Selecting an equities strategy in a downturn can be difficult – but the performance of investments in previous recessions can prove helpful.

Britain is not yet officially in a recession – two quarters of negative economic growth need to be confirmed for that to happen, which cannot be until next month. But the British Chambers of Commerce warned this week that the UK economy was effectively already in a recession.

So what have investment experts done in the past and could this be replicated now? The received wisdom is to invest in defensive sectors that provide household essentials, such as healthcare, food and utilities. A refinement is to invest in slightly more downmarket versions of these, as people still need the goods and may turn to cheaper versions.

Charles MacKinnon, chief investment officer at Thurleigh Investment Managers, picked JD Wetherspoon for this reason in the recession of 1993. “It had cheaper beer,” he says simply. He bought the stock at 40p and watched the price rise 16-fold, hitting a high of £7.45 in 2007.

Another example is basic transport, as people start taking public transport and driving less. So MacKinnon recommends selling Mercedes and buying Stagecoach.

But it is important to look for well-capitalised businesses – those with cash on their balance sheets or strong cash generation – such as supermarkets.

MacKinnon also advises buying companies that can raise or lower their prices in line with a recession. “The classic example of this is a bakery – as grain prices go down, bread prices go down,” he says.

He adds that says investors should still keep an eye on undervalued areas – such as emerging markets. The main emerging markets have lost 50 per cent of their value this year, which he says has not a lot to do with economic reality, so they offer a buying opportunity.

Some believe it is as important to identify the sectors that will not do well in a recession. Robert Talbut, chief investment officer at RLAM, says: “The sectors that do well prior to the recession don’t tend to be the ones leading the market back up again.” He believes that people who think financials, metals and mining will do well again, because they have taken the biggest hit, are wrong.

Anne West, chief investment officer at Cazenove Capital Management, says: “You should avoid cyclical businesses, such as materials and industrials which are sensitive to a cyclical slowdown. Also those that have high levels of borrowings such as airlines.”

Julian Chillingworth, chief investment officer at Rathbones, suggests the under-30s will not be as badly affected in this recession as in the early 1990s, as fewer have bought houses. He suggests this age bracket – who may still be living at home with parents – will have a positive impact on leisure companies and cheaper restaurants.

Fixed-income holdings can also benefit as interest rates tend to be cut in a recession – as has already happened this week. This has a positive impact on fixed income. “Lower interest rates are excellent news for gilts and corporate bonds, both of which can increase in value during recessions, especially the former,” says Andrew Wilson, head of investment at Towry Law.

Talbut says corporate bonds tend to improve about a quarter before equities do. He predicts that the first quarter of next year will prove to be a good buying time for corporate bonds.

However, there are differences between this recession and previous downturns. One is the role of the banks. MacKinnon says: “The huge difference now is that nobody trusts the banks or the financial institutions. Previously you trusted the financial institutions, but you didn’t trust the corporations, such as Enron.”

This factor makes him unwilling to invest in banks this time. Previously, he says, they would have been a good buy in a recession, as they could reclaim assets as people defaulted on mortgages. Now, having lent out more than houses are worth, repossessions are “catastrophic” for the banks.

But not everyone believes in drawing comparisons with previous recessions. Ken Fisher, of Fisher Wealth Management in the US, calls the current situation “a panic” rather than a bear market, and suggests the normal rules of a bear market do not apply. He says: “You shouldn’t rely on instruments too much. I’d go back to a very macro view – people should buy equities.”