<span class="HighlightShare-hidden"></span><div id="ArticleBody-InlineImage-107064612"><div><div><div></div></div><div><div></div><div>Phonlamaiphoto | Istock | Getty Images</div></div></div></div><div><p>Months of stock market volatility, surging inflation and rising interest rates have left many investors wondering if a recession is coming.</p><p>The stock market tumbled again on Thursday, with the S&amp;P 500 capping its worst six-month start to a year since 1970. In all, it's down more than 20% year to date. The Dow Jones Industrial Average and Nasdaq Composite are also down significantly since the beginning of 2022, dropping more than 15% and nearly 30%, respectively.</p><div></div><p>Meanwhile, consumer feelings about the economy have plummeted, according to the University of Michigan's closely-watched Survey of Consumers, measuring a 14.4% decline in June and a record low for the report.</p><p><strong>More from Personal Finance:</strong><br/>Inflation is making Fourth of July celebrations more expensive than ever<br/>'It's like going to the DMV online': How to buy Series I bonds<br/>Here are 3 ways to deal with inflation, rising rates and your credit </p><p>Some 68% of chief financial officers expect a recession to occur during the first half of 2023, according to CNBC's CFO survey. However, expert forecasts vary about the possibility of an economic downturn.</p></div><div><div id="RegularArticle-DataWrapperChart"></div></div><div><p>&#34;We all understand that markets go through cycles and recession is part of the cycle that we may be facing,&#34; said certified financial planner Elliot Herman, partner at PRW Wealth Management in Quincy, Massachusetts.</p><p>However, since no one can predict if and when a downturn will occur, Herman pushes for clients to be proactive and make sure their portfolio is ready.</p><div></div></div><div><div><h3>Loading chart...</h3><p></p></div></div><h2><a id="headline0" rel="nofollow" target="_blank"></a>Diversify your portfolio</h2><div><p>Diversification is critical when preparing for a possible economic recession, said Anthony Watson, a CFP and founder and president of Thrive Retirement Specialists in Dearborn, Michigan.</p><p>You can reduce company-specific risk by opting for funds rather than individual stocks because you're less likely to feel a company going bankrupt within an exchange-traded fund of 4,000 others, he said.</p></div><blockquote><div><div><span class="Pullquote-quotemark1"></span><span class="Pullquote-quotemark2"></span></div><div><div>Value stocks tend to outperform growth stocks going into a recession.</div><div><div></div><div>Anthony Watson</div><div>Founder and president of Thrive Retirement Specialists</div></div></div></div></blockquote><div><p>He suggests checking your mix of growth stocks, which are generally expected to provide above-average returns, and value stocks, typically trading for less than the asset is worth.     </p><p>&#34;Value stocks tend to outperform growth stocks going into a recession,&#34; Watson explained.</p><p>International exposure is also important, and many investors default to 100% domestic assets for stock allocations, he added. While the U.S. Federal Reserve is aggressively fighting inflation, strategies from other central banks may trigger other growth trajectories.</p></div><h2><a id="headline1" rel="nofollow" target="_blank"></a>Revisit bond allocations</h2><div><p>Since market interest rates and bond prices typically move in opposite directions, the Fed's rate hikes have sunk bond values. The benchmark 10-year Treasury, which rises when bond prices fall, topped 3.48% on June 14, the highest yield in 11 years. </p><p>Despite slumping prices, bonds are still a key part of your portfolio, Watson said. If stocks plummet heading into a recession, interest rates may also decrease, allowing bond prices to recover, which can offset stock losses.</p><p>&#34;Over time, that negative correlation tends to show itself,&#34; he said. &#34;It's not necessarily day to day.&#34;</p></div><div><div><h3>Loading chart...</h3><p></p></div></div><div><p>Advisors also consider duration, which measures a bond's sensitivity to interest rate changes based on the coupon, time to maturity and yield paid through the term. Generally, the longer a bond's duration, the more likely it may be affected by rising interest rates.</p><p>&#34;Higher-yielding bonds with shorter maturities are attractive now, and we have kept our fixed income in this area,&#34; Herman from PRW Wealth Management added.</p></div><h2><a id="headline2" rel="nofollow" target="_blank"></a>Assess cash reserves</h2><div><p>Amid high inflation and low savings account yields, it's become less attractive to hold cash. However, retirees still need a cash buffer to avoid what's known as the &#34;sequence of returns&#34; risk.</p><p>You need to pay attention to when you're selling assets and taking withdrawals, as it may cause long-term harm to your portfolio. &#34;That is how you fall prey to the negative sequence of returns, which will eat your retirement alive,&#34; said Watson at Thrive Retirement Specialists.</p><p>However, retirees may avoid tapping their nest egg during periods of deep losses with a significant cash buffer and access to a home equity line of credit, he added.</p></div><div id="Placeholder-ArticleBody-Video-107081661"><div id="InlineVideo-0"><div><div></div><div><div><span class="InlineVideo-videoLabel">VIDEO</span><span class="InlineVideo-videoDurationWithLeading0">3:42</span><span class="InlineVideo-videoDuration InlineVideo-videoLabel">03:42</span></div><div>We are in a mild recession, says Wharton's Jeremy Siegel</div><div>Squawk Box</div></div></div></div><div></div></div><div><p>Of course, the exact amount needed may depend on monthly expenses and other sources of income, such as Social Security or a pension. </p><p>From 1945 to 2009, the average recession lasted 11 months, according to the National Bureau of Economic Research, the official documenter of economic cycles. But there's no guarantee a future downturn won't be longer.</p><p>Cash reserves are also important for investors in the &#34;accumulation phase,&#34; with a longer timeline before retirement, said Catherine Valega, a CFP and wealth consultant at Green Bee Advisory in Winchester, Massachusetts.</p></div><blockquote><div><div><span class="Pullquote-quotemark1"></span><span class="Pullquote-quotemark2"></span></div><div><div>I do tend to be more conservative than than many because I have seen three to six months in emergency expenses, and I don't think that's enough.</div><div><div></div><div>Catherine Valega</div><div>Wealth consultant at Green Bee Advisory</div></div></div></div></blockquote><div><p>&#34;People really need to make sure that they have sufficient emergency savings,&#34; she said, suggesting 12 months to 24 months of expenses in savings to prepare for potential layoffs.</p><p>&#34;I do tend to be more conservative than many,&#34; she said, noting the more widely-touted suggestion of three to six months of expenses. &#34;I don't think that's enough.&#34;</p><p>With extra savings, there's more time to strategize your next career move after a job loss, rather than feeling pressure to accept your first job offer to cover the bills.</p><p>&#34;If you have enough in liquid emergency savings, you are providing yourself with more options,&#34; she said.</p></div><div id="ArticleBody-MobileAdhesion"></div>

<p>Some 68% of chief financial officers expect a recession to occur during the first half of 2023, according to a CNBC survey. Here's how to prep your portfolio.</p>

Some experts say a recession is coming. Here's how to prepare your portfolio