2 ETFs to Buy Now If a Recession Is Coming in 2027

Markets have been extremely volatile as of late, particularly since the election on Nov. 3. On Nov. 5, the Nasdaq dropped some 5.5%, or 1,400 points — putting it in correction territory, down 12% from its Oct. 6 all-time closing high of 27,599. Experts and market watchers have been warning of a bear market, or at least a correction, for awhile, as large-cap stocks have become historically overvalued after a nearly four-year bull market.

Often, bear markets go hand-in-hand with recessions — that was the case in 2001, 2008-2009, and 2020. It was also partially true in 2022 when we had a bear market but not quite a recession, even though we had two straight quarters of negative economic growth.

A recession doesn’t appear as likely in 2027, as economists predict economic growth in the 2% to 3% range, depending on where you look. The Fed projects 2.4% growth while Vanguard estimates 3% growth in the U.S. next year, with inflation dropping and unemployment stabilizing.

Oxford Economics pins global gross domestic product (GDP) growth between 2.8% and 3%. However, Oxford says that risks are building. One concern is oil prices and their trajectory, as well as geopolitical uncertainty. Further, a slowdown in the AI boom due to hyperscalers’ liabilities, a decline in investment, or competition from China could prove challenging.

It is not time for drastic measures, but it is a good idea to prepare for the possibility of a bear market or recession in 2027. These two exchange-traded funds (ETFs) would help offset those impacts.

1. VictoryShares Free Cash Flow ETF

When there is a recession or some shock to the market, the companies with strong balance sheets and cash flows typically navigate the downturns the best.

Strong free cash flows in any market means the company has the capital to invest in itself and its dividend. When times are tough, this becomes even more important, because while others are cutting, companies with strong cash flows and balance sheets can take advantage and grow when others can’t. It also means they have business models in industries that are less susceptible to economic or market swings.

The VictoryShares Free Cash Flow ETF (VFLO -0.56%) is built to do just that. It tracks the proprietary Victory U.S. Large Cap Free Cash Flow index, which features 50 stocks from the VettaFi US Equity Large/Mid-Cap 1000 index with the highest free cash flow yields, as determined by its scores and calculations.

The advisor sees free cash flow, the cash a company has left after operating expenses and capital expenditures, as a vital indicator of a company’s financial health. It demonstrates the ability to generate sufficient revenue to sustain operations and potentially deliver value to shareholders.

The top three holdings currently are Accenture, Centene, and Intuit. The ETF is up 31% year-to-date and 38% over the past year. It has only been around since 2023 but has a three-year average annualized return of about 26%.

2. VanEck Morningstar Wide Moat ETF

The VanEck Morningstar Wide Moat ETF (MOAT -0.55%) is another great option for a recessionary period. But it’s really a smart ETF for any type of market because it contains stocks with wide moats, or competitive advantages that are so durable that they have few competitors and a high barrier, or wide moat, that is difficult for competitors to penetrate. It allows these wide moat stocks to typically maintain their dominance and perform well, even during downturns.

This ETF tracks the Morningstar Wide Moat Focus index, which consists of attractively priced companies with sustainable competitive advantages, as determined by Morningstar’s equity research team. The ETF holds about 54 stocks with Tyler Technologies, GE Healthcare Technologies, and Broadridge Financial as the three largest holdings.

The ETF is up about 10% YTD and 13% over the past year. It has averaged a return of 9% over the past five years and roughly 155 over the past 10 years. In 2022, the last bear market, it outperformed the Nasdaq and S&P 500, down about 13%.

While these two ETFs are great options to provide some ballast and balance during a recession, they are also just good all-weather ETFs you can buy and hold for the long term.