If a Recession Is Coming in 2027, I'm Making This 1 Investing Move Without Any Hesitation

There's a 28% chance the U.S. could experience its next recession by the end of 2027, according to predictions from Polymarket. U.S. Bank's Economic Research Group also estimates a 25% chance of a recession within the next 12 months. These predictions may sound optimistic, but they hint that persistent inflation, additional rate hikes, and other macroeconomic challenges could still impact the U.S. economy and trigger a recession.

In such a scenario, I'd choose a single strategy: buy more stocks rather than selling. The S&P 500 has delivered an average annual total return of nearly 11% since its creation in 1957. If you had invested $1,000 in the S&P 500 with reinvested dividends, it would be worth $1.16 million today, about $97,315 back in 1957 dollars. However, achieving this gain required staying invested through ten recessions and 11 bear markets, including steep declines of 49%, 57%, 34%, and 25% during those periods.

Despite the downturns, buying more stocks as the market crashed led to better results than withdrawing during those times. Warren Buffett advises being fearful when others are greedy and greedy only when others are fearful. If you had done nothing, you still would have outperformed investors who fled the market. For instance, a $1,000 investment in the S&P 500 on the first trading day of 2002, with reinvested dividends, would still be worth around $10,580.

Investing in top-performing individual stocks like Apple, Nvidia, and Microsoft would have yielded even greater gains. While past performance doesn't guarantee future results, prematurely selling those tech giants, which now make up over a fifth of the S&P 500, would have been a poor decision for long-term investors. Although perfectly timing the market is unattainable, as someone who began investing during the Great Recession, I suggest monitoring a few key indicators.

If the S&P 500's forward price-to-earnings ratio—currently at 18—drops to the mid-teens, it suggests the market is poised for a rebound. The Fear and Greed Index, which fluctuates between extreme fear and extreme greed, is another popular tool to assess the market's overall sentiment. As you can't predict when the next bear market will end, it's wiser to gradually invest in more stocks in fixed dollar amounts as the broader market declines.

By doing so through dollar-cost averaging, you buy more shares when prices are low, fewer when they're high, and smooth out your average purchase price.