Recession-Proof Your Portfolio UK 2026: How the GIP Five Screens Identify Resilient Stocks
- Alpesh Patel
- Apr 13
- 3 min read
Updated: Apr 25
In early 2025, US tariff announcements triggered the sharpest single-day market falls since 2020. The S&P 500 fell more than 10% in two days. Most retail portfolios fell with it. GIP-selected portfolios held materially better, not because of luck, but because the framework specifically screens for the businesses that hold up when markets don’t.
This is not a claim about timing the market or predicting recessions. Nobody can do either consistently. It is a claim about quality and about the fact that businesses with genuine pricing power, high cash returns, and low historical drawdowns behave differently in downturns than speculative, capital-intensive, or momentum-driven stocks. The GIP framework was designed from the start to favour the former.
Alpesh Patel OBE is a hedge fund manager, Bloomberg TV alumnus, Financial Times author, and former Visiting Fellow at Corpus Christi College, Oxford. Recession resilience is a central design principle of the GIP framework, not an afterthought.
What Happens to Portfolios in a Recession and Why Most Are Poorly Positioned
In a recession, corporate revenues fall. Companies with high fixed costs, heavy debt loads, and limited pricing power see earnings collapse disproportionately. Their shares fall harder and faster than the market average because their business models are fundamentally leveraged to economic conditions they cannot control. Investors who hold these stocks in default managed funds which frequently overweight financials, energy, basic materials, and cyclical industrials, absorb the full force of these declines.
The S&P 500 fell an average of approximately 35% during the recessions of 2001, 2008, and 2020. At 35%, you need a 54% subsequent gain just to return to breakeven. For a SIPP investor in their late 50s or already in drawdown, this is not just uncomfortable, it is potentially retirement-altering.
How Each GIP Screen Builds Recession Resilience
CROCI Above 10%: Pricing Power and Capital Efficiency
Businesses with high CROCI earn strong cash returns because they have genuine competitive advantage - pricing power, switching costs, network effects, or regulatory protection. In a recession, these businesses can maintain or raise prices because their customers have no viable alternative.
Revenue may dip, but it does not collapse. Contrast with a commodity producer with CROCI of 4%: when prices fall in a downturn, they may not even cover their cost of capital.
Sortino Ratio: Filtering for Downside Volatility History
The Sortino ratio measures return relative to downside deviation. A stock with a Sortino above 1.0 has historically been adequately compensated for its downside risk. Crucially, it means the stock has not had a history of severe one-way falls that were not accompanied by commensurate returns.
Stocks that failed the Sortino screen have a track record of large downside moves, exactly the kind of profile that gets catastrophically worse in a recession.
Calmar Ratio: The Maximum Drawdown Gate
The Calmar ratio is the most direct recession-protection screen in the framework. It measures annualised return divided by maximum drawdown. A stock that has previously fallen 60% in a downturn has demonstrated that it will fall 60% again in the next comparable downturn - unless the business has fundamentally changed.
The GIP framework uses Calmar to exclude stocks with this track record. The GIP target profile is maximum drawdown well below market average, meaning the portfolio is structurally better positioned to survive the bad scenarios that Monte Carlo analysis shows are possible.
What This Means Practically: April 2025 Tariff Shock
When US tariff announcements triggered sharp market falls in April 2025, the businesses most affected were those with global supply chains, thin margins, and limited pricing power - manufacturers, retailers, and commodities companies. Businesses with high CROCI, strong domestic pricing power, and asset-light models fell significantly less. This is not coincidence. It is the direct result of screening for quality characteristics that are structurally more defensive.
The correct response to recession risk is not to move to cash or bonds. Cash yields less than inflation in most environments. Bonds, as shown in 2022, can fall sharply when rates rise, often precisely when investors think they are taking cover. The correct response is to hold fewer, better businesses which is exactly what the GIP framework produces.
To review your own portfolio's recession resilience profile against the GIP framework, book a free portfolio review here
Sources & Further Reading
S&P Dow Jones Indices — SPIVA UK Scorecard 2024 and drawdown data across market cycles. spglobal.com/spdji/en/research-insights/spiva
AQR Capital Management — Quality factor returns in recessionary environments. aqr.com/insights/research
Financial Times — US tariff impact on global equity markets and recession risk 2025. ft.com
Disclaimer: This article is for educational purposes only. All investing carries risk including in recessions. Past performance is not a reliable indicator of future results. This does not constitute personal financial guidance.
Alpesh Patel OBE
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