There aren’t too many investments in existence that are truly recession-proof. And even fewer are market-proof. U.S. government bonds, especially Treasury inflation-protected securities (TIPS) and zero-coupon bonds — the hedges I discussed in this article — come quite close to being both. #-ad_banner-#Utilities, despite their reputation for being recession-resistant investments, are not quite there in terms of their portfolio-protection abilities. For one, demand for energy isn’t always steady. Because much of it comes from industrial uses, when a recession hits, overall energy demand usually declines. Furthermore, even a regulated-utility business model — while making these stocks safer — hardly guarantees… Read More
There aren’t too many investments in existence that are truly recession-proof. And even fewer are market-proof. U.S. government bonds, especially Treasury inflation-protected securities (TIPS) and zero-coupon bonds — the hedges I discussed in this article — come quite close to being both. #-ad_banner-#Utilities, despite their reputation for being recession-resistant investments, are not quite there in terms of their portfolio-protection abilities. For one, demand for energy isn’t always steady. Because much of it comes from industrial uses, when a recession hits, overall energy demand usually declines. Furthermore, even a regulated-utility business model — while making these stocks safer — hardly guarantees growth. Power companies have to contend with regulation, capital expenditures, the costs of maintaining and upgrading our aging infrastructure, the advent of renewable energy, and the additional costs of providing enhanced cybersecurity. But they are indeed safer than much of the rest of the market. Society needs these businesses to always operate, and so the government strives to guarantee that regulated utilities have at least some certainty in their businesses. This is achieved via setting up a regulated return on investment for a regulated utility. Because utilities are largely domestic businesses, their results don’t depend on currency fluctuations. This domestic… Read More