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from left, Chris Brightman, Terri Spath and Floyd Tyler
from left, Chris Brightman, Terri Spath and Floyd Tyler
Courtesy of the subjects

The U.S. just entered its longest period of economic expansion, but signs point to a slowdown ahead. It's a good time to reevaluate your investing approach, since what worked in the past might not be as effective going forward.

Financial pros caution that key indicators of a weakening economy have been "flashing red" for some time now. What's more, the Dow plunged 767 points on Monday on concerns about the escalation of U.S and China trade disagreements. This leaves investors to ponder the million-dollar question: how long can this 10-year-old bull market last? Maybe not much longer.

While you can't time the markets, you can take steps to mitigate your risk exposure. That means controlling what you can: your savings rate and your asset allocation. If you're on the cusp of retirement, you may also be able to control how long you work--postponing retirement is a great way to cushion your portfolio.

These adjustments are important because you can't rely on the market to do all the heavy lifting going forward. When stocks are soaring, savers can afford to slack off a bit and still see nice gains in their portfolio. But those days probably won't last forever. Terri Spath, chief investment officer of Sierra Mutual Funds, doesn't believe a recession is a sure thing. Even so, she has some advice for investors: always save more money — that’s always the key.”

Money asked three investing professionals how to respond to decelerating economic growth and a possibly slowing stock market. Here's what they said:

Floyd Tyler, Chief Investment Officer, Preserver Partners

Stock Market Predictions: 3-5% real returns over the next 10 years

“It’s clear that the global economy is slowing,” says Floyd Tyler, chief investment officer at Preserver Partners. It’s just a question of how much. Large-cap stocks' 15% annualized return over the previous decade is rare (historically, it's closer to 7%), and Tyler expects to see closer to a 3-5% real return on stocks, meaning the effective rate after adjusting for inflation.

But no one can predict when a recession will happen, which means it’s important to take into account how close you are to retirement when planning out your investments.

What You Should Do

“If you are a long-term investor and you’re decades away from retirement, I think you do nothing, you just continue to invest,” Tyler says. However, it’s a different story if you are on the cusp of retirement, as you have less time to recover any losses should a downturn take place. But don’t panic and go all cash, Tyler says. If you have a 401(k) plan with your employer, you should at least contribute enough to receive your company match, because that is essentially free money. You can also consider changing your allocations within your 401(k) through your plan’s administrator, he says.

“For those really close to retirement, say inside of five years, it makes sense to reduce the amount of equities they have in their current balances and to possibly skew future contributions to lower risk, income-producing fund options within the 401k plan,” he says. (One caveat: you don't need to change your allocation if your money is in a target-date fund, Tyler notes, since those adjustments are automatically made for you within the fund.)

Tyler also suggests taking advantage of fixed-rate CDs while they still offer interest rates as high as 2.5%. It’s unlikely those rates are going to exist a year from now, he says.

Terri Spath, Chief Investment Officer, Sierra Mutual Funds

Stock Market Predictions: low to mid single-digit real returns over the next 10 years

Even though you can’t anticipate market movements (and you shouldn’t even try), we're nearing the end of a cycle one way or way another, Spath says.

“No matter how you slice it, no matter how long it goes on, we’re in the more mature part of a global expansion and certainly a U.S. expansion,” says Spath, who also believes the market is headed for low to mid single-digit returns.

"The key is to make sure and manage the risk in this type of environment,” she says. “Where there’s a lot of confusion, there’s a lot of volatility.”

What You Should Do

Look beyond U.S. equities to diversify your portfolio, she says. In the developing world, Spath favors emerging market debt over emerging market equities because it is cheap and offers the opportunity for more returns with less risk, she says. Even if you are currently diversified with a combination of large cap and small cap stocks, ETFs and index funds, if they're all U.S.-based, then they're all equally vulnerable to a domestic slowdown.

“It’s more important than ever not to overlook certain asset classes that can generate a nice yield, away from the pure, plain vanilla U.S. stocks,” she says. “They give a little bit of a yield, but have a lot of risk at this point.“

Chris Brightman, Chief Investment Officer, Research Affiliates

Stock Market Predictions: 2.5% (0 - 5%) real returns over the next 10 years

"I expect the ten-year annualized real return for market of between 0% and 5%," says Chris Brightman, chief investment officer of Research Affiliates, an investment management firm. "On the optimistic side, if profits continue to grow above their long-term trend, we avoid a market crash."

What You Should Do

“Most investors in the U.S. hold portfolios that are not as diversified as they might be,” Brightman says. “In today’s global markets, there are many opportunities to diversify beyond mainstream stocks and bonds.”

Right now is a fantastic time for investors to move some of their investments out of the U.S. stock market into international stocks, he says. “If there’s one simple thing that people can do to increase the sustainable income produced by their portfolio, it’s to diversify internationally.”

But regardless of your portfolio allocation, he says there are three key actions you can take to secure yourself a financial cushion as you approach retirement.

“Recognize the signal that the markets are telling you," Brightman says. "Save more, plan to work a little longer, and be a little more modest in your expectations of your income in retirement.”