Recessions are part-and-parcel of the economic cycle.
Earnings may weaken, market conditions may change, resulting in drops in stock prices, which then lead to investors losing confidence.
While the risk associated with an economic downturn cannot be avoided, it is possible to prepare your portfolio to survive the recession better than those caught off-guard.
What Happens to Markets During a Recession
A declining economy has an immediate impact on financial markets.
Lower consumer spending reduces business earnings and profits.
In such an environment, cyclical companies are affected the most.
As observed during the COVID-19 pandemic in 2020, shares of cyclical companies dropped sharply.
For instance, Singapore Airlines (SGX: C6L) saw its share price drop from S$9.15 on 9 January 2020 to S$3.82 on 15 May 2020 as global air travel halted.
Additionally, low investor confidence during recessions can create a vicious cycle, exacerbating stock market volatility.
Core Principles of a Recession-Resilient Portfolio
Strong Balance Sheets
Not all businesses suffer equally when the economy slows.
Companies with robust balance sheets – characterised by low debt and strong cash reserves – are better equipped to survive downturns.
Having sufficient cash protects firms during periods of weak earnings, reducing the need to divest assets at discounted prices or take on unfavourable financing to sustain operations.
Stable Cash Flow
Businesses that remain resilient during a recession are those with recurring or essential revenue streams, like consumer staples and utilities, making them effective defensive anchors.
Supermarket chain Sheng Siong Group (SGX: OV8) saw an initial dip in share price, dropping from S$1.30 per share on 17 February 2020 to S$1.08 barely a month later.
However, the chain’s defensive nature saw its share price reach a historical peak soon after, hitting S$1.85 during the height of the pandemic on 5 August 2020.
Despite the recession, the group’s balance sheet remained healthy, reporting no debt in its FY2020 results.
The group maintained a rock-solid balance sheet in FY2025, with S$435.5 million in cash and zero debt.
Dividend Sustainability
A stable dividend payer provides income even when the market underperforms.
The dividend payout ratio should ideally remain between 60% and 75% to ensure sustainability.
Anchor your core holdings with companies like Singapore Exchange Ltd (SGX: S68), which has a history of steady payouts and strong cash flow.
The bourse operator, which generated net cash from operating activities of S$363.7 million for the first half of fiscal year ending 30 June 2026 (1HFY2026), has paid out consistent dividends since inception.
Key Portfolio Building Blocks
Singapore Blue-Chip Stocks
Blue chips are established companies known for steady earnings growth and dependable dividends.
They include leaders like Singapore’s biggest bank, DBS Group (SGX: D05), and utility giant, Sembcorp Industries Ltd (SGX: U96).
These companies often have diversified revenue streams and strong capital buffers to support them during downturns.
Defensive REITs
Real Estate Investment Trusts (REITs) in sectors with stable demand, such as logistics and healthcare, are ideal for defensive positioning.
Even during recessions, healthcare remains essential.
With 67.8% of its portfolio in hospitals and medical centres and the remainder spread across nursing homes in Japan and France, Parkway Life REIT’s (SGX: C2PU) defensive nature is reflected in its distribution consistency.
By raising distributions steadily even during the pandemic – from S$0.1319 per unit in FY2019 to S$0.1379 in FY2020 – the REIT demonstrated resilience.
Its distribution per unit (DPU) for FY2025 was S$0.1529.
With an interest coverage ratio of 8.6 times and aggregate leverage of 33.4% as of 31 December 2025, Parkway Life can cover its debts with ease.
When selecting REITs, remember to avoid over-leveraged entities, especially those with weak tenant profiles.
Cash or Short-Term Instruments
Rather than being forced to sell holdings during market lows, a cash reserve provides flexibility to act on opportunities and reduces overall portfolio volatility.
It is also advisable to hold short-term instruments, such as six-month Treasury bills, to help diversify your portfolio.
Selective Growth Exposure
High-quality growth companies with strong balance sheets can still perform over the long term.
iFAST Corporation (SGX: AIY) has seen its stock price rise approximately 102% over the past three years, reflecting growing investor confidence in its platform business.
Its net profit for FY2025 increased 50.1% year-on-year (YoY) to S$100.01 million.
Looking ahead, the fintech company is committed to becoming a global digital banking and wealth management platform, with its hubs in Singapore, Hong Kong, and London.
iFAST is targeting AUA — the total value of investments held on its platform — of S$100 billion by 2030, implying a compound annual growth rate (CAGR) of at least 25.6% over the next five years.
Common Mistakes Investors Make During Recessions
Recessions trigger panic.
When the market declines, some investors panic-sell without considering fundamentals, locking in unnecessary losses.
Failing to rebalance before a recession hits is also a costly mistake; a portfolio concentrated in highly cyclical sectors is often the most impacted.
High yields are tempting, but chasing them while ignoring dividend sustainability and balance sheet strength can be an expensive error.
High yields can quickly become “no-yields” when a recession hits, especially if the company already has a weak balance sheet.
How to Position Before and During a Recession
Preparation, not reaction, is key.
Build a resilient portfolio before downturns occur by anchoring your holdings to blue chips and defensive REITs while keeping some cash on hand.
Instead of a buy-all-sell-all strategy, rebalance gradually according to your risk tolerance.
Maintain diversification across sectors and asset types to dampen volatility.
Finally, focus on long-term potential and business fundamentals rather than short-term market noise.
Get Smart: Stay Invested For The Long-Term
A recession-proof portfolio is all about building resilience and staying invested throughout economic cycles.
By focusing on quality businesses with strong balance sheets, investors can mitigate losses during recessions and navigate downturns with greater confidence – ultimately positioning themselves for long-term wealth appreciation.
Don’t let mixed signals stall your wealth building. Learn the exact “Secret Sauce” our Co-Founder, Chin Hui Leong, uses to filter market noise and find businesses built to survive disruption. Save your spot at our upcoming webinar now.
The world’s gotten unpredictable, but some Singapore companies have quietly kept thriving. You’ve probably seen them in your daily life. And yes, they’ve kept paying dividends through it all. Meet 5 resilient stocks built to navigate global storms. Get the free report here and see how they’ve done it.
Follow us on Facebook, Instagram and Telegram for the latest investing news and analyses!
Disclosure: Wenting A. does not own shares of any companies mentioned.
