How to Protect Your Portfolio from a Potential Bear Market in 2027
The S&P 500 index rose by approximately 26% in 2023, 25% in 2024, and 18% in 2025. However, investor sentiment is worsening, and a bear market in 2027 cannot be ruled out.
The main risk is linked to uncertainty surrounding spending on generative AI. Five tech giants (Apple, Nvidia, Microsoft, Amazon, and Alphabet) account for around 30% of the S&P 500, so their decline would significantly impact the entire index. All of them, except Apple, are investing hundreds of billions of dollars in AI, while cheap open-source and Chinese models are intensifying competition.
There are three ways to protect your portfolio. The first is to reduce the share of big tech in your holdings. The second is to add "boring" assets: short-term U.S. government bonds with yields above 4%, tobacco company stocks, and REITs. Berkshire Hathaway, led by Warren Buffett, is cited as an example, holding a record $365.5 billion in cash and liquid securities. The third is to focus on the long term, as the market has historically recovered after downturns.
