⚠️ Market Downturn Preparedness

What would you do if the stock market fell by a third… or even by half?

You’ve probably heard us say this before, but it’s always worth repeating: Now is a great time to check the risk in your retirement portfolio and ask yourself a simple but uncomfortable question: are you prepared for a downturn?

While the market has been on a run for the past couple of years, yellow flags are popping up across Wall Street, and they’re getting harder to ignore. So let’s look at those flags and what they mean for you:

📉 Flag #1: Surreal Levels of Investor Complacency

The latest Bank of America global fund manager survey — covering more than 170 managers handling nearly $500 billion — shows us something unusual: They’re extremely bullish on stocks while also admitting stocks are overvalued. They are also saying that AI stocks are in a bubble… and that the biggest risk to the market is that bubble bursting.

No one wants to be the first to jump off the bandwagon, even on Wall Street.

Fund managers typically keep cash levels from 2.5%-3.5% when markets are strong and there is a bullish outlook. When there is fear of a downturn or a bear market, cash levels will rise to about 5-6%. Right now, Fund managers are around 3.7% in cash.

So, today’s cash levels are higher than typical bullish levels, but still lower than a recession or bear market. It’s not quite a red flag, but it is something to be mindful of.

📊 Flag #2: Mixed Signals on Rates, Yields, and Tariffs

A majority of fund managers believe long-term rates will rise IF the Supreme Court tosses out some of President Trump’s tariffs. But one-third of them also think stocks will rise even if yields rise.

The disagreement among fund managers could be a sign that investors are operating on emotion instead of logic.

Meanwhile, managers are heavily underinvested in areas like energy, consumer staples, and cash… the exact places investors often flee to when things get rocky.

🚨 Flag #3: Big-Name Investors Are Flashing Warning Signs

Within days:

• Jeffrey Gundlach, the “Bond King,” publicly urged investors to move 20% of their portfolios into cash or T-bills.
• Michael Burry — famous for calling the 2008 crisis — deregistered his hedge fund and disclosed put options betting AI darling Palantir could fall below $50 by 2027.

None of this predicts a crash.

But historically, you see this sort of behavior near market peaks, when the last remaining bears throw in the towel or start quietly hedging.

📉 Flag #4: Market Momentum Is Starting to Crack

As of this recording, The S&P 500 has dipped about 3% in just a few days. The Nasdaq is down a little over 5%. And the S&P just broke below its 50-day moving average, which has historically been a warning sign — though not a guarantee — that momentum is shifting.

All of these yellow flags that have popped up do not mean a bear market is here. Many fund managers were bearish about 2025, but the S&P500 is up more than 10% year-to-date.

So, when you hear all this talk about a downturn in the market, remember that most things aren’t as good or as bad as everyone makes it out to be.

But it does mean it’s time to check your strategy.

🛡️ The Bottom Line: Is Your Retirement Plan Built for Volatility?

The Bottom Line is that changes in the market are unpredictable and they happen fast.

One may come. Or it may not.

But the right question isn’t, “What will the market do next?”
The right question is, “Am I prepared if it drops 20%, 30%, or even 50%?”

A properly diversified, risk-aligned retirement plan should expect bear markets. It should be built to withstand them. And it should be built so you don’t have to panic, flinch, or guess what comes next.

If your retirement plan doesn’t feel that way… it might be time for a conversation with a trusted financial advisor.

Securities are offered through LPL Financial, Member FINRA/SIPC. GenWealth Financial Advisors is an other business name of Independent Advisor Alliance, LLC. All investment advice is offered through Independent Advisor Alliance, LLC, a registered investment adviser. Independent Advisor Alliance, LLC is a separate entity from LPL Financial.