ChatGPT is growing its influence and capabilities apace, and it’s often sought out for its advice pertaining to all things financial.
And with some talk of recession, the major question analysts seem to be asking is “When?” It could be prudent to consult ChatGPT over the question of which investments might best weather any possible coming market downturn.
ChatGPT was quick to gesture toward three particular cornerstones of investment that should be able to withstand the macroeconomic turmoil common to recessionary periods: defensive sectors (“stuff people can’t really cut,” according to the artificial intelligence, or AI, model), high-quality companies (“balance-sheet survivors”), and bonds as well as defensive exchange-traded funds, or ETFs (or “boring ballast” in its terms).
Let’s examine each in brief, outlining its reasoning for each named category.
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ChatGPT was quick to point to an August Morningstar report suggesting that “healthcare, utilities staples, and consumer stocks typically perform best during economic weakness.”
“In plain English: people keep buying food, medication, electricity, and basic household items even when they’re broke and cranky. Companies that sell those things often see smaller earnings hits and less-severe stock drawdowns,” ChatGPT explained.
Speaking of several high-profile pieces of recent data points — notably, Goldman Sachs — ChatGPT highlighted the value of cultivating a “high-quality” basket of investments.
In Goldman Sachs’ case, an extensive study of 2024’s likely equity performers (from Nov. 2023) showed that its own quality basket (constituted by 50 different picks, from Alphabet to Tractor Supply to UnitedHealth Group and beyond) was outperformed by the S&P 500 (posting a 6% return versus 19%), but this was a valuable strategic hedge against volatility.
The same principle applies more broadly, per the AI’s advice.
“So, if you’re hunting for ‘survivors,’ you’re not just looking for any old utility or grocery chain; you’re looking for the ones with: low or manageable debt, durable, recurring cash flows, and a history of keeping dividends going (and ideally growing) through past slowdowns,” ChatGPT suggested.
Bonds and defensive-posture ETFs are also comparatively solid portfolio picks, according to AI predictions.
