Equity markets have been volatile this year, and market downturns have a way of testing even the most confident investors. Amid geopolitical tensions and lingering tariff-related uncertainty, some fear the stock market could take a turn for the worse by the end of the year, though no one can know for sure.
But history shows that some of the best long-term investment opportunities emerge precisely when uncertainty is at its highest.
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The key isn’t trying to predict exactly when the market will bottom. Instead, it’s identifying high-quality companies with resilient businesses — ones capable of weathering economic slowdowns and continuing to create value for years to come.
Here are two excellent examples: AbbVie (NYSE: ABBV) and Microsoft (NASDAQ: MSFT).
The pharmaceutical leader has a vast portfolio of medicines across several therapeutic areas, enabling it to generate consistent revenue and earnings. Prescription volumes may soften during challenging periods, but demand for therapies addressing chronic autoimmune conditions and cancer — areas where AbbVie has a strong portfolio — tends to remain resilient over time. In other words, pharma stocks tend to be defensive in nature.
That’s among the several reasons why AbbVie should navigate a market downturn or any severe economic problem relatively well. When the going gets rough, investors tend to pivot to defensive stocks from a predominantly cyclical exposure. However, it must be kept in mind that not all healthcare stocks are created equal. For example, speculative biotechs with no products on the market and consistent net losses wouldn’t count as defensive stocks.
Further, AbbVie has a deep pipeline, allowing it to develop and launch newer, better products. This is how it can get around the dreaded patent cliff. Lastly, AbbVie is a phenomenal dividend stock. It is a Dividend King, or a corporation with 50 straight (or more) years of payout increases.
This matters: When equity markets crash, dividends can help smooth out losses, but only if a company maintains its dividend program even in challenging times. AbbVie’s streak suggests it is likely to do so, making it a top stock to invest in to prepare for a market downturn.
Microsoft may operate in a fairly cyclical industry, but it is about as defensive as tech stocks can get. Microsoft’s products, including its productivity suite, are deeply entrenched in the day-to-day lives of individuals, businesses, and other institutions, including universities. Microsoft generates fairly consistent and predictable revenue from its office suite, and that won’t change significantly even in a recession.
