Fears of a recession are growing, and many investors are starting to lose confidence in the market.
A weekly survey from the American Association of Individual Investors shows investors are increasingly less optimistic about the future. In mid-January 2026, about 50% of survey participants felt “optimistic” about the market. That number has steadily declined since then, with only 35% of investors currently feeling optimistic.
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This doesn’t necessarily mean a recession is coming, but it’s still smart to prepare your portfolio accordingly just in case. While all investments are susceptible to short-term swings, these three exchange-traded funds (ETFs) may be more resilient to major declines.
If you are worried about market volatility, you can choose something like Schwab U.S. Broad Market ETF (NYSE: SCHB) It is one of the more reliable choices.
This ETF targets the entire market, holding nearly 2,500 stocks of all sizes across various industries. The market itself has weathered every recession, crash, and correction, so ETFs designed to replicate the performance of the market as a whole have a good chance of weathering future volatility as well.
Likewise, no investment is immune to drawdowns, so this ETF will still experience some level of volatility. But because of its extremely broad diversification, it may be less volatile than tech-focused ETFs or growth ETFs.
For those seeking maximum diversification across all industries, a large market fund may be a wise choice. But if you’re looking for a more focused ETF, Vanguard Consumer Staples ETF (NYSE: VDC) Might be a wise choice.
The consumer staples industry is one of the most recession-resistant industries because these companies tend to thrive regardless of overall economic conditions. After all, even during a recession, consumers still tend to spend money on packaged foods, personal care products and household goods.
But keep in mind that any ETF that only focuses on one area of ​​the market will carry greater risk. If you choose to invest in the Vanguard Consumer Staples ETF, make sure the rest of your portfolio is well diversified, choosing stocks or funds from different industries to provide balance.
The standard S&P 500 ETF is a cap-weighted fund, meaning the largest companies make up the largest portion of the fund. This can be a good thing, as investing more in fast-growing stocks can lead to higher returns.
However, as technology companies grow at a breakneck pace, a handful of tech stocks now make up about a third of the S&P 500. Because technology stocks can be so volatile, especially during economic downturns, the cap-weighted S&P 500 ETF may carry more risk than many investors realize.
A potential solution? Equally weighted funds, e.g. Invesco S&P 500 Equal Weight ETF (NYSE:RSP). This ETF holds all companies in the S&P 500 Index, but each stock represents roughly the same proportion of the portfolio. This provides exposure to fast-growing technology companies without overwhelming the fund with a single industry.
The disadvantage of an equal-weighted ETF is that its returns are lower than those of a market-cap-weighted ETF. Likewise, fast-growing companies tend to deliver higher returns over time, so when these stocks are equally weighted with underperforming companies, that can limit growth potential. However, if your main goal is to manage volatility, sometimes these lower returns can be a worthwhile trade-off.
No one knows when the next recession or bear market will begin, but it pays to be prepared. With a diversified collection of healthy stocks or funds, your portfolio is more likely to survive no matter what the market does.
Before buying shares of the Invesco S&P 500 Equal Weight ETF, consider the following factors:
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Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
3 Recession-Proof ETFs Worth Stocking Up Now Originally published by The Motley Fool
