Recession fears can be a big drain on your mental and physical health. During tough times, it’s important to take control of your emotions and make smart financial decisions that will help you weather the storm.

One development that has stoked recession fears is the steep decline in a real-time gauge of the economy, known as the coincident index. It peaked last summer, inspiring a short-lived market selloff. Since then, the gauge has slid further, implying a higher likelihood of recession.

The index is based on a combination of words reported by Google as searches made by economic agents. The methodology is a departure from existing search-based indices, which can be biased and not necessarily reflective of investor behavior (Da et al., 2022; Boubaker et al., 2023).

Other developments that may fuel recession fears include a slowdown in business spending, lower-than-expected GDP growth, and more evidence of a global economic slowdown (Freyberg, 2020). Also, the administration’s recent dialing down of some tariffs could reduce the risk of a U.S. recession, depending on future developments in trade negotiations with China and other trading partners.

While a recession isn’t inevitable, you should still prepare for a potential downturn by giving your job options a careful review and beefing up your emergency savings. You should also consider making any necessary adjustments to your investment portfolio so that it reflects your current risk tolerance and time horizon. Regardless of the economic environment, it’s essential to maintain a well-diversified portfolio.