How to Prepare to Survive and Thrive in Stormy Conditions

Like so many of my neighbors and friends, the severe storms that swept through western Pennsylvania on April 29th left our home without power and electricity for days. We were well-prepared for a normal, seasonal storm – but, unfortunately, the unexpected happened. Multiple transformers blew up and solving the issue was more severe than usual. I couldn’t help but see similarities between a sudden thunderstorm and volatile conditions in the stock market in both their unpredictability and potential impact on those caught unprepared.

Most thunderstorms pass quickly, even if they are intense. Similarly, market volatility often represents short-term disruption within a longer-term trend. Investors with a long-term perspective and a clear risk strategy are better equipped to handle market upheaval. We as investors remain watchful of the thunder in the distance – national debt and deficits, uncertain tax policy, Moody’s downgrades and the many geo-political issues of the day.

But just as storms pass and skies eventually clear, so too do markets recover. Having a well thought out plan to protect your portfolio can not only help you stay on course, but also prepare you for recovery in the aftermath. The April 2nd ‘liberation day’ was unsettling to the market. Since then, however, stocks have recovered for the most part. Well-prepared, long-term-oriented investors were likely able to take advantage of the recovery without locking in steep short-term losses.

Our team remains on high alert when protecting our clients’ assets against unforeseen circumstances. A good example is the recent spike in oil prices due to military conflict in the Middle East. It’s impossible to know when they are coming, and futile to think we can prevent them by trying to time the market.

Our best approach is to stay true to our core fundamental beliefs:

1. Diversify strategically

Spread your investments across different asset classes—stocks, bonds, commodities (gold), and real estate. You also want to look at international markets which have been a headline story for returns recently – triggered by a weak dollar, particularly in Europe and Latin America. This reduces exposure to any single market downturn and can help smooth returns over time.

While investing in international stocks might have been a drag on returns over the past several years when the S&P 500 was up over 20% annually, geographic diversification has paid so far this year. Specifically, the MSCI EAFE index is up more than 18% year-to-date while the S&P 500 is up a little over 3%.¹ Think of diversification as your first line of defense and insurance against meaningful losses in any single area of your portfolio. It can be difficult to see the value during very buoyant US equity markets, but when markets reverse and you need that insurance, the payoff is rewarding.

2. Focus on quality

During uncertain times for the stock market, shift your focus toward high-quality companies with strong balance sheets, consistent cash flows, dividends and a history of weathering market downturns. These tend to be more resilient in a downturn and recover more quickly when markets rebound.

3. Reassess risk tolerance

Volatility often reveals whether your portfolio aligns with your true risk appetite. If sleepless nights become common, it may be time to reduce exposure to high-risk assets and reallocate toward more conservative options like government bonds, dividend-paying stocks or even gold.

4. Stay liquid

Aligning a portion of your portfolio according to your risk tolerance in cash or cash equivalents can provide flexibility. It gives you the option to buy undervalued assets during market dips or simply wait out the storm without being forced to sell at a loss.

5. Avoid emotional decisions

Perhaps the most critical step is keeping a long-term perspective. Panic-selling in response to short-term fluctuations can lock in losses and derail your financial goals. Stick to your investment plan and consult your advisor when in doubt.

Conclusion

Market volatility is inevitable. Whether triggered by economic uncertainty, geopolitical tension, or unexpected global events, turbulent times in the stock market can rattle even seasoned investors. Like surprise thunderstorms, they can evoke fear and cause us to seek shelter. Don’t pay attention to the noise; instead rely on the facts on the ground. Just as we trust the seasons to change and the skies to clear, so too can we trust in the long-term growth potential of well-managed investments.

Thanks for reading.

¹ FactSet, as of June 11, 2025.