Are ASX 200 lithium shares the new recession-proof investment?

It’s been a brilliant year so far for S&P/ASX 200 Index (ASX: XJO) lithium shares despite growing talk of global recessions.

Could companies dealing in the battery-making material be among those capable of dodging major downturn carnage? Plenty of experts appear to think so.

Indeed, Macquarie reportedly upgraded its outlook for lithium prices earlier this week despite Treasurer Jim Chalmers’ prediction of recessions around the globe.

Though, Chalmers remains confident Australia will avoid much of that which many of its trading partners cannot, telling ABC’s Q+A last week:

When the global economy turns down … we can’t completely escape the consequences of that but … I don’t expect us to go into recession.

Indeed, the ASX 200 has outperformed many of its global peers, falling just 8% year to date.

Comparatively, the Dow Jones Industrial Average Index (DJX: .DJI), S&P 500 Index (SP: .INX), and Nasdaq Composite Index (NASDAQ: .IXIC) all entered bear markets in 2022.

So, how have ASX 200 lithium shares performed amid the market downturn and could they represent a recession hedge? Let’s take a look.

ASX 200 lithium shares outperform through 2022’s downturn

Most ASX 200 lithium shares have outperformed the market significantly this year, shaking off the broader downturn to rocket higher.

The star performer has been Core Lithium Ltd (ASX: CXO). Its stock has soared nearly 150% year to date.

Meanwhile, shares in the newly profitable Pilbara Minerals Ltd (ASX: PLS) have lifted over 50% and those in ASX 200 newbie Sayona Mining Ltd (ASX: SYA) have gained more than 75%.

Other winning market favourites include Allkem Ltd (ASX: AKE and Mineral Resources Limited (ASX: MIN), both up 40%, and Liontown Resources Limited (ASX: LTR), up 10%.

It’s safe to say the sector as a whole has defied recession talk so far.

Lithium prices have also defied a slowing Chinese economy. That’s no mean feat, as the nation generally drives demand for major commodities.

What’s next?

Many experts remain bullish on lithium prices despite the potential for a global slowdown.

My Fool colleague Bronwyn reports that Wilsons’ Rob Crookston recently voiced that the energy transition will drive demand for electric vehicles, and the lithium needed for their batteries is sky high in coming years.

Meanwhile, Macquarie upped its predictions for the spodumene price’s peak to US$6,500 a tonne this week, the Australian Financial Review reports. Though, Morgan Stanley is said to expect spot prices to slip amid pressures on demand and rising supply.

Finally, the Federal Government recently tipped lithium prices to peak next year, with spodumene expected to reach US$3,280 a tonne before easing in 2024.

No doubt such commodity prices, if realised, could help bolster many ASX 200 lithium shares through probable international recessions and an Aussie downturn.

The post Are ASX 200 lithium shares the new recession-proof investment? appeared first on The Motley Fool Australia.

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More reading

• The Pilbara Minerals share price is up 117% in 6 months. So, does JPMorgan have it wrong?
• 3 ASX All Ordinaries shares that hit multi-year highs today
• Why has the Sayona Mining share price dumped 33% in 2 months?
• Why did ASX lithium shares smash the market on Tuesday?
• Why did the Pilbara Minerals share price have such a cracker day?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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