US Market 2025: Recession-Proof Your Portfolio with Commodities and Equities

Preparing for Economic Shifts in the United States (2025 Outlook)

As the U.S. economy navigates persistent inflation, shifting Federal Reserve policy, and global uncertainty, the possibility of a recession in 2025 remains a top concern for investors. While no one can predict the exact timing or depth of an economic downturn, proactive planning can make all the difference in preserving and growing wealth over time. This guide breaks down how two major asset classes-commodities and equities-behave during recessions, offering real-world data, strategic insights, and practical investment approaches tailored to American investors. Whether you’re managing your own portfolio or advising clients, understanding these dynamics is essential for navigating the financial landscape ahead.

Understanding Recessions and Their Impact on U.S. Markets

In the United States, a recession is officially determined by the National Bureau of Economic Research (NBER), which defines it as a “significant decline in economic activity spread across the economy, lasting more than a few months.” Key indicators include drops in real GDP, employment, industrial production, income, and retail sales. Though two consecutive quarters of negative GDP often signal trouble, the NBER considers a broader set of data before declaring a recession.

When a downturn hits, financial markets typically react swiftly. Equities often fall sharply as corporate profits decline and investor confidence wavers. The Federal Reserve usually responds by cutting interest rates to stimulate borrowing and spending, which affects bond yields, mortgage rates, and credit conditions. Market volatility spikes, and safe-haven assets like gold or Treasury bonds often see increased demand. Understanding these patterns helps investors anticipate shifts and adjust their portfolios accordingly.

Equities During a Recession: Volatility, Opportunity, and Sector Performance in the U.S.

The U.S. stock market, particularly the S&P 500, has historically suffered during recessions. During the 2008 financial crisis, the index lost over half its value. In early 2020, amid the pandemic-induced shock, it dropped nearly 34% in just over a month. These downturns are driven by several interconnected factors:

• Declining Corporate Earnings: As consumer spending slows and businesses cut back, revenues and profits shrink, dragging down stock valuations.
• Investor Sentiment: Fear and uncertainty can fuel panic selling, pushing prices below fundamental levels.
• Valuation Compression: In uncertain times, investors demand higher returns for risk, leading to lower price-to-earnings (P/E) multiples.

However, not all stocks fall equally. Defensive sectors-those providing essential goods and services-tend to outperform during downturns. In the U.S., these include:

• Healthcare: Demand for medical care, prescription drugs, and insurance remains steady even in hard times.
• Utilities: Electricity, water, and gas are non-discretionary needs with regulated revenue models.
• Consumer Staples: People still buy food, cleaning supplies, and personal care products regardless of economic conditions.

Cyclical sectors like consumer discretionary, industrials, and financials often suffer the most, as they rely heavily on economic growth and consumer confidence.

Despite the pain, recessions can create long-term opportunities. The stock market has historically bottomed before the economy recovered, meaning patient investors who buy during downturns may capture substantial gains. The key is maintaining discipline, avoiding emotional decisions, and focusing on high-quality companies with strong balance sheets and consistent cash flow.

Commodities During a Recession: The Inflation Hedge and Safe-Haven Debate for U.S. Investors

Commodities-raw materials like oil, gold, wheat, and copper-behave differently than stocks during economic contractions. Their performance depends heavily on the nature of the recession, inflation trends, and supply-demand imbalances.

Broadly, commodities fall into three categories:

• Energy: Crude oil, natural gas, gasoline-highly sensitive to industrial activity and global demand.
• Metals: Gold and silver (precious metals) are often viewed as safe-haven assets; copper and aluminum (industrial metals) reflect manufacturing and construction trends.
• Agriculture: Corn, soybeans, livestock, and soft commodities like coffee and sugar-affected by weather, trade, and population needs.

Gold, in particular, has a strong track record during recessions. In 2008 and 2020, investors flocked to gold as a store of value amid market turmoil, driving prices higher. It’s also a proven hedge against inflation, which often persists or even accelerates during or after a downturn.

Other commodities, however, don’t always hold up. Oil prices crashed in early 2020 when global travel halted and demand evaporated. Industrial metals like copper can fall alongside equities when construction and manufacturing slow. Agricultural commodities may remain stable or even rise if supply chains are disrupted or geopolitical tensions flare.

Key factors influencing commodity prices during recessions include:

• Supply and Demand: A global slowdown reduces industrial demand, but supply shocks-like wars or natural disasters-can boost prices.
• Geopolitical Risk: Conflicts in oil-producing regions or trade restrictions can send energy and grain prices soaring.
• U.S. Dollar Strength: Since most commodities are priced in dollars, a stronger dollar makes them more expensive for foreign buyers, potentially suppressing demand. A weaker dollar tends to support higher commodity prices.

Investing in commodities isn’t without risk. Prices can be extremely volatile, and physical storage is impractical for most individuals. Futures contracts introduce complexities like contango (when future prices are higher than spot prices) and backwardation. For most U.S. investors, commodity ETFs or ETNs offer a more accessible and cost-effective route.

Commodities vs. Equities: A Direct Comparison for U.S. Investors in 2025

Choosing between commodities and equities isn’t about picking a winner-it’s about understanding how each asset class fits into a resilient portfolio. As 2025 approaches, investors need clarity on performance trends, risk exposure, and strategic advantages.

Performance Metrics

Historically, equities deliver strong long-term returns but suffer steep drawdowns during recessions. Commodities offer no dividends or earnings, but certain types-especially gold-can appreciate when stocks fall. While equities are tied to corporate performance, commodities respond more directly to macroeconomic forces like inflation, currency moves, and supply shocks.

Inflation Protection

Commodities are widely regarded as a direct hedge against inflation. When the cost of raw materials rises, so do commodity prices-helping preserve purchasing power. Equities can struggle in high-inflation environments, especially if companies can’t pass on higher costs. However, some sectors (like energy or materials) may benefit.

Risk Profiles

Equities carry company-specific risks-management missteps, competitive threats, or regulatory changes-on top of market-wide volatility. During recessions, these risks intensify. Commodities avoid business risk but are vulnerable to geopolitical events, weather patterns, and rapid shifts in supply. Both asset classes are volatile, but for different reasons.

Liquidity and Accessibility

For U.S. investors, equities are highly liquid and easy to trade through brokerage accounts. Commodities require more nuanced access. Most investors use commodity ETFs (like GLD for gold or USO for oil), ETNs, or futures contracts. While direct CFD trading is restricted for U.S. retail investors, regulated alternatives exist through futures markets and ETF platforms.

Diversification Benefits

The real power of combining commodities and equities lies in diversification. Because their price movements are often driven by different factors, they can offset each other during market stress. For example, gold may rise while stocks fall, smoothing overall portfolio volatility. This low or negative correlation enhances resilience, especially in uncertain economic climates.

Strategic Investment Approaches for the United States in 2025

With recession risks on the horizon, U.S. investors need a flexible, forward-looking strategy that balances growth, protection, and adaptability.

Diversification Beyond Traditional Baskets

A simple 60/40 stock-bond split may not be enough in 2025. Consider expanding into real assets like gold, real estate investment trusts (REITs), or inflation-protected securities (TIPS). Within equities, overweight defensive sectors such as healthcare, utilities, and consumer staples. For commodities, focus on those with strong inflation-hedging properties, like gold or agricultural products less tied to industrial cycles.

Dollar-Cost Averaging

Instead of trying to time the market, commit to investing a fixed amount regularly-monthly or quarterly. This approach reduces the impact of short-term volatility and can lower your average cost per share over time. It’s especially effective during downturns, when prices are depressed.

Hedging Strategies

Sophisticated investors can use options or futures to hedge equity exposure. For example, buying put options on the S&P 500 can protect against a market drop. Going long on gold futures or using leveraged commodity ETFs can provide targeted exposure during inflation spikes. These tools require experience, but they add powerful layers of risk control.

Sector-Specific Opportunities

Within equities, look for companies with strong balance sheets, low debt, and consistent cash flow. These firms are more likely to survive downturns and may even acquire weaker competitors. In commodities, consider allocations to precious metals or farmland-linked assets, which often maintain or increase value during economic stress.

Monitoring Key U.S. Economic Indicators

Stay informed by tracking critical data points:

• Inflation: CPI and PPI reports reveal trends in consumer and producer prices.
• Labor Market: Unemployment rate and nonfarm payrolls indicate economic health.
• Manufacturing: ISM Manufacturing Index shows sector momentum.
• Consumer Confidence: Signals spending intentions.
• Federal Reserve Policy: Interest rate decisions and balance sheet changes influence all markets.

The Federal Reserve Economic Data (FRED) portal is an invaluable resource for tracking these metrics in real time.

Accessing Commodities and Equities: Top Broker Considerations for U.S. Investors (2025)

U.S. investors have multiple ways to gain exposure to both equities and commodities. Stocks, ETFs, and mutual funds are available through standard brokerage accounts. For commodities, most investors use ETFs that track prices or hold futures contracts. Others trade futures or options directly on exchanges like the CME.

It’s important to note that CFD (Contract for Difference) trading is generally not permitted for U.S. retail investors due to regulatory restrictions. However, global platforms offering CFDs can provide insight into advanced derivative strategies for qualified or international investors.

Recommended Brokers for Commodity & Equity Trading in the U.S. (2025)

• Moneta Markets
  • Advantages: Moneta Markets is a globally recognized broker offering a comprehensive suite of CFDs on commodities (including gold, oil, and natural gas), indices, and equities. While CFDs are not available to U.S. retail investors, Moneta Markets serves international clients with competitive spreads, advanced MetaTrader 4/5 platforms, and 24/7 support. Regulated by the Financial Conduct Authority (FCA), it provides a secure environment for sophisticated traders exploring global markets. U.S. investors can apply lessons from such platforms when using regulated futures or ETFs domestically.
• Interactive Brokers (IBKR)
  • Advantages: A top choice for active U.S. investors, Interactive Brokers offers access to global equities, ETFs, options, futures, and forex. Its Trader Workstation (TWS) platform delivers powerful analytics, real-time data, and low-cost execution, making it ideal for managing complex, diversified portfolios across asset classes.
• Charles Schwab / TD Ameritrade (now merged)
  • Advantages: This combined platform provides commission-free trading on stocks and ETFs, robust tools for options and futures, and extensive research and education. It’s well-suited for both beginners and experienced investors seeking reliable access to equities and commodity-linked ETFs.
• Fidelity Investments
  • Advantages: Fidelity offers a full range of investment products, including stocks, ETFs, mutual funds, and options. Its intuitive platform, strong research capabilities, and access to commodity ETFs make it a solid choice for long-term investors focused on stability and retirement planning.

Managing Risk and Protecting Capital in a Recessionary U.S. Environment

In a downturn, protecting your capital is just as important as seeking returns. A disciplined risk management framework helps preserve wealth and positions you to take advantage of recovery opportunities.

Stop-Loss Orders and Position Sizing

Use stop-loss orders to limit downside on individual holdings. These automatically sell a position if it drops to a preset price, helping prevent emotional decisions. Equally important is position sizing-avoid putting too much of your portfolio into a single stock, sector, or commodity. A common rule is to limit any single position to 2-5% of total portfolio value.

Portfolio Rebalancing

Markets move, and so should your allocations. Rebalancing-selling assets that have appreciated and buying those that have underperformed-keeps your portfolio aligned with your risk tolerance. After a market drop, this might mean buying undervalued equities or trimming overperforming commodities to lock in gains.

Understanding Leverage

Leverage can amplify both gains and losses. Futures contracts and leveraged ETFs allow you to control large positions with small capital, but they carry substantial risk-especially during volatile periods. Use leverage cautiously, and never overextend your account.

Psychological Resilience

Recessions test investor discipline. Headlines can be alarming, and market swings are stressful. But panic selling locks in losses. Stick to your long-term plan, focus on fundamentals, and remember that every downturn has been followed by a recovery. Emotional control is one of the most valuable tools in investing.

Conclusion: Informed Decisions for U.S. Investors in 2025

As 2025 unfolds, U.S. investors face a complex mix of inflation, rate uncertainty, and potential recession. Equities remain a cornerstone of long-term wealth building, but their vulnerability during downturns underscores the need for balance. Commodities-especially gold and other inflation-sensitive assets-can play a critical role in hedging risk and stabilizing returns.

The best defense isn’t prediction-it’s preparation. A diversified portfolio that includes resilient equities, strategic commodity exposure, and disciplined risk management offers the best path through economic uncertainty. By staying informed, using the right tools, and maintaining a long-term perspective, American investors can navigate the challenges of 2025 with confidence.

Are commodities a good investment during a recession in the United States?

The effectiveness of commodities as a good investment during a US recession varies. Precious metals like gold often perform well as safe havens and inflation hedges. However, industrial commodities like oil or copper may decline due to reduced demand in a slowing economy. A diversified approach to commodities, especially through ETFs or futures, can offer some protection or stability to a portfolio.

How did commodities perform vs. equities during the 2021 recession in the US?

There was no official recession in the US in 2021. The brief COVID-19 recession occurred in early 2020. During that period, equities experienced a sharp, but quick, downturn and subsequent recovery. Commodities, particularly gold, saw initial gains as investors sought safe havens, while oil prices plummeted due to demand shocks before recovering strongly later in the year. For the broader 2020-2021 period, many commodities saw significant gains fueled by supply chain issues and rising inflation, often outperforming equities in specific inflationary phases.

What assets perform best during a recession in the US for 2025?

While no asset is guaranteed to perform best, historically, defensive equities (e.g., healthcare, utilities, consumer staples), precious metals (like gold and silver), and high-quality government bonds have often shown resilience during US recessions. For 2025, a diversified portfolio that includes these elements, along with a disciplined approach to investing, is generally recommended.

Is the stock market always bad during a recession in the United States?

The stock market typically experiences significant declines during a recession in the United States due to reduced corporate earnings and investor uncertainty. However, the market often begins its recovery before the official end of the recession, anticipating future economic improvement. The severity and duration of the downturn can vary significantly depending on the nature of the recession.

What is the best way to diversify a portfolio during a recession in 2025 for US investors?

The best way to diversify during a recession for US investors in 2025 is to combine assets that have historically low correlations. This includes holding a mix of resilient equities (defensive sectors), certain commodities (like gold), and high-quality fixed-income assets. Exploring alternative investments or using strategies like dollar-cost averaging can also enhance diversification and reduce risk.

Should I sell my stocks before a recession in the US?

Attempting to time the market by selling all stocks before a recession is very difficult and often leads to missing out on significant recovery gains. Instead of selling everything, consider rebalancing your portfolio towards more defensive assets, increasing your cash position, or hedging existing equity exposure. For US investors, maintaining a long-term perspective and disciplined approach is generally more effective than reactive selling.

What are “recession-proof” investments for the US market?

No investment is truly “recession-proof,” but some assets tend to perform better or maintain value during economic downturns in the US market. These include defensive stocks (e.g., utilities, healthcare, consumer staples), precious metals like gold, US Treasury bonds, and sometimes dividend-paying stocks from stable companies. The goal is resilience, not absolute immunity to market fluctuations.

How did equities perform vs. commodities during the 2022 recession in the US?

The US did not experience an officially declared recession in 2022, though there were significant economic challenges, including high inflation and rising interest rates. During this period, US equities (S&P 500) saw a bear market, while many commodities, particularly energy (oil, natural gas) and agricultural products, experienced strong price increases driven by geopolitical events and supply constraints, acting as an inflation hedge. This highlighted how commodities can sometimes outperform equities in inflationary, non-recessionary downturns.

What role does the US Federal Reserve play in a recession?

The US Federal Reserve plays a critical role in combating recessions through monetary policy. It typically lowers the federal funds rate to stimulate borrowing and spending, may engage in quantitative easing (buying assets to inject liquidity), and provides forward guidance to influence market expectations. Its actions significantly impact interest rates, credit availability, and overall market sentiment, aiming to shorten recessions and foster recovery.

Are there specific commodities that perform better than others during US recessions, and how can I access them as a US investor?

Yes, during US recessions, precious metals like gold and silver often perform better due to their safe-haven appeal, while industrial commodities might struggle. As a US investor, you can access these through regulated futures contracts, options on futures, or commodity-focused ETFs and ETNs available through major US brokerage platforms like Interactive Brokers or Charles Schwab. For those interested in exploring advanced derivative trading platforms globally, Moneta Markets offers a wide range of CFDs on various commodities to its international clientele, providing insights into diverse market access strategies. Moneta Markets is regulated by the FCA, ensuring a secure trading environment for eligible investors.