Which sectors of the Australian stockmarket are likely to ride a recessionary environment better?

While we have not yet fully entered recession, we are on the cusp of it with runaway inflation posing a key threat. In response, the Reserve Bank has been aggressive in raising interest rates. We are all hoping that each further increase would not be the straw that breaks the camel’s back. Already, this has had a significant bearish effect on the markets as bond yields rise and equities get hammered due to the increased cost of borrowing.

Despite economic uncertainties, some constants will remain. People will always need to eat, heat their homes and travel from point A to B. Furthermore, in times of global uncertainty, governments are also focused on controlling and managing their external threats.

With that in mind, investors can consider the following sectors to ride out the economic storm. Agriculture

As we all know, climate change is creating unpredictable weather patterns as extreme heat and rain affect crop yields globally. This is probably why the price of your daily coffee and staple food products, such as wheat flour and sugar, have gone up. With higher prices, companies in the soft commodities space, such as wheat, corn, sugar and soy, are expected to achieve growing earnings. Energy

Many of us would have recently experienced energy bill shock and some are even giving up driving because petrol has gotten too expensive. It is expected that energy prices are likely to stay up for longer as access to Russian energy is restricted and the northern hemisphere heads into winter. Energy resource producers, especially coal producers, are likely to benefit from this trend as elevated prices lift margins. Defence

In a world of conflict, defence spending is likely to go up as countries look to shore up their defences. Companies in this industry will be key beneficiaries of this trend. Defence is not just about guns and bombs, however. Most of today’s wars are fought online, and cybersecurity spending is expected to surge as online threats evolve and escalate. In light of recent events, Optus – and for that matter many governments and companies handling sensitive information – will likely spend more on cyber defence.