The S&P 500 index (SNPINDEX: ^GSPC) is on an incredible run. It put up total returns exceeding 17% in each of the past three calendar years. And in 2026, the total return so far has been 14% (as of Aug. 11).
This kind of stellar performance doesn't prevent investors from constantly thinking about the possibility of a stock market crash. Instead of sitting still, though, history says this one move is absolutely critical to be prepared for whatever comes. This Rare Signal Is Flashing Again.
In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » To be clear, no one can accurately predict if or when a crash is coming.
But should there be a correction (a 10% to 20% drop from the recent peak) or bear market (a fall of 20% or more) in the not-too-distant future, the best investors are taking a simple course of action. It's time to build up an adequate cash reserve. This will enable investors to be opportunistic enough to buy the dip.
But why might investors be worried today? There are some notable developments that support a less optimistic point of view right now. The personal consumption expenditures price index, which is the Federal Reserve's preferred inflation data point, was up a reported 3.7% in the month of June.
This is well ahead of the central bank's 2% target, supporting the case that the fed funds rate shouldn't be lowered. Tighter monetary policy, all else equal, doesn't stoke a bullish view among investors quite like the prospect of a more accommodative Fed would. This could get in the way of rising stock prices.
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