Most investors dread a stock market crash, but it’s not all bad – for some, it’s an opportunity. If you’re an investor, it can be terrifying, but not everything drops in a crash.
Let’s take a look at what goes up when the stock market crashes.
Why would anything go up when the stock market crashes?
The stock market is a barometer of investors’ confidence in the market. When investors lose confidence, stocks fall.
If you think about it that way, it makes sense that the things the investors are still confident about have more chance of rising in a stock market crash. The trick is making sure you have those assets in your portfolio.
RELATED: Is the Stock Market Going to Crash?
What goes up when the stock market crashes?
We can argue about whether rising fear, uncertainty and doubt cause or result from stock market crashes, but in reality, it’s probably both.
More usefully, several investment types often rise when others fall. Of course, past performance is not an indicator of future results. Just because something rose in the last crash, it doesn’t mean it’ll rise in the next one.
That said, let’s take a look at some common options.
Gold, silver and bonds are the classics that traditionally stay stable or rise when the markets crash. We’ll look at gold and silver first.
In theory, gold and silver hold their value over time. This makes them attractive when the stock market is volatile, and the increased demand drives the prices up. However, history shows that this is more true of gold than silver. According to GoldSilver, gold went up in six of the nine stock market crashes between 1976 and 2020, while silver only went up in two.
As fixed-income instruments, bonds offer stable income regardless of what the stock market is doing. This makes good-quality bonds a safe haven when stocks are volatile.
As always, increased demand drives prices up. Bear in mind, however, that not all bonds are quality bonds.
Essential stocks to survive and recover
Stock market crashes don’t happen on their own – something causes them. In 2020, this was the COVID-19 pandemic, and in 2008, it was the mortgage crisis. If you can identify what will help fix or survive the crisis, those stocks will probably go up.
The path out of a pandemic relies on vaccines and medical equipment, so you’d expect stocks for related companies to go up. This is indeed what happened, with stocks like Pfizer performing well during COVID-19.
You can see a similar pattern in each stock market crash, but the likely solution – and therefore the ‘right’ stocks – is different each time.
A dividend yield is the amount a company pays out in dividends relative to its stock price. Dividends tend to be consistent, so when the stock price falls and the company continues to pay the same dividend, then the dividend yield rises.
While dividend-yielding stocks are more volatile than gold, they’re less volatile than other stocks. This could make them a good choice in a stock market crash.
RELATED: When Will the Stock Market Recover?
What are risky options in a stock market crash?
If you think a stock will fall in the short term, shorting or short-selling is a way to bet against it. Put simply, you borrow a few shares from a friend (for a fee), then sell them. When the price of the shares falls, you buy them back at a lower price, give them back to your friend and pocket the difference.
However, if the price rises, you still have to buy them back and return them to your friend. In this case, you foot the losses as well. Spread-betting and contract-for-difference trading is similar, and just as risky.
Derivatives should go up when the market goes down, but they’re complicated and risky. Hedging and inverse exchange-traded funds (ETFs) are based on derivatives. While these are all less risky than short-selling, they only respond to short-term changes. This makes them less helpful as a long-term safe haven in a stock market crash.
A stock market crash is unnerving, we know. But it’s not the end of the world. Remember, you haven’t lost anything until you sell your investments at a lower price than you bought them for.
If you include some stable assets in your portfolio to buffer you against sudden changes and invest for the long haul, it could even be an opportunity.
What investments go up during a market crash? ›
While no investment is guaranteed to be recession-proof, some tend to perform better than others during downturns. These include health care and consumer staples stocks (or funds tracking those sectors), large-cap stocks and income investments.How do you profit from a stock market crash? ›
- Stay Calm.
- Buy Stocks At A Reduced Price.
- Buy Bonds.
- Consider Fixed Index Annuities.
- Next Steps.
- Request A Quote.
If you are a short-term investor, bank CDs and Treasury securities are a good bet. If you are investing for a longer time period, fixed or indexed annuities or even indexed universal life insurance products can provide better returns than Treasury bonds.What stock rises when market falls? ›
Bonds Often Rise When Stocks Fall
As you are sure to have noticed, every financial advisor recommends adding bonds to your portfolio in various proportions, depending on your financial goals. Bonds often rise when stocks fall, which ensures that your investment is somewhat protected against dramatic market downturns.
Precious metals, like gold or silver, tend to perform well during market slowdowns. But since the demand for these kinds of commodities often increases during recessions, their prices usually go up too. You can invest in precious metals in a few different ways.What should I own if a dollar crashes? ›
- Gold And Silver Coins.
- Gold IRAs.
- Real Estate Investments.
- Foreign Bonds.
- Collectables Such as NFTs.
- Food Storages.
- Own Foreign Currency.
Economists often see a massive increase in demand for their services as the general public, businesses, and policy makers grapple with the recession. Consultants, government policy advisors, and even media personalities may also find opportunities to market their expertise during uncertain economic times.Should you buy during a stock market crash? ›
If you can do it and still sleep at night, then yes.
As it turns out, buying stocks when the market crashes can be an excellent strategy so long as you refrain from trying to trade in and out of a position at the "perfect" time.
No matter what the market does, it's important to remember that you won't lose any money unless you sell. Even if your investments decrease in value, you only lock in those losses by selling when prices are lower. By holding your stocks until prices recover, you can avoid losing money.How do you not lose money in a stock market crash? ›
You can do a few things to protect your money from a market crash. One is to invest in assets that tend to be less volatile, such as deferred annuities, bonds, or cash. Another is to diversify your portfolio to include different asset classes, which can help offset the losses in one sector with gains in another.
Is cash King during recession? ›
Because of how precious cash can be during times of financial stress, many have said that cash is king. The phrase means that having liquid funds available can be vital because of the flexibility it provides during a crisis.Should I keep cash during recession? ›
And having cash handy is vital during a recession in case of a job loss or other reduction in income. And as rates rise your cash will earn more money in a savings account. Reduce debt: If you have high-interest debt, pay it down if you can. But don't tap your emergency fund.Do some stocks rise during recession? ›
Stocks are sometimes up during recessions: The S&P 500 was positive in four of the past ten recessions, including the early 1980s when the Fed was aggressively fighting inflation.Will stocks go up before recession? ›
Typically during the early part of a recession, the stock market has negative returns. This is often because of the negative sentiment around poor or lackluster corporate earnings. But the stock market will often recover before the recession is over.What are the 2 most valuable assets in a time of crisis? ›
Human life and wealth are the two most significant things worth preserving since crises are unavoidable.Is it smart to buy a house during a recession? ›
Buying a home during a recession can sometimes be a good idea — but only for people who are lucky enough to remain financially stable. Mortgage rates may drop as the Fed tries to help the economy recover, and with fewer qualified buyers and less competition, home prices can drop as well.What will replace the dollar? ›
The currency wars are getting hot and it's looking increasingly likely that the world is going to start moving away from the US dollar as a reserve currency – gold or bitcoin are the front runners to replace it.What is the strongest currency right now? ›
Kuwaiti Dinar (KWD)
The Kuwaiti dinar continues to remain the highest currency in the world owing to Kuwait's economic stability. The country's economy is primarily reliant on oil exports because it has one of the world's largest reserves.
For example, your home's mortgage payments wouldn't fall by half after a 50 percent dollar devaluation. Generally, homeowners with existing fixed-rate mortgages and credit cards aren't negatively affected by currency devaluation. Of course, dollar devaluation could lead to inflation.Who suffers the most during a recession? ›
The riskiest industries to work in include:
- Real estate.
- Leisure and hospitality.
Who got rich during the 2008 financial crisis? ›
The most lucrative bet against the housing bubble was made by Paulson. His hedge fund firm, Paulson & Co., made $20 billion on the trade between 2007 and 2009 driven by its bets against subprime mortgages through credit default swaps, according to The Wall Street Journal.How long do recessions last? ›
Recessions can last from a few weeks to several years, depending on the cause and government response. Data from the National Bureau of Economic Research shows that between 1854 and 2022, the average recession lasted 17 months.Do houses get cheaper when the stock market crashes? ›
During a housing market crash, the value of a home decreases. You will find sellers that are eager to reduce their asking prices.How long did it take for stocks to recover in 2008? ›
2008: In response to the housing bubble and subprime mortgage crisis, the S&P 500 lost nearly half its value and took two years to recover. 2020: As COVID-19 spread globally in February 2020, the market fell by over 30% in a little over a month.What products sell best during a recession? ›
- Consumer staples. There are some items that you need no matter what the stock market is doing. ...
- Camping gear. Lavish vacations to distant lands are not as attractive during recessions. ...
- Automotive parts. ...
- Coffee and tea. ...
- Tupperware. ...
- Candy. ...
- Cosmetics. ...
- Pet care products.
Your 401(k) is invested in stocks, meaning your account's value can go up or down depending on the market. If the market drops, you could lose money in your 401(k). This is why it's essential to diversify your investments and not put all your eggs in one basket.Does 401k recover after recession? ›
You're likely to see the value of the investments in your 401(k) decline during a recession. Most equities will eventually recover from a recession-induced pullback.At what age should you get out of the stock market? ›
You probably want to hang it up around the age of 70, if not before. That's not only because, by that age, you are aiming to conserve what you've got more than you are aiming to make more, so you're probably moving more money into bonds, or an immediate lifetime annuity.What businesses get hurt in a recession? ›
A recession is “a significant decline in economic activity spread across the economy, lasting more than a few months.” Industries affected most include retail, restaurants, travel/tourism, leisure/hospitality, service purveyors, real estate, & manufacturing/warehouse.Do people gamble in recessions? ›
The fact that people spend more on luck-based gambling during a recession could mean that they consider gambling as a potential source of income. However, gambling is not a significant or reliable source of income. So, gambling retailers and regulatory boards could raise people's awareness of this fact.
What are the worst investments during inflation? ›
The worst investment to put money into, during periods of inflation, are long-term, fixed-rate interest-bearing investments. These can include any interest-bearing debt securities that pay fixed rates, but especially those with maturities of 10 years or longer.Do food prices go down in a recession? ›
Because people have less money to spend, demand falls, taking the prices of many goods and services with it. Because a decline in disposable income affects prices, the prices of essentials, such as food and utilities, often stay the same.What stocks did well after 2008 crash? ›
No less than 19 S&P 500 stocks, including consumer staple Walmart (WMT), health care Baxter International (BAX) and tech stock Analog Devices (ADI), beat the S&P 500 during all of the past five recessions, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.Will 2023 be a bear market? ›
Recession In 2023, Bear Market Is About Inflation | The Watch List| TD Ameritrade Network. "Stock market today is seeing a decline with volatility, which can be attributed to the Federal Reserve raising interest rates and inflation. The recession lip service is not driving the market, but it could occur in 2023.Will stock recover in 2023? ›
After ending the year down nearly 20%, the S&P 500 index is in the green for 2023. And the Nasdaq Composite — which plunged 33% in 2022 — is up more than 4.5% this year. So when will stocks fully recover from the bear market? Many experts appear optimistic it will happen in 2023.Do all stocks go down in a recession? ›
Some sectors tend to perform better than others during a recession. For example, defensive stocks—such as consumer staples and healthcare—are typically less affected by an economic downturn than cyclical stocks—such as energy and industrials.How can I invest a millionaire in 5 years? ›
- Select your Niche. ...
- Put aside 20% of your income every month. ...
- Don't spend anything other than essentials. ...
- Get out of debt as quickly as possible. ...
- Start building Passive Income Streams.
After ending the year down nearly 20%, the S&P 500 index is in the green for 2023. And the Nasdaq Composite — which plunged 33% in 2022 — is up more than 4.5% this year. So when will stocks fully recover from the bear market? Many experts appear optimistic it will happen in 2023.What stocks will boom in 2023? ›
- HAL-0.15 (-0.40%)
- ENPH+0.70 (+0.33%)
- NFLX-0.08 (-0.03%)
- VFC-0.04 (-0.16%)
If you have saved enough and have other assets that generate income for you, this is the right time to buy more stocks. The reason for this is simple, a stock market crash signifies all the prices are down and this is the perfect opportunity to buy low and sell high.
What are the two most valuable assets in a time of crisis? ›
Human life and wealth are the two most significant things worth preserving since crises are unavoidable.How long to recover from 2008 crash? ›
The recession lasted 18 months and was officially over by June 2009. However, the effects on the overall economy were felt for much longer. The unemployment rate did not return to pre-recession levels until 2014, and it took until 2016 for median household incomes to recover.What should you not do when the stock market crashes? ›
Resist any urge to sell stocks
Selling stocks in a panic is the worst thing you could do after a stock market crash. Successful investing is about buying low and selling high. When you sell after a crash, you do just the opposite.
Anything that involves selling an essential product is a safe bet during a recession. Whether it's deodorant, pantry staples or baby products, these goods will always be in demand. Companies like Procter & Gamble, Unilever and British American Tobacco are all currently performing solidly.
Millionaires have many different investment philosophies. These can include investing in real estate, stock, commodities and hedge funds, among other types of financial investments.What asset do the wealthy own more of? ›
Affluent people are more likely to allocate their money to financial assets such as stocks, bonds, and other investments which hold the possibility of capital appreciation. Those who are not wealthy are more likely to have their money in savings accounts and home ownership.What asset makes the most millionaires? ›
“90% of all millionaires become so through owning real estate.” This famous quote from Andrew Carnegie, one of the wealthiest entrepreneurs of all time, is just as relevant today as it was more than a century ago. Some of the most successful entrepreneurs in the world have built their wealth through real estate.