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Read Part 1: “The Spark” here [ [link removed] ]
As a veteran financial advisor, Certified Financial Planner™, business owner, and political leader, I’ve spent over two decades guiding families through booms, busts, and everything in between.
Last week I wrote [ [link removed] ] about The Spark and the Accelerant—how political chaos and speculative excess could ignite the next financial crisis.
This week is about The Shield—how to prepare before that spark becomes a fire.
If the first part was about recognizing risk, this one is about building flexibility: how to stay steady when everything else starts to shake.
Liquidity: The Cornerstone of Preparedness
Liquidity means the cash or easily accessible assets you can tap without penalty or delay. It’s the oxygen of financial planning. When crises hit, liquidity is what lets you adjust, stay patient, and make clear decisions.
Now is the time to build a larger cash cushion, tighten your budget, and be careful with any big purchases. Buying a new home, vehicle, or undertaking major renovations while prices remain high could leave you stuck with debt that becomes harder to manage in a downturn.
This also applies to your investment accounts. Raising cash positions serves two purposes: it cushions your portfolio during sharp market drops and gives you dry powder to buy back in at lower prices. With markets near all-time highs, it’s smart to take a few chips off the table and strengthen your cash position before volatility returns.
Economists once described a debt-deflation spiral—a worst-case scenario that can unfold in a deep recession or depression. Prices fall, wages and revenues shrink, but debts stay fixed, making what you owe feel heavier over time. That’s why the Federal Reserve targets about 2 percent inflation: mild inflation keeps money moving, while deflation can paralyze an economy.
Keeping high-interest or credit-card debt low and maintaining flexibility in your spending reduces that risk. Liquidity gives you options; debt takes them away.
A Pre-Recession Playbook
If we enter 2026 without a correction, use strong markets as a cue to reduce risk gradually—like turning a ratchet instead of flipping a switch. Each quarter that stocks climb, take a few chips off the table and lock in some gains while prices are high.
Favor high-quality bonds and Treasuries over “high-yield” or junk bonds, which tend to act like stocks in bad times—falling sharply when the economy weakens. Even in money markets, read the fine print; some “high-yield” funds hold short-term corporate paper that can drop in value quickly. During 2008, a few funds even “broke the buck,” and the government had to step in. That safety net may not exist this time.
And remember, large corporations often use recessions as opportunities to cut costs permanently—sometimes by replacing workers with automation or AI. You can’t control that, but you can control how prepared you are if your income changes. Hence why we focus on liquidity, reducing debt, and raising cash in the paragraphs above—those are the very tools that give you flexibility when opportunity finally returns.
Crisis Creates Opportunity
When markets fall, they fall fast—but recoveries, though slower, can be powerful. Investors who kept their discipline after 2008 saw the Dow rise from roughly 6,000 to 46,000 over sixteen years. That’s the reward of patience.
Raising cash now gives you dry powder to reinvest when prices eventually reset. As Warren Buffett reminds us, “Be fearful when others are greedy, and greedy when others are fearful.”
Preparation isn’t pessimism; it’s positioning. Crises eventually give way to recoveries, and those who’ve managed risk well are the ones ready to act when the smoke clears.
Gold’s Role in a Volatile World
I’ve always had a love-hate relationship with gold. It’s an emotional investment—part hedge, part habit, and too often a magnet for fear. Historically, when “gold bugs” dominate headlines, it’s often a warning sign that fear is peaking. Warren Buffett has long joked that gold mostly “just sits there and looks at you,” and he’s pointed out that when enthusiasm for it reaches extremes, it can mean investors are overlooking better opportunities elsewhere.
I’ve grown wary when gold is pushed too hard—it’s often marketed through scare tactics, especially when Democrats are in office, and rarely turns out well for investors chasing that fear. But this time, the backdrop is different. Tariffs, trade wars, and global uncertainty have created a perfect storm: fear, inflation pressure, and a weakening dollar.
There’s also a new and significant factor we haven’t seen in decades. Other countries are losing trust in America’s financial leadership. Trump’s willingness to use economic power—tariffs, sanctions, even Treasury markets—as political weapons has weakened global faith in the U.S. as a stable financial partner. As a result, foreign governments and central banks have been buying and holding more gold instead of U.S. dollars and Treasuries.
This shift isn’t speculative; it’s strategic. When nations buy gold, they tend to hold it for years, even decades. That creates a durable floor under global gold demand and helps explain why prices have remained strong. It reflects a deeper concern that the “safe asset” status of the U.S. dollar is no longer guaranteed under erratic political leadership.
Gold’s long-term record supports its reputation as a hedge in instability. In the 1970s—an era of double-digit inflation—it delivered strong annual returns. During the 2008 financial crisis, gold first fell to about $700 per ounce as liquidity vanished, then surged to nearly $1,900 by 2011—a 170 percent rebound once panic faded.
Gold is also a stand-alone asset class with unique supply and demand dynamics, largely uncorrelated to stocks and bonds. Even a modest allocation—up to around 10 percent—can lower overall portfolio volatility and enhance risk-adjusted returns.
That said, gold isn’t a growth engine; it’s insurance. It can drop during the initial panic but historically recovers faster as stability returns. I still believe in disciplined, diversified investing as the core strategy—but in this environment, gold once again deserves a measured role as part of a balanced shield.
Behavioral Discipline: The True Shield
Emotional reactions often do more damage than downturns themselves. Don’t cash everything out in fear or chase every rally in greed. Focus on maintaining flexibility: higher-quality investments, ample liquidity, and fewer speculative bets.
Markets reward patience, not panic. Preparation means having a plan in place so you don’t have to make one under stress.
From Panic to Preparedness
You can’t control when a recession arrives, but you can control your readiness for it. Preparation is what turns volatility into opportunity.
This is The Shield—a disciplined approach that keeps you flexible, liquid, and positioned to protect what you’ve built while being ready for what comes next.
Want to know more? We go deeper in our free webinar next week…
🛡️ Join Us Next Week, November 12 — “Financially Preparing for the Potential Fall of Democracy”
Join Danielle Nava, CFP® [ [link removed] ], and me on November 12 for our free webinar, [ [link removed] ]“Financially Preparing for the Potential Fall of Democracy.” [ [link removed] ] We’ll share practical steps to build financial resilience — from liquidity and diversification to avoiding common pitfalls — and discuss why most of the industry isn’t addressing these risks. It’s not about fear, but proactive planning in uncertain times.
Sign up here [ [link removed] ].
Important Disclosure: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
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