The past year hasn't been easy for investors, and with the recent surge in stock prices, many people are feeling conflicted about the future. While some experts are calling this the beginning of a new bull market, the long-anticipated recession may still be on its way. Researchers at Deutsche Bank recently noted that they believe there's a "near 100%" chance of a recession in the next 12 months.
The American public is also concerned about the probability of a recession. Around 68% of U.S. adults expect a recession within the next six months, according to a 2023 survey from Nationwide. Of those who expect a recession, 80% believe it will be severe.
Although the future may look bleak, there are ways to protect your investments. By making these four moves right now, you can keep your money as safe as possible.
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1. Double-check your emergency fund
A strong emergency fund can help keep your investments safer during recessions and periods of volatility. If we face a recession, stock prices could drop again. If you experience an unexpected expense or job loss and are forced to tap your investments, you may end up selling your stocks for less than you paid for them -- locking in your losses.
When you have at least three to six months' worth of savings stashed in an emergency fund, however, it's easier to avoid touching your investment account or retirement fund.
2. Keep your money in the market
Even if you're not forced to pull money from your investments, it can still be tempting to withdraw from the market when times are tough. If stock prices plummet later this year, it may seem like the best move is to get out now while you still can.
However, the market can be unpredictable, and nobody knows for certain what will happen. Stocks could take a dive in the coming months, or prices could continue to surge. If it's the latter, selling your investments now may mean missing out on potentially lucrative gains.
The best thing you can do right now, then, is simply keep investing consistently. If stock prices fall, just ride out the storm and wait for the inevitable rebound.
3. Maintain a long-term outlook
It's not always easy, but keeping a long-term outlook is critical right now. If a recession is looming, things could get worse before they get better. But they will get better -- perhaps sooner than you think.
The market is forward-looking, which means it generally experiences fluctuations ahead of the economy. For example, if investors are worried about a recession, the market will often fall well before the recession actually begins.
But this also means that the market will usually recover ahead of the economy. In fact, in nearly every recession over the past 50 years, the S&P 500 began its rebound before economic activity reached its lowest point, according to research from JPMorgan Chase.
Periods of turbulence are tough to stomach but are only temporary. By keeping a long-term outlook, it will be a little easier to get through short-term volatility.
4. Invest in the right places
The individual investments you choose will make or break your portfolio's ability to survive a recession. Not all stocks can get through tough economic times, and if you invest in the wrong places, your portfolio could be in trouble.
While there's no single right way to invest, the best stocks are from companies with healthy underlying business fundamentals -- such as strong financials, a competent leadership team, and a competitive advantage in their industry.
With the right stocks in your portfolio, it's far more likely your investments will survive even the worst recessions. They may still take a hit in the near term, but there's a much better chance they'll rebound when economic conditions improve.
If a recession is around the corner, now is the time to start preparing. By investing in the right places and holding those investments for the long term, you can protect your money as much as possible -- no matter what happens in the market.
