It has been a turbulent few weeks for the markets. Notably, the Dow closed down over 1,400 points last Wednesday, ending its historic bull market run and entering bear market territory for the first time since 2009.
Although it is still uncertain if a recession is on the way, one could be. And if a recession does occur, where you live could make a difference in how deeply you are affected. Personal finance company SmartAsset examined 264 U.S. cities to determine which places are the most "recession resistant" by comparing three main factors: employment, housing and social assistance.
- Employment: This category compared the unemployment rate in 2018, change in the unemployment rate during the Great Recession (from 2007 through 2010) and the labor force participation rate in 2018.
- Housing: SmartAsset compared cities based on housing costs as a percentage of income, change in median home value during the Great Recession (from 2007 through 2010) and the 2018 mortgage delinquency rate.
- Social Assistance: This includes the percentage of the population relying on public assistance in 2018, the average annual amount of assistance per household and state rainy-day funds as a percentage of state expenditures.
SmartAsset ranked and indexed each city out of 100, with 100 being the most recession resistant and one the least recession resistant. For the ranking, the site used data from the U.S. Census Bureau's 2018, 2010 and 2007 1-year American Community Surveys, the Consumer Financial Protection Bureau (CFPB) and the Pew Charitable Trusts' Fiscal 50: State Trends and Analysis report.
Source: SmartAsset
Here's a closer look at the top 10 U.S. cities SmartAsset found to be the most recession resistant.
10. Sioux Falls, South Dakota
Average index score: 76.34
- Unemployment rate in 2018: 2.8%
- Percentage of income spent on housing: 19.88%
- Percentage of population who rely on social assistance: 1.8%
9. Raleigh, North Carolina
Average index score: 78.08
- Unemployment rate in 2018: 3.3%
- Percentage of income spent on housing: 21.52%
- Percentage of population who rely on social assistance: 1.4%
8. Cary, North Carolina
Average index score: 78.9
- Unemployment rate in 2018: 3.2%
- Percentage of income spent on housing: 16.87%
- Percentage of population who rely on social assistance: 1.3%
7. Lubbock, Texas
Average index score: 79.1
- Unemployment rate in 2018: 2.8%
- Percentage of income spent on housing: 23.75%
- Percentage of population who rely on social assistance: 1.5%
6. Sunnyvale, California
Average index score: 79.23
- Unemployment rate in 2018: 3.8%
- Percentage of income spent on housing: 20.32%
- Percentage of population who rely on social assistance: 1%
5. Austin, Texas
Average index score: 79.28
- Unemployment rate in 2018: 3.8%
- Percentage of income spent on housing: 23.6%
- Percentage of population who rely on social assistance: 1%
4. Denton, Texas
Average index score: 80.02
- Unemployment rate in 2018: 5.2%
- Percentage of income spent on housing: 22.47%
- Percentage of population who rely on social assistance: 1.2%
3. Plano, Texas
Average index score: 85.71
- Unemployment rate in 2018: 3.9%
- Percentage of income spent on housing: 19.39%
- Percentage of population who rely on social assistance: 0.8%
2. Cedar Rapids, Iowa
Average index score: 87.83
- Unemployment rate in 2018: 2.7%
- Percentage of income spent on housing: 18.2%
- Percentage of population who rely on social assistance: 0.9%
1. Frisco, Texas
Average index score: 88.8
- Unemployment rate in 2018: 3.1%
- Percentage of income spent on housing: 18.22%
- Percentage of population who rely on social assistance: 1.4%
Frisco, Texas, earned the No. 1 spot on the list, thanks in part to its low unemployment rate and relatively affordable housing. On average, Frisco residents spend just 18.22% of their income on housing.
Cedar Rapids, Iowa, came in at No. 2 on the list due to its low unemployment rate — it was the sixth lowest in 2018 at 2.7%. It also has the third-lowest housing cost as a percentage of income, at just above 18%.
On the other end of the spectrum, Springfield, Massachusetts, landed in last place out of all 264 cities ranked. Notably, Springfield residents put nearly 36% of their income toward housing costs, on average.
How to recession-proof your finances
Even if you aren't in a position to move to a more recession-resistant part of the country, there are ways to prepare yourself for periods of economic downturn.
One way to firm up your finances is to build up an adequate an emergency fund. Experts generally recommend having at least three to six months' worth of living expenses stowed away. To determine exactly how much you'll need, follow these three steps.
Next, take some time to check in on your investments, either on your own or with the help of a financial advisor, to decide whether your portfolio needs to "be more conservative, moderate or aggressive," SmartAsset suggests. Are the sectors you're invested in considered safe or risky during an economic downturn? How soon do you need the money in those accounts? How comfortable would you feel watching your investments drop?
By checking in on how your assets are allocated, and adjusting as needed, you can test your threshold for risk and feel more confident that you've done everything you can to ensure the longevity of your investment profile.
In the face of a recession, "don't do anything until you sit down and make sure your portfolio is in line with your financial goals," says Ryan Marshall, a certified financial planner at Ela Financial Group. "It's the investors who look at the market and make decisions on a day to day basis that typically end up getting hurt."
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