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U.S. stocks rebounded after the brutal sell-off on Monday, but optimism was short-lived as markets wavered again late Wednesday amid the latest recession warnings. JPMorgan said it now expects a 35% chance that the U.S. economy will enter a recession by the end of this year, up from its previous projection of 25%.
According to JPMorgan, the odds of a recession hitting the economy in the second half 2025 are 45%. The bank’s analysts said a weakening labor market is an early sign of economic troubles.
JPMorgan isn’t alone. Goldman Sachs also upped the probability of a recession next year to 25%.
What ETFs perform better during market downturns and protect investors from recessionary effects? How can you protect your investments and keep getting regular dividend checks even when the economy is down? We surveyed popular discussion boards on Reddit to see the top ETFs to buy before a recession recommended by investors on the platform.
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Vanguard S&P 500 ETF
Vanguard S&P 500 ETF (NYSE:VOO) is perhaps the most popular recession-proof ETF on Reddit. The ETF exposes investors to the top 500 U.S. stocks from technology, consumer discretionary, staples, energy, health care and materials sectors. Microsoft, Alphabet, Berkshire Hathaway, Broadcom, Nvidia, Meta Platforms and Apple are among the fund’s top holdings. Redditors highlighted that VOO has never lost money on average over the past 20 years as the broader market tends to go higher in the long term. This ETF is therefore a decent choice for risk-averse investors.
iShares 20+ Year Treasury Bond ETF
Redditors believe having exposure to long-term T-bills is one of the ideal investments if you are betting on a hard landing scenario where the economy would tip into a recession or see a deflationary crisis. If a Black Swan event happens and you are already invested in a bond ETF like iShares 20+ Year Treasury Bond ETF (TLT), you’d see immediate capital appreciation since bond prices rise when investors flock to safe-haven assets like treasuries. Redditors also like the monthly dividend payments of iShares 20+ Year Treasury Bond ETF (TLT).
Schwab U.S. Dividend Equity ETF
Schwab U.S. Dividend Equity ETF (NYSE:SCHD) tracks the Dow Jones U.S. Dividend 100™ Index and gives you exposure to some of the top dividend stocks trading in the U.S., including Home Depot, Coca-Cola, Verizon, Lockheed Martin, Pepsi, and AbbVie, among many others. Redditors believe since many of these companies have been paying regular dividends for decades, any recession or downturn isn’t likely to affect them significantly. Since SCHD’s holdings are mostly conservative dividend payers, investors should not expect fast capital growth. The ETF suits people close to retirement, looking for consistent dividend income or those who want to hedge against any major economic downturn.
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Vanguard Total Stock Market Index Fund ETF
Vanguard Total Stock Market Index Fund ETF (NYSE:VTI) is a total market ETF, exposing you to small-, mid- and large-cap growth and value stocks across all sectors. Since the ETF’s holdings include over 3,600 stocks, it’s stable and hedges against any major recessionary event. Redditors believe the ETF is also a safe way to bet on risky small-cap stocks expected to thrive when recession fears abate and interest rates decline.
Consumer Staples Select Sector SPDR Fund
People continue to buy essentials even during recessions. That’s why having exposure to a consumer staples ETF like Consumer Staples Select Sector SPDR Fund (NYSE:XLP) is a safe investment before a possible recession, according to Redditors. XLP’s top holdings include some of the safest consumer companies with regular dividends – Procter & Gamble, Costco, Walmart, Coca-Cola, and Philip Morris.
Can You Find Better Yields Beyond These ETFs?
The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through ETFs… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider.
For example, Arrived Homes, the Jeff Bezos-backed investment platform just launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. The best part? Unlike other private credit funds, this one has a minimum investment of only $100.
Don’t miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga’s favorite high-yield offerings.
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This article Redditors Say Buy These 5 ETFs Before Market Crash Starts As Recession Odds Hit Record Levels originally appeared on Benzinga.com