Today’s market environment
Before diving in, let’s take a look at the current market environment. Stocks have soared as investors cheered outstanding corporate earnings and piled into the artificial intelligence (AI) players that have driven this bull market. AI has fueled the S&P 500 and other major indexes over the past three years on optimism about the technology’s potential to transform the way business is done — and generate gains in efficiency and revenue for companies across industries.
In the most recent quarter, S&P 500 companies delivered a 52% earnings growth rate, the highest since the second quarter of 2021, according to FactSet Insight. And players in the AI space continued to offer the same message they delivered in recent quarters: Demand for AI remains high. This has translated into tremendous growth for those offering AI products and services, such as chip leader Nvidia and cloud giant Amazon.
Amid this excitement, though, economic concerns are brewing. President Donald Trump’s tariffs and the conflict in Iran have driven inflation higher, and investors worry that the Federal Reserve may soon increase interest rates to favor price stability. The CME Group FedWatch tool shows a 67% probability that the Fed will lift rates during its September meeting.
Though the corporate earnings picture and AI story remain bright, these economic factors could weigh on appetite for stocks — and push the S&P 500 lower.
Expand
Index
S&P 500 Index
Today’s Change
(0.46%) +35.13
Index Level
7,666.60
Key Data Points
Day’s Range
7,633.62 – 7,681.19
52wk Range
6,316.91 – 7,816.70
What you can do now
Before you worry about that scenario, or even a potential market crash on the way, let’s talk about what you can do as of right now to protect your portfolio. The smartest move investors can make is to continue investing throughout all market environments. This doesn’t mean you should buy poor-quality stocks or companies trading at ridiculously high valuations. Instead, what’s important to note is that the opportunity to find a great stock for a reasonable price always exists — in bull markets, bear markets, and particularly during market crashes, as many investors flee the market.
If you sell positions at the start of a crash, you may avoid a short-term loss (at least on paper), but history shows us you could miss out on a major longer-term gain. For example, tech giant Amazon slipped during the coronavirus market crash in March of 2020, but it went on to deliver fantastic returns later in the year and over the long term.
The importance of time
It’s important to remember that the most significant stock market wins happen over a period of years — not a few weeks or months. In fact, even investing at what may be seen as the worst possible time, right before a market crash, has resulted in gains over time, according to history.
An investment on Oct. 9, 2007, ahead of the global financial crisis would have resulted in a 109% cumulative return over the ing 10 years, and an investment on Feb. 19, 2020, ahead of the coronavirus market crash would have resulted in a 25% increase over the year to , Daniel Prince, U.S. head of product at is, wrote in a note.
So, selling quality stocks and avoiding the market in general could be a big mistake ahead of or during a market crash. History shows us that the one thing that supports success over time is the decision to remain in the market throughout its various phases and pick up stocks when opportunity arises — as mentioned, this can happen at any time, and you’ll only be able to take advantage of it if you’re present.
All of that means that, if a stock market crash is coming, the smartest move you can make is to keep investing and hold on for the long term.
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About the Author
Adria Cimino is a contributing Motley Fool stock market analyst covering healthcare, technology, and consumer goods sectors. Prior to The Motley Fool, Adria covered the European stock market and U.S. stocks pre-market trading for Bloomberg News, Bloomberg TV, and Bloomberg Radio for more than a decade. Earlier in her career, she wrote about biotech, medtech, and technology companies in Boston for Mass High Tech, an American City Business Journals publication. She holds a bachelor’s degree in mass communications from the University of South Florida.
Stocks Mentioned
S&P 500 Index
SNPINDEX: ^GSPC
$7,666.60
(+0.46%)+$35.13
Motley Fool Stock Advisor’s Latest Pick
—% Avg Return
Amazon
NASDAQ: AMZN
$254.98
(+0.02%)+$0.06
Nvidia
NASDAQ: NVDA
$224.41
(+3.21%)+$6.97
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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