As of mid-June, the U.S. economy is in a technical recession. GDP for the quarter will approach around
0%. Companies that have higher input costs have the most downside risks. Those are not recession-
proof stocks that investors should buy.
3M (MMM), Proctor & Gamble (PG), and Colgate-Palmolive (CL) are examples of companies that cannot
pass higher prices to consumers. They could shrink the product size to hide the higher costs, tricking
consumers. However, customers know better. They will cut their spending on higher-priced goods that
they do not need.
Investors should pivot to drug companies like AbbVie (ABBV), Astra Zeneca (AZN), or GSK plc (GSK).
Those firms have a healthy drug portfolio. Prices are not at risk unless the U.S. government imposes
price ceilings.
Investors sold off retail stocks. Target (TGT), Walmart (WMT), and Costco (COST) have high inventory.
Still, COST stock valuations are falling to more attractive levels. Walmart can hold its excess inventory,
preserving profit margins.
The retail sector is not entirely recession-proof. It is sensitive to rising prices. Consumers will still shop at
Walmart and Costco for competitively-priced food. As inflation eases, they will buy bigger ticket items.
Investors cannot predict when overall demand rebounds. Consider starting a position with a stock price
that matches your risk tolerance.
