Worried About the Economy? Invest In These Quality Stocks
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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When the economy seems shaky, many investors instinctively look for safer ground. Financial experts often point to “quality stocks” as a way to stay invested without taking on unnecessary risk — but what defines quality?
A recent Fidelity post listed a number of quality stocks worth investing in. While seven of them are an especially good place to start, financial experts explained generally what to look for in a stock, and why investing isn’t always as straightforward as it sounds.
Fidelity’s Picks
First, we’ll cover the picks and then we’ll get into what makes a quality stock and what you should consider. The following are picks Fidelity found to be quality options:
- Costco Wholesale (COST): The wholesale retailer has great prices, solid customer trust and low market volatility.
- Verisk Analytics (VRSK): This risk-assessment software in the insurance industry has high revenue and low volatility.
- Amazon (AMZN): Amazon’s Prime and Prime Video subscription services plus its Amazon Web Services division keep it a strong competitor in the market.
- Alphabet (GOOGL) and Meta (META): The tech giants behind Google and Facebook/Instagram respectively, have long held their own. Both tech giants maintain their values by what Fidelity calls “self-sustaining, self-reinforcing flywheels.” This means they have big networks, wide reach and billions of customers frequently utilizing their services.
- Netflix (NFLX) and Roblox (RBLX): The entertainment streamer and the video game platform are also businesses that do well because of wide subscriber bases and ongoing usage.
What ‘Quality Stocks’ Really Means When the Economy Feels Uncertain
When markets get shaky, investors often hear advice to “stick with quality,” but that term can mean very different things depending on who you ask, and it’s not always about brand recognition.
“Quality is a vague metric but typically includes any fundamental factor that isn’t defined as value or growth,” said Asher Rogovy, the chief investment officer of Magnifina, an SEC registered investment advisor firm. He also includes “many traits that can’t be quantified” in the definition of quality. “For example, I look for a management team with an even temperament.”
Adem Selita, co-founder of The Debt Relief Company, suggested quality stocks mean “something that is relatively solid in its demand and has consistency,” he said. “That consistency can be consistent dividend and dividend growth, consistent EPS performance, consistent cash flow, etc.”
And contrary to the belief that quality always equals the most recognizable brands, Julian B. Morris, a CFP with Concierge Wealth Management, said, “It’s likely a business that has staying power, not something that’s just necessarily a popular recognizable name.”
The Financial Fundamentals That Matter Most
While investors often debate whether dividends, cash flow or growth matter most, experts agree that resilience starts with strong underlying fundamentals. This is especially true when the economy feels shaky.
“Companies with high margins can withstand turmoil much better than low margin, high turnover businesses,” Rogovy said. “Overall stable businesses tend to fare better.”
Morris added that companies able to do this without excessive borrowing “generally tend to hold up better during times of stress.”
Most investors naturally flock toward stocks with “cash flow and dividends,” Selita said, noting that “these two things show that companies are able to provide value to shareholders or are generating enough demand regardless of the economic environment.”
Sectors That Hold Up During Economic Stress
Beyond individual company fundamentals, some sectors have historically been more resilient during downturns because they provide goods and services that people continue to need no matter what’s happening in the economy.
Utilities, for example, Rogovy said, are notoriously stable and tend to be “low-risk, low-growth and high-dividend stocks.”
Morris added that sectors tied to essential goods and services, such as healthcare and consumer staples, have also shown greater resilience during periods of economic stress.
Why Dividends and Pricing Power Matter
When prices fluctuate and recession fears rise, dividends can provide both income and psychological reassurance for investors trying to stay the course.
“These elements add comfort to investors and help bring cashflow into portfolios,” Selita said.
At the same time, companies that can raise prices without losing customers are better positioned to protect margins during inflationary periods, Morris noted. This is an important trait when costs are rising in general.
Why a Great Company Can Still Be a Bad Investment
Even high-quality businesses can become poor investments if investors overpay or blindly follow crowded trades.
“Quality alone doesn’t make a good investment,” Rogovy said. “Anything can become overvalued.”
And a beloved brand name doesn’t automatically translate into a sound stock. “Just because you like something doesn’t mean the business is run smoothly and efficiently,” Selita said.
How Focusing on Quality Can Reduce Emotional Investing
Periods of economic uncertainty often trigger fear-driven decisions, but experts say quality-focused investing can help keep emotions in check.
Instead of reacting to headlines, investors should focus on “deep research that simply can’t be based on vibes alone,” said Rogovy, and make sure they truly understand what they’re investing in.
“Investors who understand their allocation are going to be less likely to panic during downturns,” Morris said.
The Biggest ‘Playing It Safe’ Mistakes Investors Make
Ironically, trying too hard to avoid risk can introduce new ones. Rogovy pointed out that “passive investing might form the core of an equity portfolio, but we view active investing as a smart diversification.”
Morris echoed that sentiment, saying “playing it safe is not about avoiding markets, it’s about intelligent structure of your portfolio.”
In uncertain times, investing in quality isn’t about finding the perfect stock; it’s about building a resilient approach that allows investors to stay disciplined and diversified.
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