Even if the next quarter continues to show negative growth, he said, it’s important to remember that the stock market has had three straight years of solid, double-digit growth. “One down year out of four doesn’t mean the train is off the tracks,” said Ernst.

Listen To Your Clients
To be sure, for many clients the spate of bad economic news does feel like a train wreck. It’s important to listen to them and their concerns.

Rob Comfort, president of CUNA Brokerage Services in Waverly, Iowa, recommended “simply being there for clients. Holding their hands through turbulent times is when advisors truly earn their keep.”

Communication is key. “We communicate to clients that we are constantly challenging our assumptions and always striving to adapt to a changing world,” said Sam Solem, a portfolio manager for private wealth at Intrepid Capital, an independent RIA in Jacksonville, Fla. That clarity and candor, he said, “gives them comfort that we have a close eye on the world and how different events can affect their portfolios.”

But make sure to remain well-informed. “Study research from multiple economists, as their perspectives differ significantly,” suggested Smitha Thomas at Sancus Wealth Management in Dallas.

There are a few ideas that might be especially relevant in light of a recession.

For instance, clients should maintain “adequate cash reserves,” said Brian Leslie, a director at Edelman in Omaha, Neb. “You need to make sure you’re in a position to weather the storm in the event of an income disruption. You don’t want to be in a position where you’re forced into selling your long-term growth assets at an inopportune time.”

Another good idea is to reinforce the value of diversification. “Strategic asset allocation has endured for a reason, and advisors can point their clients to historical data to help them stay the course,” said Chris Tidmore, a senior manager at Vanguard’s Investment Advisory Research Center in Malvern, Pa.

Tidmore pointed to early 2020: By late March of that year, he said, a $1 million portfolio of 60% equities and 40% fixed income securities would’ve lost about 20% of its value because of the pandemic shock. Then the market rebounded. “Converting the portfolio to cash at that time would have cost an investor more than $350,000 over the next eight months, versus the alternative of staying invested,” he said.

Silver Linings?
Certainly no one can guarantee that history will repeat itself, but historical knowledge can help calm client fears. “If advisors can show the market returns during the last recession, combined with the current plan for the client ... they will be able to explain the impact [of a recession] and justify any adjustments confidently,” said Chris Volpe, head of  Zephyr, a Merrick, N.Y.-based fintech platform for advisors.

Or, as Dylan Huang, senior vice president and head of retirement and wealth management solutions at New York Life in New York City, put it, “We can’t predict, but we can plan.”

Advisors, he said, should “help clients understand and define their risk tolerance and incorporate protection solutions that both guard against a challenging market environment and set them up to prosper when conditions improve. ... One good thing about the financial services industry is that we have a tool for every financial need.”

Indeed, the silver lining of downturns is that they can create opportunities. “One of the worst mistakes is capitulating and creating permanent losses at a time when opportunities begin to present themselves,” said Jeff Wagner, senior partner at LVW Advisors in Pittsford, N.Y. “Use volatility to your advantage.”

Recessions, he said, can be a chance to “shift defensive assets to aggressive assets,” meaning in part that equity downturns are often good entry points.

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