If a downturn is looming, the right strategy is crucial to protect your portfolio.
Stock prices are continuing to surge, with the S&P 500 (^GSPC +0.63%) up by around 19% over the past 12 months, as of this writing. But no bull market can last forever, and we’re bound to face a downturn eventually.
According to many investors, that slump could be coming sooner rather than later. A whopping 80% of Americans are at least somewhat concerned about the onset of a recession, a December 2025 survey from financial association MDRT found.
While it’s unclear whether we’ll face a recession, crash, or bear market in 2026, it never hurts to prepare your finances accordingly. And if a downturn is around the corner, there’s one all-too-common mistake to avoid right now.
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Keeping a clear head is key right now
Market anxiety is incredibly common, especially during periods of economic instability. While it’s a normal experience, it can be detrimental to your investment strategy if it leads to panic selling.
If you’re worried that a crash is looming, it’s tempting to get out of the market while prices are still high. Then, when prices drop, you can load up on quality stocks for a discount. Although timing the market may seem like a sound strategy on the surface, it can be incredibly risky.
There’s always a chance that stock prices could continue climbing for months or even years before another downturn hits, and if you sell now in fear of a looming recession, you could miss out on potentially lucrative gains.
For example, after a nearly yearlong bear market throughout 2022, many investors worried the worst was yet to come. In fact, in June 2023, analysts at Deutsche Bank predicted a “near 100%” chance that the U.S. would enter a recession within the next year.
Not only did the economy avoid a recession altogether, but the S&P 500 surged by more than 25% in the 12 months after Deutsche Bank’s prediction. This doesn’t mean the analysts were uninformed, but rather that the market can sometimes defy even the experts’ expectations.
If you had sold your investments in June 2023 in fear that a recession was around the corner, you may have missed out on substantial gains in the following years. Also, if you eventually decided to reinvest after the market had climbed, you’d have been forced to buy back your investments at much higher prices.
The best move you can make right now
A market downturn may land in 2026, or it may not. Regardless of what happens, the best thing you can do right now is double-check that you’re only investing in quality stocks from solid companies.
Healthy organizations can still experience temporary volatility, but they’re far more likely to eventually recover. Weak companies, on the other hand, may crash and burn during a downturn. If you’re investing primarily in companies that are more hype than substance, your portfolio will be at greater risk during the next market slump.
So what makes for a strong stock? There are many factors to consider when researching investments, but the healthiest companies have strong underlying fundamentals. This includes everything from a strong financial foundation to an experienced management team with a track record of navigating volatility. Certain industries are also more likely to thrive over the long term, which can increase a stock’s chance of pulling through a recession.
When you’re investing in strong companies, you can rest easier knowing your portfolio is as protected as possible. Holding those stocks for the long term will also make it easier to avoid letting market anxiety wreak havoc on your financial future.
