Stocks are still surging, but some investors worry that may soon be over.
Some stock market indicators may send warning signals to investors, but that doesn’t necessarily mean a crash is imminent.
No matter what’s coming, the right strategy can protect your investment.
These 10 stocks could create the next wave of millionaires ›
Many stocks experienced record-breaking growth in 2025. However, some are worried a downturn is coming, with more than a quarter of investors feeling pessimistic about the market’s future, according to the latest weekly survey from the American Association of Individual Investors.
To be clear, no one knows if this will happen, and even if we do face a bear market, it won’t necessarily lead to a severe crash or long-term recession. The good news is that no matter what is about to happen in the market, investors can start preparing their portfolios now.
Image source: Getty Images.
In short, it’s impossible even for experts. Still, some stock market indicators suggest the market may be overvalued.
For example, the Buffett indicator, the ratio of GDP to the total value of U.S. stocks, is at an all-time high, which could be a warning sign. The indicator is named after legendary investor Warren Buffett because the legendary investor used it to correctly predict the onset of the dot-com bubble burst in the early 2000s.
In a 2001 interview wealth In the magazine, Buffett explained how he predicted the market would turn south. “If the percentage relationship drops into the 70% or 80% area, then buying stocks may work very well for you,” he said of stock market indicators. “If it’s closer to 200 percent – as it was in 1999 and part of 2000 – then you’re playing with fire.”
As of this writing, the Buffett Index is around 221%. The last time it was close to 200% was at the end of 2021, right at S&P 500 Index(SNPINDEX:^GSPC) fell into a bear market that lasted for much of the following year.
Likewise, short-term market movements are always unpredictable to a certain extent, and no stock market indicator is foolproof. A lot has changed over the past 25 years, and Buffett’s indicators may not be as accurate today as they were in Buffett’s early predictions.
Still, even with a market downturn looming, perhaps the best thing all investors can do right now is double-check that they’re only investing in quality stocks with healthy fundamentals.
Strong companies are more likely to survive periods of economic uncertainty, and many of them have endured multiple bear markets or recessions over the past few decades. On the other hand, weaker companies often struggle to survive economic downturns.
Stock price alone is not a sufficient measure of a company’s strength. When markets surge, even unhealthy companies can thrive, especially if they’re in an industry that experiences a lot of hype. These stocks may appear profitable in the short term, but they often struggle to sustain those returns over several years—especially if the market is unstable.
A company’s fundamentals are a better predictor of whether the company can weather potential fluctuations. Investment metrics—such as the price-to-earnings ratio (P/E) or the price-to-earnings ratio (PEG)—can help determine whether an organization is financially strong. Less tangible factors, such as the strength of a company’s competitive advantage or whether its leadership team has a track record of making smart decisions in difficult times, can also distinguish leaders from other companies.
Now is the perfect time to make sure your portfolio is full of strong stocks. If you find any weak companies or stocks that were once strong but have lost their edge, now might be a smart time to sell them while prices are still higher.
No one can say whether the market will get worse in 2026, but it’s smart to be prepared regardless. By investing in quality stocks that you plan to hold for the long term, your portfolio has a better chance of surviving no matter what the market does.
Ever feel like you missed out on an opportunity to buy the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts will publish ‘Double Down’ Stocks Recommend companies they think will be popular. If you’re worried that you’ve missed out on an investment opportunity, now is the best time to buy before it’s too late. The numbers speak for themselves:
NVIDIA:If you invested $1,000 in 2009 when we doubled down,You will have $479,943!*
apple: If you invested $1,000 in 2008 when we doubled down, You will have $49,280!*
Netflix: If you invested $1,000 in 2004 when you doubled down, You will have $488,222!*
Now, we’re issuing a “Double Down” alert for three incredible companiesyou can use it after joiningstock advisorand there may not be another opportunity like this in the short term.
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.
If a 2026 Stock Market Crash Is Coming, 1 Smart Move Investors Can Make Now Originally Posted by The Motley Fool
