DEFINITION of 'Recession Proof'
A term used to describe an asset, company, industry or other entity that is believed to be economically resistant to the outcomes of a recession. Oftentimes, recession-proof stocks are added to many investment portfolios during times of economic decline, which may be the onset of a recession. Securities that are believed to be recession proof often have a negative beta values, which would indicate an inverse relationship to the greater market.
BREAKING DOWN 'Recession Proof'
Although many items have been labeled as recession proof, very few turn out to be so. Quite often, the long-reaching consequences of a recessionary period are too much for even the most recession-proof firms, assets etc. to withstand.
Securities that are believed to be recession proof often have negative beta values, which indicate an inverse relationship to the greater market. It was once believed that gold and gold stocks, for example, were recession proof due to gold's negative beta value. However this belief has been disproved over the long run.