The stock market continues to reach new heights, with the S&P 500 (SNPINDEX: ^GSPC) soaring by a staggering 71% since its low point in late 2022 as of this writing. However, many investors are anxiously awaiting the next downturn.
According to a mid-January survey from the American Association of Individual Investors, more than 40% of investors have a bearish outlook on the market. That’s the highest that figure has been in the last 12 months, and it’s steadily increased from around 31% in early December.
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The Federal Reserve Bank of New York also estimates that there’s around a 29% probability of a recession occurring by December 2025. While it’s unclear when or if a recession or market crash is around the corner, there’s one critical move to avoid right now.
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Avoid panic-selling your stocks
If you’re worried that a downturn is looming, it can be tempting to sell your investments now to try to get ahead of falling stock prices. While that idea makes sense in theory, it can be tricky to pull off successfully.
Nobody knows when the next bear market will begin, and there’s a chance that stock prices still have many more months or even years of growth ahead. Even when experts do make predictions, they’re not always correct.
For example, analysts at Deutsche Bank predicted back in June 2023 that there was a “nearly 100% chance” we’d face a recession by the end of the year. While those analysts were making the best prediction they could with the information they had at the time, the S&P 500 has soared by nearly 45% between then and now.
The stock market can be wildly unpredictable in the short term, and even if there are signs that a crash or recession may be coming, that doesn’t necessarily mean it will happen. If you sell your stocks and the market continues to surge, you could miss out on some serious earnings.
Also, if you sell now and prices continue rising, you could end up paying a premium to get back into the market. The longer you wait (and the higher prices climb), the more expensive it will be to reinvest later.
A safer way to survive volatility
We can’t stop market turbulence from happening, and a downturn will strike sooner or later. If there’s one thing to remember, though, it’s that time in the market is more valuable than timing the market.
The market has managed to survive even the worst crashes and recessions in its history — several of which have happened in just the last couple of decades. While there are never any guarantees when investing, the market will likely survive future downturns, too.
The average S&P 500 bear market lasts around 286 days, according to data from Bespoke Investment Group. You can avoid the risk of selling at the wrong moment by simply riding out the storm and waiting for the next upswing.
It’s equally important, though, to do your research to ensure you’re investing in healthy stocks that are likely to pull through tough economic times. Companies with solid fundamentals have a better chance of rebounding from periods of volatility, even if the short term is bumpy. By filling your portfolio with these types of stocks, you’re far more likely to survive even significant crashes or recessions.
If you’re feeling nervous about the future, you’re not alone. While nobody can predict exactly what the market will do in 2025, loading up on quality stocks and holding them for the long term could help you rest easier knowing your portfolio is as protected as possible.
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Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
