If JP Morgan’s ‘Healthy Correction’ Is Coming, 6 Investor Moves to Remember

By Lee Jackson Updated Oct 26, 2:16PM EDT · Published Oct 25, 9:43AM EDT

24/7 Wall St. Key Points:

The S&P 500 is up a stunning 35% from its lows in April and 14% year to date.
The venerable index is trading at 30 times trailing earnings, much higher than the median point over the last five years.
While a market crash is unlikely given the solid economy, a correction like the one we saw earlier this year of 20% is entirely possible.

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If JP Morgan’s ‘Healthy Correction’ Is Coming, 6 Investor Moves to Remember — © katleho Seisa / E+ via Getty Images

The “buy the dip” financial news teleprompter readers and the 30-year-old portfolio managers who have never seen a market crash are insisting that stocks are still going to the moon. Market veterans and “Hey Boomer” professionals have seen this show before. In 1987, the Dow Jones Industrial Average plunged by a stunning 22% in a single day. Today, an equivalent drop in the venerable index would result in a collapse of an incredible 11,000 points.

So, where do we stand now? We could very well be on the precipice of a significant decline, like the one earlier this year, even as all major indices trade at all-time highs. One thing is for sure: If inflation moves higher, the war in Ukraine continues to churn, the Middle East peace does not hold, and our crushing national debt, approaching $38 trillion, spirals more out of control, the path of least resistance will likely be down. Investors should consider some crucial items now, as they may have to prepare for another 2025 correction.

One positive is that consumers and businesses are generally in reasonably good financial shape. Stock portfolios and home prices have increased dramatically over the past few years, and the economy is not teetering on the brink as it was globally in 2008, when Bear Stearns and Lehman Brothers collapsed. To avoid a similar fate that year, Merrill Lynch was bought by Bank of America. While we are not hitting the panic button, with seemingly everyone on Wall Street remaining too bullish, safety precautions should be in place now.

Start building a cash stash now

One positive is that consumers and businesses are generally in reasonably good financial shape. Stock portfolios and home prices have increased dramatically over the past few years, so it makes sense to build a cash position like Warren Buffett has in anticipation of a correction. Matching current losses against gains, even if they are short-term, makes sense to help build up a cash supply. The proverbial dry powder may come in handy down the road.

Close out any margin positions immediately

Margin is the money borrowed from a broker to purchase an investment. When times are good, using margin loans to buy more stock is a bad plan for individual investors, especially when those margin positions are high-volatility momentum stocks. If the market collapses, a highly leveraged investment account could be destroyed.

Gold and silver still make sense now

Gold is the most popular precious metal investment, having surged in 2025 and moving toward the $ 5,000 level. As we have recommended for years at 24/7 Wall St., a gold position helps mitigate the downside. As we noted recently, while the precious metal has returned to all-time highs, it could explode higher in a market crash.

Make sure all investments are reinvested in more shares

Dividend reinvestment is a great way for an investor to steadily grow wealth. Please make sure that all the dividend-paying stock and mutual funds in personal and retirement accounts are coded to reinvest all capital gains and dividends, if possible. This allows you to buy more shares when prices are hit hard and fewer when the investment trades higher. The fourth quarter is underway, and many stocks and funds pay dividends on a calendar quarterly basis.

Real estate can help soften the blow

Buying and owning real estate is an investment strategy that can be both satisfying and lucrative. Consider real estate if you have the good fortune to inherit a windfall, such as an inheritance or similar gift. While mortgage rates have increased over the past two years, the 30-year fixed rate has risen to 7.25%. However, it has fallen back to 6.12% for a 30-year FHA mortgage. While still reasonable on a historical basis, it’s the highest since 2008. Owning a cash-generating rental property with passive income makes sense now.

U.S. Treasury bonds, CDs, and high-yield money markets rule

Treasury bonds include a range of debt securities issued and backed by the US government. Sell super high-volatility stocks and look at the short end of the Treasury market. The two-year note, like all Treasury debt, is guaranteed by the full faith and credit of the United States and yields a solid 3.47%. One-year certificates of deposit yield as high as 4%, and money market savings accounts, FDIC-insured up to $250,000, yield 3.5% to 4.0% with daily liquidity.

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About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.