That’s economist talk for whether the current business cycle is winding down too fast or just right.
A hard landing means the economy has slowed too rapidly and growth all but stopped. This could lead to a recession if a no growth pattern holds for more than one quarter.
Soft Landing?
A soft landing means the economy has slowed but not stopped and continues to move forward, but not at a pace that will stir up inflation.Of course, heaven, which we experienced for a time in the 1990s, is when you have a growing economy and low inflation.
What is a good defensive position if we are headed for a hard landing? There are a number of strategies to consider, but here’s one you might think about, especially if you are a conservative investor and/or an investor looking for current income potential.
The strategy is utility stocks. Stocks of companies that keep the lights on, the house warm and the phones ringing usually do well when the economy gets rocky.
Dividends
Most utility stocks pay handsome dividends (this is not a guarantee, so do your homework) and can be a good choice in tough times because they offer services and products that are reasonably recession-proof.Besides, if a recession does develop one of the cures is lowering interest rates. As we saw in the last slow down beginning in 2000, the Fed is willing to go as far as necessary to get the economy back on its feet.
When interest rates fall, utility dividends look very attractive compared to the rates offered by bank CDs and many other fixed income products.
You probably won’t get rich investing in utility stocks. However, if you are looking for another source of steady income and stock prices that typically hold their own in difficult economies, consider utilities.
