So far in 2026, the U.S. stock market has delivered strong performance, with the S&P 500 recently hitting repeated record highs and posting a year-to-date gain of approximately 12%. Beneath the optimistic sentiment, however, growing concerns among investors are being sparked by debates over whether artificial intelligence (AI) has already bred a market bubble. Has the frenzied enthusiasm for AI’s prospects led large-cap tech companies to overinvest in AI data centers? Should the AI trade become excessively overhyped, the shadow of an economic recession could well follow.
That said, historical experience offers a straightforward coping strategy for investors worried about a potential recession-driven selloff: stay committed to a well-diversified portfolio composed of high-quality companies with solid fundamentals. From a long-term perspective, even in the face of short-term bear markets, recessions, or bubble bursts, such an investment still has a strong probability of delivering sustained growth.
Against this backdrop, a low-cost index fund—the SPDR Portfolio S&P 500 ETF (SPYM)—may be worth considering. This ETF is designed to track the S&P 500 at an extremely low cost, holding 505 constituent stocks with an expense ratio of just 0.02%. With its simplicity, transparency, and cost advantage, the fund stands on par with the best-in-class peers.
In terms of performance, SPYM has shown strong recent momentum, with a five-year annualized return of roughly 12.8% and a one-year return of 19.5%. More importantly, looking back at the previous bear market in 2022—when the tech-heavy Nasdaq 100 Index (represented by the Invesco QQQ Trust) tumbled approximately 32.6% over the year—SPYM posted a significantly smaller decline of about 18.1%, demonstrating relatively greater resilience during economic downturns.
Of course, there is no guarantee that any stock ETF will outperform the broader market during a recession. However, for investors wary of an AI bubble and seeking to reduce concentrated exposure to large-cap tech stocks that are heavily betting on AI technology, allocating to a broader S&P 500 ETF—rather than a tech-heavy ETF—may offer a more prudent hedge against risk.
Reviewing SPYM’s performance since its inception in November 2005, its twenty-year average annualized return stands at 11.26%. Over this period, the market weathered multiple severe tests, including the global financial crisis, the Great Recession, and the COVID-19 pandemic. Despite short-term volatility along the way, the fund ultimately generated substantial wealth appreciation for long-term holders. Therefore, even if an AI bubble burst or an economic recession materializes in the coming years, long-term investment in an S&P 500 ETF remains a sensible move.
