What Should You Do If the Stock Market Is Crashing? A Practical Guide for 2026

The Market’s Current State and Investor Sentiment

The stock market has delivered impressive returns throughout 2025, with many equities hitting unprecedented highs. Yet beneath this bullish surface, anxiety is growing. Recent surveys show that over 25% of individual investors are now expressing concern about where markets are headed, wondering if the bull run can continue or if is stock market crashing fears are justified.

The reality? Nobody can predict with certainty whether a downturn will arrive in 2026. But what we can do is examine the warning signs and prepare accordingly.

Reading the Market’s Temperature: The Buffett Indicator Explained

One metric drawing significant attention is the Buffett indicator—a tool that compares the total market value of U.S. stocks to the nation’s GDP. When this ratio runs too high, it historically signals overvaluation.

Warren Buffett famously used this indicator to forecast the dot-com bubble’s collapse in the early 2000s. In a 2001 Fortune interview, he outlined his thinking: “If the ratio approaches 200%—as it did in 1999 and part of 2000—you are playing with fire.” At that time, buying appeared risky, while lower ratios around 70-80% represented sounder entry points.

Today, this indicator sits near 221%, well above the danger zone Buffett identified. The last time we saw similar levels was late 2021, immediately before the S&P 500 entered a bear market that persisted for much of 2022.

Does this mean a crash is imminent? Not necessarily. Market metrics are guides, not guarantees. Conditions have evolved significantly in 25 years, and single indicators rarely tell the complete story.

Beyond the Numbers: What Really Matters

Whether is stock market crashing becomes reality in 2026 or not, investors can take meaningful action today. The smartest move isn’t timing the market—it’s ensuring your portfolio is built on solid ground.

Focus on investing in quality companies with genuine fundamentals rather than chasing hype-driven sectors. Strong businesses typically weather economic storms far better than weaker competitors. They’ve survived previous bear markets and recessions, proving their resilience.

Identifying Quality Over Hype

Stock price alone reveals little about a company’s true strength. During bull markets, even fundamentally weak businesses can appear thriving if they’re riding industry momentum.

Look deeper. Examine metrics like the price-to-earnings (P/E) ratio and price/earnings-to-growth (PEG) ratio to assess financial health. Consider less obvious factors too: Does the company possess genuine competitive advantages? Is the leadership team proven in navigating difficult periods?

These indicators separate durable winners from temporary performers.

A Strategic Approach Right Now

With valuations stretched by historical standards, now is an excellent time to audit your holdings. Trim positions in stocks that have lost their fundamental edge or never had one to begin with. Use current higher prices as an exit opportunity for lower-quality names.

Simultaneously, focus your capital on businesses with proven track records, solid balance sheets, and competitive moats. These are the stocks most likely to preserve and grow wealth regardless of what 2026 brings.

The bottom line: You cannot control whether the market crashes or climbs. What you can control is ensuring your portfolio is positioned with quality companies designed to endure volatility. That’s your best insurance policy against whatever economic shifts lie ahead.