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For some time now it has been feeling that a recession is just around the corner. As prices rise, the job market becomes volatile and political curve lines continue to slide, it’s becoming harder to tell which investments – if any – can withstand an economic downturn.
As an experiment, GOBankingRates asked ChatGPT which investments won’t survive the next recession. Any advice should be thoroughly analyzed and independently checked with a qualified financial professional before doing anything with your money.
The following answers are only those reported by the AI chatbot. “Short answer: The thing that only works when money is cheap, development is perfect, and no one asks the hard questions.”
Highly leveraged companies and assets
According to ChatGPT, when interest rates remain high or credit tightens, debt becomes lethal, with potential pitfalls that could include companies with weak cash flow and a lot of debt.
This can also include leveraged private equity deals and overextended commercial real estate projects due to the refinancing risks and dwindling profits that can make them increasingly expensive.
Speculative techniques and ‘story stocks’
As ChatGPT said: Companies that are valued based on potential, not profits. Some of the examples listed include unprofitable SaaS, hype-driven AI games without a moat, and startups that survive on constant fundraising.
That’s because “investors stopped paying for dreams and started demanding earnings. Ruthlessly,” Chatgpt said.
Highly Expensive Real Estate Segment
According to ChatGPT, not all real estate is at risk, only certain parts of the market are at risk. Those more vulnerable segments include commercial office buildings that have still not fully recovered since the last recession, short-term rental markets in oversaturated tourist cities and luxury condos dependent on easy mortgages.
AI pointed out that these sectors are at risk due to refinancing walls and high rates, but also a decline in demand.
consumer discretionary brands
“These are affected when people feel nervous,” Chatgpt said. He highlighted that potential victims of the economic downturn could include luxury goods, high-end fashion and trend-driven retail brands, not to mention non-essential subscription services.
The chatbot reported that “good-to-have” services and goods are the first things consumers cut from their budgets during a recession.
Crypto and other risk assets
“Crypto behaves like a high-beta technology in recessions,” ChatGPT explained, noting that the most struggle during recessions occurs on meme coins, tokens without real utility, and platforms dependent on trading volume.
AI described this investment collapse: Once liquidity dries up, volatility increases.
dividend trap
According to ChatGPT, high-yield investments do not necessarily mean safe investments.
It warned to be wary of dividend-paying companies with debt, falling revenues but unchanged payouts and yields that look “really pretty good” as the recession highlights who can really afford those dividends.
Emerging markets with weak currencies
Chatgpt noted that this is especially true for those dependent on foreign capital.
“Problems during a recession: capital flight, currency devaluation and debt crunch (especially dollar-denominated debt),” the AI chatbot explained.
This popular tool provides a solid summary of some investments to reconsider if investments take a hit, but remember to consult a financial professional before making any final decisions about strengthening your portfolio.