JPMorgan CEO Jamie Dimon Says Stocks Could Tumble 30% in a Recession. Should You Be Worried?

Image source: Getty Images

For months on end, financial experts have been sounding warnings about an impending recession. And JPMorgan CEO Jamie Dimon has very much been a part of that trend.

Recently, Dimon went as far as to say that we should expect a recession to hit in 2023. And he’s also warned that an upcoming recession could be more lengthy and painful than consumers may be preparing for.

Not only does Dimon expect a recession within the next six to nine months, but he also thinks that if things get bad enough, the stock market could fall another 30%. That would be pretty terrible given that the market is already down well over 20% year to date.

But while the idea of a drastic stock market crash may sound scary, it’s not necessarily a cause for immediate alarm. Here’s why.

It’s all about riding out the storm

Any money you have invested in a brokerage account should be money you’re not planning to touch for a good number of years. And so if you’ve been sticking to that rule, then you don’t need to panic over a massive stock market decline.

Let’s say your portfolio is worth $20,000 now, and next year, its value drops to $14,000. Clearly, that’s a big hit. But if you’re not cashing out investments next year, then you’re not really in trouble. The reason? The market might come back up after it plunges.

In fact, historically speaking, some of the stock market’s strongest periods of gains have followed periods of decline. So going back to our example, if your portfolio value drops from $20,000 to $14,000 next year and you leave all of your holdings alone, by 2024, your portfolio may be back up to $20,000. And by 2025, your portfolio value might climb to $24,000.

Now if you do plan to cash out investments in your brokerage account, then a drastic stock market dip is obviously more concerning. But in that scenario, you’d be wise to look at other ways to get your hands on money as needed. That could mean taking out a personal loan or borrowing against your home equity.

Plus, if you’re near or in retirement, a 30% portfolio dip could be catastrophic if you don’t have some of your assets outside of stocks, such as in cash. But in that case, once again, you’d ideally look to borrow affordably rather than lock in such large losses. You may, for example, have a home you own outright that you can borrow against.

Try to stay calm

The idea of a massive stock market crash is unquestionably scary. But we don’t know what the coming year has in store for the economy or the stock market. So rather than lose sleep, try to remind yourself that if you don’t cash out investments when they’re down, you don’t actually lose money at all. And if you have a solid emergency fund, there shouldn’t be a need to tap your investment portfolio if a recession does indeed strike at some point in 2023.

The Ascent’s best credit cards

We’ve vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class picks pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with The Ascent’s best credit cards.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.