2 ETFs Under $50 That Could Outperform in a Recession

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Just three months ago, it felt like the U.S. was headed straight for a recession as tariffs threatened to take a stride out of the step of an otherwise fast-running economy. Mad Money host Jim Cramer coined the term “Trump discount” to describe how tariffs may be causing stocks to go for a slightly lower price of admission. Undoubtedly, the Trump discount has affected some tariff-vulnerable firms more than others. In any case, with the S&P 500 right back at new highs, stocks don’t seem all that discounted.

Arguably, the market is getting expensive again after bouncing back so quickly from the stormy start of the second quarter. In any case, Trump’s policies on trade do pose a significant risk to a handful of China-exposed stocks, some of which may have been stuck on the tarmac so far this year, effectively missing out on the great AI rally.

Key Points in This Article:

• These two ETFs can insulate investors portfolios from an economic downturn. 
• Adding to their appeal, both ETFs pay dividends, making them the good fit for conservative-minded investors.
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The Stock Market Is Roaring Again. But Don’t Count out a Recession Just Yet

For investors who recognize the risks, it seems like a good idea to stay defensively positioned. While the S&P has come all the way back in record time, there are still sectors out there that I view as attractively valued, even as Wall Street raises the bar on their market price targets following recent strength.

Though the odds of recession have come down, there’s still a risk that self-guided investors would be smart to manage, especially now that investor sentiment has healed. With new investors bidding up promising high-growth AI stocks, perhaps we could experience another red-hot run followed by a wild swing lower. And if a recession is in the forecast, perhaps the V-shaped bounce won’t reward dip-buyers as much as it did earlier this year.

Currently, a number of big banks pin the odds of a recession in the U.S. between 35% and 45%. Notably, JPMorgan (NYSE:JPM) sees a tariff-driven “stagflationary” slowdown in the second half, with a 40% chance of a recession. Given lingering inflation and a more cautious consumer, I think JPMorgan’s call is about right, and investors would be wise to manage the risks while it’s still relatively cheap to play defense. In this piece, we’ll check out a pair of under-$50 ETFs that could stand tall even if the U.S. does sink into a recession in the back half.

Invesco S&P SmallCap Low Volatility ETF 

The Invesco S&P SmallCap Low Volatility ETF (NYSEARCA:XSLV) is a fantastic way for investors to gain exposure to the small-cap scene without having to deal with the bumpier ride. Indeed, small- and mid-cap stocks tend to be more volatile, on average, than most of their large- and mega-cap counterparts. Either way, the XSLV boasts a fairly respectable 0.82 beta, meaning the ETF is bound to be a tad less wild of a ride than the S&P 500 in most conditions.

Furthermore, shares are still around 11% off from their 2021 highs, making them less at risk of a pronounced downside come the next market slide. With a lower price-to-earnings (P/E) multiple of around 20.0 times, and a decent 2.1% dividend yield, I’d much rather be in the XSLV than the S&P 500 and certainly the Nasdaq 100 if the broad market sinks in anticipation of a recession. Remember, the stock market is the recession indicator, not the other way around!

Invesco S&P 500 High Dividend Low Volatility ETF

Income and value investors may find that the Invesco S&P 500 High Dividend Low Volatility ETF (NYSEARCA:SPHD), which trades at $48 and change per share, is a better “version” of the S&P 500 to bet on. Apart from the cheaper average P/E ratio and the much higher yield, currently at 3.44%, the SPHD stands out as a more defensive way to ride out an economic downturn.

With a 0.77 beta (even lower than the XSLV) and heavier exposure to the real estate and utilities, the SPHD seems like it’d fare far better in an environment where there’s a “stagflationary slowdown” of sorts. Though the SPHD took a softer hit to the chin during the April 2025 sell-off, it’s worth noting that the ETF has only regained about half of the ground. Indeed, there are more unloved bargains to be had with the name, making it a great pick for investors who are keen on upping their defenses after a reasonably decent first half for markets.

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