After a horror summer in Australia so far, investors are this week definitely feeling nervous (if the markets are anything to go by). With a summer defined by destructive fires and more recently the coronavirus, the short-term outlook for our economy has certainly weakened since September.
Unfortunately for investors, the stock market and the economy are closely linked. So with that in mind, here are two ASX shares I think would be fairly recession-proof if darker times do hit our economic growth in 2020.
Woolworths Group Ltd (ASX: WOW)
Woolworths is about as rock-solid a business as you can get on the ASX, in my opinion. Buying food and other household essentials is not really optional for any Australian – and more Australians go to Woolies to get them more than any of its competitors. No matter if the economy is booming or busting, Woolworths will be welcoming customers through its aisles, and I think that makes this company a great long-term investment.
Woolworths Group also owns the BWS and Dan Murphy's bottle shops, which (as many of us would know) also benefit from those 'recession-resistant' characteristics.
Woolworths shares also pay a dividend, which on current prices produce a grossed-up trailing yield of 3.47%. Considering all of these factors, Woolies is a share I would be very comfortable owning in a recession.
Telstra Corporation Ltd (ASX: TLS)
Telstra may have some haters out there, but one thing I don't think anyone can deny is the recession-resistant nature of this company. These days, can you really imagine anyone giving up their mobile phone or internet connection unless things were exceptionally dire? I certainly can't. And that's where most of Telstra's earnings come from.
No other telco in Australia comes close to Telstra's market dominance in the telecommunications space. It owns roughly half the market share of the mobile market and a similar chunk of the fixed-line market as well. The company's plans to launch a 5G network are also a promising development in my view.
Like Woolies, Telstra shares also pay a dividend – which comes to a total grossed-up yield of 5.96%. These reasons lead me to believe Telstra would be a great company to hold during a recession.
Foolish Takeaway
Whilst no company can be 100% recession-proof (especially the short-term stock price), I think these two ASX shares would be amongst the best to have if a recession does hit. I think both companies have very defensive earnings bases which should allow a continuous flow of dividends through good times and bad.
