFT): 4.02%
  • Apple Inc. (AAPL): 3.68%
  • Broadcom Inc. (AVGO): 3.35%
  • April 2008 high: $55.19
  • February 2009 low: $33.18


VIG didn’t hold up well during the last crisis. That might be the case in the future as well. On the other hand, this low-expense ETF tracks the performance of companies that have a record of increasing their dividends over time.

Companies such as these almost alwayspossess healthy balance sheets and generate strong cash flows. Therefore, they’re likely to weather the storm. The correct approach here would be to buy VIG on any dips, knowing it’s only a matter of time before these elite companies bounce back.

The 2nd Tier

Second-tier ETFs have somewhat lower liquidity and assets, with lower volumes and relatively more volatile stocks in their portfolios.

The Utilities Select Sector SPDR ETF (XLU)

  • Purpose: Tracks the performance of the Utilities Select Sector Index
  • Total assets: $12 billion (as of April 29, 2024)
  • Inception date: December 16, 1998
  • Average daily volume: 23.4 million
  • Dividend yield: 3.47%
  • Expense ratio: 0.09%
  • Top three holdings:
  • NextEra Energy, Inc. (NEE): 13.91%
  • Southern Comp (SO): 8.16%
  • Duke Energy Corp. (DUK): 7.66%
  • April 2008 high: $41.31
  • February 2009 low: $25.35


If you research “recession-proof ETFs” you will often find XLU on the list. But this is why you need to be careful with what you’re reading. As you can see, XLU didn’t hold up very well during the last crisis. That’s likely to be next during the next crisis as well. While utilities are generally seen as safe, the problem is that they’re leveraged. Therefore, when interest rates increase, their debts will become more expensive.

The debt-to-equity ratios for NextEra, Southern Co, and Duke are 1.64, 2.01, and 1.64, respectively. These aren’t terrible ratios, but they’re not comforting in a higher interest rate environment, either.

The Invesco Food & Beverage ETF (PBJ)

  • Purpose: Tracks the performance of the Dynamic Food & Beverage Intellidex Index.
  • Total assets: $128.5 million (As of April 30, 2024)
  • Inception date:June 23, 2005
  • Average daily volume: 17,909
  • Dividend yield: 0.60%
  • Expense ratio: 0.57%
  • Top three holdings:
  • Kroger Comp (KR): 5.37%
  • Kraft Heinz Co (KHC): 5.04%
  • Constellation Brands Inc (STZ): 4.94%
  • April 2008 high: $16.82
  • February 2009 low: $11.13


A manageable decline during the worst of times. And PBJ invests in the best of the best in Food & Beverage. The only reason PBJ is on the Second-Tier list is because of the 0.57% expense ratio, which is marginally higher than the average ETF expense ratio of 0.47% in 2022. This heightened expense ratio will eat into your profits and accelerate losses.

The Vanguard Consumer Staples ETF (VDC)

  • Purpose: Tracks the performance of the MSCI US Investable Market Index/Consumer Staples 25/50.
  • Total assets: $9.7 billion (As of March 31, 2024)
  • Inception date: Jan. 26, 2004
  • Average daily volume: 141,000
  • Dividend yield: 1.72%
  • Expense ratio: 0.10%
  • Top three holdings:
  • The Procter & Gamble Co. (PG): 12.00%
  • Costco Wholesale Corp. (COST): 10.03%
  • Walmart (WMT): 7.95%
  • April 2008 high: $69.85
  • February 2009 low: $49.53


With this ETF offering a very low expense ratio and holding top-notch companies, you might be wondering why it’s on the Second-Tier list. That can be answered in one word: liquidity.

The Bottom Line

Consider the ETFs above for downside protection, especially those in the Top-Tier category. That said, if you’re really worried about the market faltering and you want downside protection, then the safest playwould be a move into cash. If the market falters, it will take place in a deflationary environment. If you’re in cash, then the value ofthat cash will increase (every dollar will go further).

The author, Dan Moskowitz does not own any of the ETFs or stocks mentioned in this article.

6 ETFs to Fight Your Recession Jitters (2024)


Do ETFs do well in a recession? ›

Industries that fare better during recessions supply essentials like utilities, health care, consumer staples, and technology. An ETF gives individuals an opportunity to invest in a sector-based fund with holdings that have proven to weather economic downturns.

What is the top 3 ETF? ›

Top U.S. market-cap index ETFs
Fund (ticker)YTD performanceExpense ratio
Vanguard S&P 500 ETF (VOO)7.7 percent0.03 percent
SPDR S&P 500 ETF Trust (SPY)7.6 percent0.095 percent
iShares Core S&P 500 ETF (IVV)7.7 percent0.03 percent
Invesco QQQ Trust (QQQ)5.8 percent0.20 percent

What is the safest investment if the stock market crashes? ›

Add bonds. Adding bonds during a stock market downturn can help cushion the decreasing value of the stocks in your portfolio. Ultra safe bonds like Treasurys carry no risk and can help investors sleep well at night while mitigating the impact of a stock market crash.

What ETFs go up when the market goes down? ›

What is an inverse ETF? An inverse ETF is set up so that its price rises (or falls) when the price of its target asset falls (or rises). This means the ETF performs inversely to the asset it's tracking. For example, an inverse ETF may be based on the S&P 500 index and designed to rise as the index falls in value.

Why is ETF not a good investment? ›

ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.

What is the best asset to hold during a recession? ›

Still, here are seven types of investments that could position your portfolio for resilience if recession is on your mind:
  • Defensive sector stocks and funds.
  • Dividend-paying large-cap stocks.
  • Government bonds and top-rated corporate bonds.
  • Treasury bonds.
  • Gold.
  • Real estate.
  • Cash and cash equivalents.
Nov 30, 2023

What are the top 5 ETFs to buy? ›

7 Best ETFs to Buy Now
ETFExpense RatioYear-to-date Performance
Global X Copper Miners ETF (COPX)0.65%26.2%
YieldMax NVDA Option Income Strategy ETF (NVDY)1.01%12.9%
iShares Semiconductor ETF (SOXX)0.35%14.9%
Simplify Interest Rate Hedge ETF (PFIX)0.50%22.9%
3 more rows
May 7, 2024

How many ETFs should I own? ›

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.

What is the best ETF to invest in 2024? ›

5 Best ETFs by 5-year return as of May 2024
TickerFund name5-year return
SMHVanEck Semiconductor ETF31.19%
SOXXiShares Semiconductor ETF26.35%
XLKTechnology Select Sector SPDR Fund21.30%
IYWiShares U.S. Technology ETF20.70%
1 more row
5 days ago

How to profit from a recession? ›

What businesses are profitable in a recession? Many investors turn to stocks in companies that sell consumer staples like health care, food and beverages, and personal hygiene products. These businesses typically remain profitable during recessions and their share prices tend to better resist stock market sell-offs.

Is it better to have cash or property in a recession? ›

Cash. Cash is an important asset when it comes to a recession. After all, if you do end up in a situation where you need to pull from your assets, it helps to have a dedicated emergency fund to fall back on, especially if you experience a layoff.

Can I lose my 401k if the market crashes? ›

The odds are the value of your retirement savings may decline if the market crashes. While this doesn't mean you should never invest, you should be patient with the market and make long-term decisions that can withstand time and market fluctuation.

What stocks do best in a recession? ›

Historically, the industries considered to be the most defensive and better placed to fare reasonably during recessions are utilities, health care, and consumer staples.

What are the best stocks to buy during a recession? ›

The best recession stocks include consumer staples, utilities and healthcare companies, all of which produce goods and services that consumers can't do without, no matter how bad the economy gets.

Where is the safest place to put your money during a recession? ›

Saving Accounts

Like checking accounts, they're federally insured and are generally the simplest and safest place to keep cash in good times and bad. Other advantages of savings accounts include: Simple to open and maintain. Deposits are fully insured.

Is it a good idea to invest during a recession? ›

And, if prices start to rise, you'll end up buying more shares at the lower prices and fewer shares when your favorite stocks start to get more expensive. In a nutshell, a recession can be a great time to buy the stocks of top-notch businesses at favorable prices.

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