The stock market is an incredible wealth-generating machine, but crises can be nauseating for even the most experienced investors.
While prices continue to rise for now, about 80% of Americans are at least somewhat worried about a possible recession, according to a 2025 survey by financial association MDRT. No one can say for sure whether we will face a recession this year, but history suggests it is a possibility.
Where to invest $1,000 right now? Our team of analysts has just revealed what they believe are the 10 best stocks to buy right now, by joining Stock Advisor. See the actions »
Here’s what you need to know.
First, it is important to note that past performance does not predict future returns. Even with strong historical patterns, today’s stock market is tremendously different in many ways than it was 10 or 20 years ago.
While it is advisable to avoid making major investment decisions based on historical data, this context can help outline your future strategy. And one market indicator to watch is the S&P 500 Shiller CAPE Ratio, or cyclically adjusted price-to-earnings ratio.
This ratio is calculated by dividing the current price of the S&P 500 (SNPINDEX: ^GSPC) by the 10-year moving average of its inflation-adjusted earnings. It has historically been a strong indicator of market valuations, and a higher ratio suggests the index may experience lower returns in the coming years.
Its long-term average is around 17. It reached an all-time high of around 44 just before the dot-com bubble burst, triggering one of the longest bear markets in US history. At the time of writing, it currently sits near 40, the second highest number in history.
While data suggests a recession could be coming, no stock market indicator is 100% accurate. Higher company valuations also complicate metrics like these. The technology industry has driven unprecedented growth in recent decades, so it is normal for valuations to be higher without necessarily being overvalued.
That said, stock prices can’t keep rising forever, so it’s only a matter of time before we face some type of recession. This may not be an unprecedented recession or crisis, but it is still wise to start preparing your portfolio.
At this time, check that you are only investing in quality stocks with long-term growth potential. Weak companies may still experience increases in their stock prices, but may have difficulty recovering from a recession. However, healthy companies with strong underlying fundamentals are much more likely to recover from volatility and prosper over time.