3 Ways to Prepare for a Potential Bear Market in 2026

Investors across Canada have had plenty to cheer about over the past few years, as markets largely rebounded from recent downturns and delivered solid gains. But as we head deeper into 2026, many are wondering: Is the next bear market around the corner?

Let’s dive into some key strategies to consider for those looking to prepare their own mindset and portfolios for the long term.

Fortify your portfolio’s foundation

I think the first step investors should consider is to review your portfolio’s mix of equities, bonds, and cash. In the late stages of a market expansion, it’s easy to become overweight in higher-growth or speculative holdings. A quick rebalance (as in, trimming some winners and adding to defensive positions) can make a big difference.

For Canadian investors, this might mean owning more dividend-paying blue chips like the big banks or utility stocks or companies in other defensive sectors. These businesses generate steady cash flow and tend to weather downturns better than their high-flying tech counterparts. A dose of stability goes a long way when volatility spikes.

Maintain plenty of cash and flexibility

Liquidity gives you options. That’s what cash is good for, and it’s something most investors underestimate. During a bear market, cash isn’t dead money. Rather, it’s dry powder. With even a modest cash reserve of 10–15% of your portfolio, you’ll be ready to scoop up quality stocks trading at fire-sale prices when the market overreacts.

Being patient while others panic often separates the average investor from the great ones. Remember Warren Buffett’s famous line: “Be fearful when others are greedy, and greedy when others are fearful.” It applies perfectly to bear markets.

Time in the market beats timing the market

Trying to forecast the exact start or end of a bear market is a losing game. Instead, concentrate on controlling what you can. That may mean one’s savings rate, investment strategy, and emotional discipline – doesn’t matter. Personally, I prefer to stick to mostly top-tier blue-chip stocks with proven business models and secure cash flow generation capacities.

Indeed, bear markets can be painful, but they’re always temporary. These downturns reset valuations, test conviction, and reward patience. However, if you’ve done the work ahead of time, stayed diversified, and avoided panic-selling, you’ll not only survive the next downturn. You’ll come out stronger on the other side.

The post 3 Ways to Prepare for a Potential Bear Market in 2026 appeared first on The Motley Fool Canada.

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More reading

• 5 Tricks of TFSA Millionaires
• Energy Stocks Could Be Canada’s Secret Weapon in 2026
• 3 Canadian Bank Stocks That Could Outperform Global Peers Again in 2026 and 2027
• The TSX Dominated U.S. Stocks in 2025, and Here’s Why it Could Keep Winning
• Tailwinds Are Coming: Buy These Stocks Before They Get Here

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.