What selling ahead of a crash has cost investors, when reducing risk by rule makes sense, what investors sell first, the tax bill in a taxable account, and what the cash earns while you wait. With a market risk check that updates every trading day.
Selling everything because you expect a crash has a poor record. Reducing risk by a rule you set in advance can make sense. The difference is the second decision. A sale on a forecast has to be followed by a purchase, and that one is made in the middle of the panic, when the best days tend to arrive.
Three sets of evidence point the same way. J.P. Morgan Asset Management’s 2025 Guide to Retirement found that missing the 10 best days over 20 years cut annualized return by almost half. Morningstar’s Mind the Gap 2026 study found that the average dollar in US funds and ETFs earned 8.7% a year over the 10 years to 2025, while the funds themselves returned 9.9%; the 1.2‑point gap came from mistimed buys and sells. And the S&P 500’s best and worst days came in the same weeks (table below).
There are good reasons to sell some stocks: money you need within a few years, leverage you could not hold through a 50% fall, a position that has grown too large, or a rule that has triggered. A prediction is rarely one of them. The full set of tools is in the portfolio protection guide.
Data through the close of Oct 19, 2026. The S&P 500 fell 1.5% over the last five trading days, and the Nasdaq‑100 fell 3.7%. The S&P 500 is 1.6% below its record close of Oct 6: a small dip from its record. It is 6.1% above its 200‑day average (+8.0% a week earlier). Its 20‑day volatility is 9.6% a year, calmer than 70% of trading days since 2016.
Daily closes over the last year, through Oct 19, 2026. Green: the index above its average; red: below it.
Through Oct 19, 2026. “vs 200‑day avg.” = how far the close sits above or below its 200‑day average.
| Index fund | Last 5 days | Year to date | From its high | vs 200‑day avg. |
|---|---|---|---|---|
| S&P 500 (SPY) | −1.5% | +12.7% | −1.6% | +6.1% |
| Nasdaq‑100 (QQQ) | −3.7% | +17.1% | −5.4% | +7.0% |
| Russell 2000 (IWM) | −2.4% | +10.4% | −11.1% | −1.8% |
| Index fund | S&P 500 (SPY) | Nasdaq‑100 (QQQ) | Russell 2000 (IWM) |
|---|---|---|---|
| Last 5 days | −1.5% | −3.7% | −2.4% |
| Year to date | +12.7% | +17.1% | +10.4% |
| From its high | −1.6% | −5.4% | −11.1% |
| vs 200‑day avg. | +6.1% | +7.0% | −1.8% |
Last updated Oct 19, 2026. Members only.
| Exent regime pillar | Today |
|---|---|
| Liquidity | |
| Credit stress | |
| Economic cycle | |
| Sentiment | |
| Regime: Risk ON · Neutral · Risk OFF |
Price trend and volatility show what the market has already done. Exent’s macro regime score reads the backdrop behind it (liquidity, credit stress, the economic cycle and sentiment) and classifies it as Risk ON, Neutral or Risk OFF. Market intel members see today’s reading and get an alert when it changes.
Sometimes, but it means timing both ends, and the rebound usually starts while the news is still bad. In Exent’s data (Jul 2016 – Sep 2026), a few days made most of the difference:
| If you held the S&P 500 and… | Return a year |
|---|---|
| stayed invested every day | 15.2% |
| missed the 10 best days | 8.2% |
| missed the 20 best days | 4.9% |
| missed the 10 worst days | 22.9% |
| missed the 10 best and the 10 worst days | 15.5% |
The 2025 tariff selloff shows the problem. The S&P 500 lost more than 12% in the seven days after the April 2 tariff announcement, and had largely returned to its pre‑announcement level about a month later, NBC News reported on Yahoo Finance. An investor who sold after the two worst days, April 3 and 4, missed the best day since mid‑2016, three trading days later.
“Buy back lower” also has a hurdle that is easy to forget: in a taxable account the price has to fall by more than the tax you paid on the sale before the trade breaks even (see the tax section below). If you have already sold, see when to get back into the market.
A recession forecast is a weak sell signal, because stocks and the economy rarely turn at the same time. The National Bureau of Economic Research dates the 2020 recession from February to April 2020 (business cycle dating). The S&P 500 hit its low on March 23, 2020, and was already climbing before the recession ended. The 2022 bear market, a 25.4% fall, came with no recession dated by the NBER at all: its most recent dated recession is still the 2020 one.
So the question that matters is not whether a recession is coming, but how much loss your portfolio can take if stocks fall 25% to 35% either way.
Usually the holdings that fall furthest: leverage, high‑beta stocks and concentrated positions. Cutting those first lowers the portfolio’s loss the most per dollar sold. Each fund’s own largest fall inside the last four selloffs (Jul 2016 – Sep 2026):
| Fund | Q4 2018 | COVID 2020 | 2022 bear | 2025 tariffs |
|---|---|---|---|---|
| S&P 500 (SPY) | −19.3% | −33.7% | −24.5% | −18.8% |
| Nasdaq‑100 (QQQ) | −22.8% | −28.6% | −34.8% | −22.8% |
| 2× S&P 500 (SSO) | −36.5% | −59.3% | −46.7% | −35.1% |
| 3× Nasdaq‑100 (TQQQ) | −57.9% | −69.9% | −80.9% | −56.7% |
The 2× S&P 500 fund lost a little under twice as much as the S&P 500 fund in each selloff, and the 3× Nasdaq‑100 fund about two and a half times as much as the Nasdaq‑100 fund. A 70% loss needs a 233% gain to get back to even; an 80.9% loss needs 424%. High‑beta stocks (the S&P 500 High Beta fund, SPHB) fell 46.6% in the COVID crash. Single stocks can fall further still: in Exent’s data, Nvidia fell 61.8% and Meta 62.3% in the 2022 bear market. More in how much leveraged ETFs lose in a crash.
In a taxable account, selling a winner realizes the gain and the tax is due for that year; inside an IRA or 401(k), selling and buying back triggers no tax. The IRS taxes long‑term gains (on assets held more than a year) at 0%, 15% or 20% depending on income, and short‑term gains as ordinary income (IRS Topic 409). Higher earners also owe the 3.8% net investment income tax above $200,000 of modified adjusted gross income for single filers and $250,000 for joint filers (IRS Topic 559). Illustrative, federal tax only:
| Illustrative: $800,000 sold, $300,000 of it long‑term gains | Taxable account | IRA or 401(k) |
|---|---|---|
| Gain taxed this year | $300,000 | $0 |
| Federal tax at 15% + 3.8% | $56,400 | $0 |
| Left to reinvest | $743,600 | $800,000 |
| Fall needed just to buy back the same shares | About 7% | None |
Part of that tax is a prepayment rather than a pure loss, because the shares you buy back carry a higher cost basis. But the money leaves the portfolio now. One common approach is to de‑risk inside an IRA or 401(k) first, or to trim the positions with the smallest gains. Selling at a loss works the other way: a realized loss can offset gains and up to $3,000 a year of other income (same IRS page).
Less than stocks over time, but it held its value in every selloff. T‑bills (the BIL fund) returned 2.1% a year from mid‑2016 to September 2026, against 15.2% for the S&P 500 (SPY). Illustrative, from those returns: $100,000 grew to about $123,500 in T‑bills and to about $426,300 in the S&P 500 fund. What each returned between the S&P 500’s peak and its trough:
| Asset | Q4 2018 | COVID 2020 | 2022 bear | 2025 tariffs |
|---|---|---|---|---|
| S&P 500 (SPY), price | −20.2% | −34.1% | −25.4% | −19.0% |
| T‑bills (BIL) | +0.5% | +0.3% | +0.6% | +0.6% |
| Long Treasuries (TLT) | +4.5% | +14.2% | −29.3% | +0.8% |
| Asset | S&P 500 (SPY), price | T‑bills (BIL) | Long Treasuries (TLT) |
|---|---|---|---|
| Q4 2018 | −20.2% | +0.5% | +4.5% |
| COVID 2020 | −34.1% | +0.3% | +14.2% |
| 2022 bear | −25.4% | +0.6% | −29.3% |
| 2025 tariffs | −19.0% | +0.6% | +0.8% |
Long Treasuries were no safe parking place in 2022, when they fell 29.3% along with stocks. Where to put the money is covered in cash, T‑bills or bonds when you step aside and should I go to cash before a crash. For retirees the case for cash is different: money needed for withdrawals over the next few years is protected for a reason that has nothing to do with forecasts (sequence of returns risk).
Selling everything on a forecast has a poor record, because you also have to time the buy-back, and the best days tend to come right after the worst. Reducing risk by a rule set in advance, often in steps, has held up better.
It works only if you buy back before the rebound and the drop is larger than your tax bill and costs. In Exent’s data, 8 of the S&P 500’s 10 best days since mid-2016 came within 10 trading days of one of the 10 worst.
Stocks and the economy rarely turn together. In 2020 the S&P 500 bottomed on March 23, before the recession ended in April, and the 2022 bear market came without a recession dated by the NBER.
Leverage, high-beta stocks and oversized single positions, because they fall furthest. A 3x Nasdaq-100 fund fell 80.9% in the 2022 bear market, against 34.8% for the Nasdaq-100 fund.
No. Trades inside an IRA or 401(k) are not taxed; tax applies when money is withdrawn from a traditional account. In a taxable account, selling at a gain triggers capital gains tax for that year.
T-bills returned 2.1% a year from mid-2016 to September 2026, against 15.2% for the S&P 500, in Exent’s data. They gained in all four big selloffs, but the gap adds up quickly in rising markets.
Market Intelligence reads the market regime and tells you whether the backdrop favors taking risk or protecting capital.
Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.