In the current economic landscape, experts are advising investors to consider incorporating counter-cyclical stocks into their portfolios. These stocks, which tend to perform well during economic downturns, can mitigate risk and offer stability, especially as market conditions become increasingly volatile.

One of the primary concerns impacting the U.S. stock market today is the ongoing “Trump 2.0 Tariff Turmoil,” combined with a flurry of aggressive policy shifts from the new administration. These factors are fostering a climate of uncertainty that is undermining consumer confidence, a key driver of economic growth. Recent data reveals a concerning trend: the Consumer Confidence Index saw a significant decline in March, reaching its lowest level since January 2021. Even members of the Trump administration have acknowledged that their trade and cryptocurrency (DOGE) policies might introduce short-term slowdowns, although they remain optimistic about future growth, branding it as “The Golden Age of America.”

Financial theory, notably Markowitz’s modern portfolio theory, emphasizes the benefits of diversification. It indicates that integrating counter-cyclical stocks can enhance overall risk-adjusted returns by diminishing volatility without undermining potential profits. Modern financial literature supports this idea, asserting that combining assets whose returns are inversely correlated can lead to effective diversification. Counter-cyclical stocks fit this model well, as they typically display low or negative correlations with broader market movements. Historical studies have shown that investments in counter-cyclical stocks tend to experience lower volatility and more stable returns during economic downturns, making them highly attractive to investors.

Renowned fund manager Peter Lynch has also highlighted the resilience of stable companies during recessions, stating that “counter-cyclical stocks shine during economic downturns, providing stability when markets are shaky.” This resilience is particularly evident in sectors such as utilities, consumer staples, and healthcare, which provide essential products and services regardless of consumer spending constraints. Notably, the most effective counter-cyclical stocks are those that see a boost in growth during recessions, as consumers actively seek value—think discount retailers and low-cost clothing brands. The primary appeal of these stocks lies in their ability to maintain or even increase their value when other sectors falter.

We recently published a comprehensive analysis of the top 11 counter-cyclical stocks recommended by industry analysts. This article will specifically focus on the positioning of TJX Companies, Inc. (NYSE:TJX) among these stocks.

In addition to these market trends, recent business surveys indicate a growing concern among consumers regarding job availability in the near future. This sentiment has often preceded economic downturns, as seen during significant events like the dot-com bubble burst, the 2008 financial crisis, and the bear market of 2022. Notably, respected research firms such as Yardeni Research and Goldman Sachs have raised the probability of a U.S. recession in 2025, although the average estimated likelihood remains under 50%.

Potential recession triggers include a one-time inflation shock from impending tariffs, a slowdown in business capital expenditure expectations leading to layoffs, and a more cautious consumer base grappling with uncertainty and diminished purchasing power. Under these circumstances, counter-cyclical stocks may experience heightened demand, potentially yielding returns that outperform the broader market. Our analysis indicates that the best counter-cyclical stocks are those identified by analysts as having significant upside potential and a robust history of performance through various economic cycles.

Our Methodology

In our research, we referenced business literature identifying the traits of successful counter-cyclical stocks and manually curated a list of 20-30 stocks known for strong performance during economic downturns, such as those seen in 2008 and 2022. We then ranked the top 11 stocks based on the average upside potential predicted by analysts and assessed the number of hedge funds holding these stocks as of the fourth quarter of 2024.

Why do we focus on stocks favored by hedge funds? Historical data suggests that mimicking the stock picks of top hedge funds can lead to superior market performance. Our quarterly newsletter, which selects 14 small-cap and large-cap stocks, has yielded returns of 373.4% since May 2014, outperforming its benchmark by an impressive 218 percentage points.

Is TJX Companies, Inc. (TJX) the Best Counter-Cyclical Stock to Buy According to Analysts?

The TJX Companies, Inc. (NYSE:TJX) stands out as a leading off-price retailer of apparel and home fashions, with a diverse portfolio that includes well-known brands such as T.J. Maxx, Marshalls, HomeGoods, and Sierra, among others. The company typically offers products priced 20% to 60% lower than those found in traditional full-price retailers. Notably, TJX often witnesses an uptick in sales during economic downturns as consumers seek cost-effective shopping options, which drives increased foot traffic to its stores.

In its recent financial disclosures, TJX reported a remarkable 5% growth in comparable store sales for the fourth quarter, with all divisions achieving at least a 4% increase. The company celebrated a successful fiscal year 2025, surpassing $56 billion in total sales and marking the opening of its 5,000th store. This growth trajectory is complemented by a 4% rise in annual comparable sales, improved profit margins, and a double-digit increase in earnings per share, all exceeding previous forecasts. TJX attributes its success to its unbeatable value proposition, wide customer reach, and flexible operational model.

Looking ahead, TJX is gearing up for further expansion, with aspirations to reach a store count of up to 7,000, adding over 1,900 stores in its current and projected markets. With a solid financial foundation—boasting $6.1 billion in operating cash flow and $5.3 billion in cash reserves—the retailer is targeting 2% to 3% comparable sales growth and total revenues between $58.1 billion and $58.6 billion for fiscal year 2026. Additionally, the company plans to open approximately 130 new stores, representing a 3% increase in its total store count. The Board of Directors is also expected to approve a 13% increase in dividends to $0.425 per share, along with authorizing share repurchases totaling between $2 billion and $2.5 billion. Analysts currently project an average upside of 11.07% for TJX, positioning it as one of the top counter-cyclical stocks to consider now.

Overall, TJX ranks 8th in our analysis of the best counter-cyclical stocks recommended by analysts. While we recognize TJX’s potential as an investment opportunity, we believe that AI stocks may offer even greater prospects for higher returns in a shorter timeframe. Notably, there is an AI stock that has appreciated since the beginning of 2025, despite many popular AI stocks experiencing downturns of around 25%. For those interested in an AI stock that presents significant promise while trading at less than five times its earnings, we encourage you to explore our report on this value stock.

For more investment insights, check out our listings of the 20 Best AI Stocks To Buy Now and the 30 Best Stocks to Buy According to Billionaires.

Disclosure: None. This article was originally published at Insider Monkey.