In case you haven't been paying attention, "Taxmageddon," and election-year politics have driven the economy to the edge of a "fiscal cliff." This means the start of next year, unless drastic measures are taken in Washington, is looking precarious for investors.
Just look at what recent U.S. economic reports have told us.
"The Chicago Fed's activity index came in at -0.45 Monday morning, while recent weekly unemployment data have been weak and the Michigan consumer confidence is down," said Money Morning Global Investing Strategist Martin Hutchinson. "Given that first-quarter GDP growth was already under 2%, it looks as though the U.S. economy has stalled. Accordingly, we need to ask: how will our investments do in a recession?"
That's why it's time to update our portfolios with recession-proof stocks.
Not All Stocks Can Handle What's AheadTough economic and market conditions saddle most companies with operational and financial problems that aren't easily overcome.
Businesses are usually forced to cut spending and lay off employees. And there are some expenses a company can't eliminate, such as payroll, rent and taxes.
A recession hits the wallets of customers, too, who typically reign in their spending as they scramble to stay afloat.
That becomes a double whammy for corporations.
Orders for new products slow to a trickle. Some customers slow payments or may not pay their bills at all, crippling cash flows.
Still, there are certain businesses that flourish in the adversity of a recession -- making them safe harbors for your investment dollars during bad market conditions.