The S&P 500 continues to trade at a pretty lofty multiple, with more warnings emerging from investing experts that volatility could soon emerge. For the most part, the bearish predictions are calling for a correction rather than a full-blown crash.
But the latter isn’t entirely out of the question if consumers suddenly get hit with a wave of tariff-related price hikes. So let’s assume the worst and say a US stock market crash is coming. So which stocks might protect an investment portfolio?
3 ‘crash-proof’ investments?
No stock is ever truly crash-proof. Even if the underlying business continues to perform well while the wider market suffers, panicking investors often throw the baby out with the bathwater, sparking volatility, at least in the short term.
While unpleasant, this volatility does create lucrative opportunities for investors with cooler heads. And looking back to previous crashes and corrections, there are several S&P 500 stocks that have demonstrated their resilience.
As a discount retailer, Walmart (NYSE:WMT) often sees a surge in demand as consumers start hunting for bargains. In fact, we’ve already begun seeing early signs of this within the group’s latest results, which show strong like-for-like sales growth while more ‘premium’ peers fall behind.
Then there’s AutoZone (NYSE:AZO), a leading supplier of automotive parts and components. Regardless of economic conditions, people need their vehicles to get around and go to work. And since most consumers typically delay buying new cars during recessions, rising demand for spare parts for DIY repairs creates favourable headwinds.
And continuing the theme of non-discretionary spending, Procter & Gamble (NYSE:PG) is another S&P 500 stock with a knack for being resilient. Demand for its essential household brands such as Oral-B, Ariel, and Pampers tends to remain high, thanks to relatively stable sales of its healthcare, homecare, and babycare products.
Nothing’s risk-free
These three businesses appear to be well-positioned to deliver robust results in a post-tariff world. However, it’s important to recognise that none of them are guaranteed winners.
Walmart’s still susceptible to tariff-related impacts throughout its supply chain that could put pressure on margins. The company might be able to pass some of this cost onto consumers, but with its reputation built on being a cheap retailer, there’s a limit to this strategy, potentially harming earnings.
Procter & Gamble’s in a similar situation, where higher raw material prices could squeeze profitability. Even with strong brands, its ability to pass on costs could be limited by the rising number of cheaper private-label alternative products that shoppers can switch to.
As for AutoZone, the company could also encounter some issues. Consumers may opt to switch to public transportation if their cars stop working. The firm may also see a reduction in the frequency of non-essential repairs, creating some growth headwinds.
The bottom line
Each of these S&P 500 enterprises has a long track record of navigating through even the worst economic storms, including the global economic meltdown in 2008. Therefore, despite the potential challenges, investors concerned about a looming recession may want to consider investigating these businesses as a way to diversify their portfolios.
