Don’t Panic. Do This Instead. - 3/24

First, stop making fear trades

The first rule in a violent market is simple: do not let the tape bully you into a bad decision.

That sounds obvious.

It never feels obvious in real time.

But history is pretty clear here. Fidelity says the stock market has eventually recovered from past downturns, even steep ones. Hartford Funds makes the same point in blunter terms: bear markets have been a temporary part of the process, and stocks have been on the rise about 78% of the time over the last 95 years.

The part that hurts investors most is not usually the decline itself.

It's what they do next.

Hartford’s research shows that 76% of the market’s best days happened during a bear market or in the first two months of a new bull market. Miss just the 10 best days over the last 30 years, and your returns would have been cut in half. Miss the best 30, and returns would have been reduced by 84%.

That is why panic-selling is so expensive.

You do not just lock in the damage.

You often miss the snapback.

Warren Buffett said it well in Berkshire’s 2016 annual letter: “widespread fear is your friend.” He followed that by warning that personal fear is your enemy. That is not poetry. That is operating advice.

So the first job is not to predict the next headline.

It is to stay functional.

If your plan was sensible a month ago, it probably does not become nonsense just because the market turned ugly for a few weeks.

Second, keep dry powder — but do not wait for the all-clear

Cash matters again.

That's not just a trendy thing to say.

It's true.

The Fed left the federal-funds target range at 3.5% to 3.75% on March 18, which means cash is no longer the dead-weight asset it felt like when rates were pinned near zero. Even Ray Dalio, who famously pushed the “cash is trash” line a few years ago, later reversed course and said he no longer thought cash was trash once short-term rates moved higher.

That does not mean you should run to cash and hide there forever.

It means cash gives you optionality.

It gives you breathing room.

It gives you a way to buy when prices get stupid.

That is the real value of cash in a market like this. Not as a bunker. As dry powder.

But here is the catch:

Do not confuse “keeping dry powder” with “waiting for perfect clarity.”

Perfect clarity is where people get trapped.

Hartford’s bear-market data show that 42% of the S&P 500’s strongest days in the last 20 years happened during a bear market, and another 36% happened in the first two months of a bull market — before it was obvious the turn had arrived. That is why waiting for the all-clear so often becomes a self-own.

The smarter move is usually to scale, not swing.

Rebalance.

Average in.

Use levels and position sizing.

Fidelity’s playbook for corrections says the key is having a plan that matches your horizon and risk tolerance, then rebalancing back toward that plan if your mix has drifted. That is a lot more useful than trying to guess the exact day the market will bottom.

This is not a market for heroics.

It is a market for process.

Third, get paid to wait — and hide in businesses people still need

If volatility is going to hang around, you want part of your portfolio doing something productive while you wait.

That is where yield and defense start to matter.

Dividend-paying stocks are not magic. But they do have a long record of helping returns in slower, messier markets. Hartford Funds says reinvested dividends and compounding accounted for 85% of the S&P 500’s cumulative total return from 1960 through 2023. Its longer-run work also shows dividend growers and initiators delivered 10.24% average annual returns from 1973 through 2024 with lower volatility than dividend non-payers, which returned 4.31% with materially higher volatility.

That is the kind of math that matters in a rough tape.

Because “getting paid to wait” is not just a slogan.

It changes your behavior.

Cash flow makes it easier to stay patient.

And patience is a weapon when everyone else is flinching at every red candle.

The second layer is defense.

When the economy gets shaky, people still buy toothpaste. They still need medicine. They still pay the utility bill.

That is why consumer staples, health care, and utilities tend to get more attention when markets turn risk-off. Schwab’s latest sector outlook shows health care as its most favored sector, while recent performance numbers also show consumer staples, health care, and utilities all outperforming the S&P 500 over the trailing six months. Staples were up 9.4%, health care 12.3%, and utilities 12.1%, versus 3.8% for the S&P 500.

That does not mean you dump everything and turn your portfolio into canned soup and power plants.

It means you tilt toward resilience.

Toward cash flow.

Toward businesses with products people keep buying even when the headlines get ugly.

That can mean dividend growers.

That can mean defensive sectors.

That can mean a barbell with cash on one side and quality on the other.

The point is the same: make the portfolio sturdier without abandoning the market entirely.

Because that is usually the winning move in periods like this.

Not all-in.

Not all-out.

Calmer. More liquid. More selective.

That is how you survive the storm — and still have capital when the sky clears.