Although the S&P 500 index has posted gains over the past three years and again this year, the journey has been far from smooth, particularly in 2026. At the start of the year, the benchmark index swung sharply between gains and losses, buffeted by concerns over the U.S. economy, turbulence in Iran, and questions about the sustainability of artificial intelligence (AI) growth. Though it rebounded significantly afterward, the market has recently returned to volatility. Against this backdrop, some technology stocks have come under price pressure. Over the past several months, investors have repeatedly fretted that massive spending in the AI space may not be justified by long-term revenues. Such worries have weighed on tech shares and pressured the broader market, even as companies frequently stress that AI demand remains robust.
While declines and volatility are never pleasant, they are neither dangerous nor permanent. As the storm gradually passes, investors can take steps to protect their portfolios. At moments like this, every investor should keep the following three things in mind.
First, do not panic sell. When high-quality stocks with long-term earnings growth pull back, it is natural for investors to feel anxious and tempted to sell. Yet that is precisely the worst move. Market volatility and declines are normal and temporary. The top stocks currently in a slump are highly likely to rebound and continue advancing—sometimes within days or weeks, sometimes over a longer period. But history has repeatedly shown that both major indices and strong companies exhibit a pattern of recovery and growth. This means that, whether the decline lasts days or longer, the best strategy is to hold existing positions firmly.
Second, completely abandon short-term thinking. Regardless of whether the index rises or falls, it is crucial to set aside short-term thinking, because it tempts us into poor decisions. For example, when stocks soar, investors may rush to chase hot names and overpay; when stocks fall, they may cut losses in panic. A wiser approach is to pay less attention to daily price swings and instead focus on the company’s long-term prospects over the next five to ten years. From that vantage point, even specific near-term headwinds may seem less daunting. Through such a long-term lens, the urge to sell stocks diminishes greatly.
Third, be alert for positioning opportunities. During periods of market volatility or decline, buying stocks is often not the first thing that comes to investors’ minds. Yet it should be a top consideration. Of course, this does not mean buying any stock indiscriminately, but rather using the opportunity to examine high-quality companies whose shares have surged over recent weeks or months. When volatility intensifies, these outperformers often pull back quickly, and this is usually unrelated to their long-term earnings prospects—more often it is a broad-based move sweeping across a particular sector. For instance, the recent sudden drop in the AI space presents a timely opportunity to closely watch established winners such as Nvidia (NVDA), Alphabet (GOOGL), and Meta Platforms (META) and assess their valuations. After the decline, they may be trading at attractive levels, meaning long-term investors could benefit from buying on weakness rather than waiting for them to return to higher prices.
In summary, during periods of market volatility or decline, the best course for investors is not to sell in panic, but to stay calm, seize opportunities, and adhere to long-term holding. Historical experience repeatedly proves that short-term market turbulence will eventually pass, and the long-term growth potential of quality enterprises is the fundamental determinant of investment returns.
