XEQT Recession Playbook: How to Invest Before, During, and After an Economic Downturn

Recessions are inevitable. If you’re investing in XEQT over a 20-30 year period, you will experience multiple recessions. Not maybe. Definitely.

The question isn’t whether a recession will come. The question is whether you’ll be prepared for it – emotionally, financially, and strategically – when it does.

I wrote this playbook after living through the COVID crash of March 2020, which was my first real market downturn as an investor. I thought I was prepared. I wasn’t. My portfolio dropped roughly 30% in five weeks, and I spent the better part of two weeks convincing myself not to sell everything. The only thing that stopped me was a friend who had been through 2008 saying: “This is the part where the plan either works or it doesn’t. If you sell now, you never had a plan.”

He was right. I held. Three months later, I was back to breakeven. Six months later, I was at new highs. But I promised myself I’d write down everything I learned so that next time, I wouldn’t need a phone call at midnight to keep me from blowing up my portfolio.

This is that document.

What Actually Happens to XEQT During a Recession

Let’s start with data, not feelings.

Since XEQT launched in 2019, it’s experienced one major downturn (COVID, 2020) and several corrections. But we can look at the longer history of global equity markets to understand what XEQT – which holds a globally diversified equity portfolio – would have experienced during past recessions.

Key observations:

1. Every single recovery reached new highs. Without exception. Every crash, every bear market, every recession was eventually followed by a full recovery and continued growth.
2. Most recoveries happened faster than people expected. The COVID recovery was measured in months. Even the devastating 2008-09 crisis recovered fully within about four and a half years.
3. The severity varies enormously. Some recessions barely register (-20%). Others are brutal (-55%). You can’t predict in advance which type you’ll get.
4. The market often bottoms before the recession ends. Markets are forward-looking. They typically start recovering while the economic news is still terrible. If you wait for “good news” to start buying again, you’ve already missed most of the recovery.

Phase 1: Before the Recession (The Preparation Phase)

You’re reading this right now, which means you’re either in a pre-recession phase or wondering if one is coming. Here’s what to do while the economy is still functioning normally.

Build Your Emergency Fund First

This is the single most important recession preparation step, and it has nothing to do with investing. Before you worry about your XEQT portfolio, you need enough cash to cover your living expenses for 3-6 months without touching your investments.

Why? Because the worst thing you can do during a recession is sell XEQT at depressed prices to pay rent. Your emergency fund prevents this.

Where to keep it: A high-interest savings account (Wealthsimple Cash, EQ Bank, or similar). Not invested in XEQT. Not in the stock market at all.

Confirm Your Time Horizon

If your investing time horizon is 10+ years, a recession is a non-event for your long-term plan. Every 10-year period in the history of global equities has ended positive.

If your time horizon is 3-5 years, you should already have a more conservative allocation than 100% XEQT. Consider XGRO (80/20 equity/bond) or XBAL (60/40).

If you need the money within 1-2 years, it should not be in XEQT at all. Use a GIC or savings account.

Automate Your Contributions

Set up automatic XEQT purchases through your brokerage. This is critical for recession preparation because when the market starts dropping, you need your system to buy automatically without requiring you to make a decision. During a downturn, every fiber of your being will scream “stop buying” – but buying during a recession is mathematically optimal. Automation removes the decision from your hands.

Write Down Your Plan

This sounds almost too simple, but it works. Write down:

1. “I own XEQT for the long term (20+ years).”
2. “I will continue my automatic contributions regardless of market conditions.”
3. “I will not sell during a downturn.”
4. “If the market drops 30%+, I will consider adding extra if I have available cash.”

Put this somewhere you can find it. You will need it.

Stress-Test Your Budget

Ask yourself: if I lost my job, could I maintain my essential expenses for 3-6 months? If the answer is no, your emergency fund isn’t large enough. Build that before increasing your XEQT contributions.

Phase 2: During the Recession (The Discipline Phase)

This is where the plan either holds or it doesn’t. Here’s exactly what to do when the market is crashing and the news is terrifying.

Step 1: Keep Contributing

Your automatic contributions should be running. Don’t stop them. Don’t pause them. Don’t reduce them.

When XEQT drops 20%, your regular $200 contribution buys more shares than it did last month. When it drops 30%, it buys even more. This is dollar-cost averaging at its most powerful – you’re systematically buying at discounted prices.

The math is brutal and beautiful:

During the decline, your money is buying 40-65% more shares than it was before the recession. When the market recovers – and it has always recovered – those extra shares amplify your returns dramatically.

Step 2: Reduce News Consumption

This is not the time to be watching BNN, reading market commentary, or scrolling through financial Reddit. Every piece of news during a recession is designed to make you feel like things will never recover. This is empirically false, but it’s emotionally overwhelming.

Read my financial news guide for specific strategies, but the short version is: turn it off.

Step 3: Deploy Extra Cash (If Available)

If you have cash beyond your emergency fund – a tax refund, a bonus, savings you’ve been sitting on – a recession is one of the best times to deploy it. Buying XEQT when prices are depressed is one of the highest-expected-value moves available to a retail investor.

This doesn’t mean try to time the bottom. You won’t. Nobody can. It means: if you have extra cash and the market is down 20%+, buying is almost certainly a good decision. The exact timing matters far less than the act of deploying capital at depressed prices.

Step 4: Rebalance Your Life, Not Your Portfolio

XEQT rebalances itself automatically across its four underlying ETFs. You don’t need to do anything to your investments.

Instead, use the recession to focus on what you can control:

• Can you reduce expenses to maintain contributions?
• Can you increase your emergency fund?
• Can you take on extra work or a side project to boost income?
• Can you upgrade your skills to improve job security?

These actions have a much larger impact on your financial outcome than anything you could do to your portfolio.

Step 5: Read This List When You Want to Sell

When the urge to sell hits (and it will), review these facts:

1. Global stock markets have recovered from every single recession in history.
2. The average bear market lasts about 12-18 months. The average bull market lasts about 5-7 years.
3. If you sell at a 30% loss and the market rebounds 43% (which is what it takes to recover from -30%), you miss that entire recovery.
4. The biggest return days in market history typically occur within weeks of the worst days. Missing just the 10 best days in a decade can cut your returns by more than half.
5. You own 9,000+ companies across 49 countries. For XEQT to go to zero permanently, the entire global economy would need to cease functioning. If that happens, your brokerage account is the least of your problems.

Phase 3: After the Recession (The Growth Phase)

The recession is over. Markets are recovering. The news is cautiously optimistic. Here’s what to do now.

Don’t Chase the Recovery

The temptation after a recession is to pile in aggressively because “the bottom is in.” This is a form of market timing that rarely works. You don’t know if the bottom is in. There could be a secondary dip. The recovery could be uneven.

Your approach should be the same in recovery as it was during the recession: maintain your automatic contributions, don’t try to time anything, and let the plan work.

Review and Adjust (But Not Your Investments)

Post-recession is a good time to review your overall financial plan:

• Did your emergency fund hold up? Was it big enough?
• Did you maintain your contributions throughout? If not, why? What can you change to make it easier next time?
• Did you panic? What triggered it? How can you build better systems to prevent it?
• Has your income changed? Can you increase contributions?

Notice that none of these questions are about changing your investment. XEQT doesn’t need adjusting after a recession. You might.

Resist the “I Should Have Done More” Regret

After every recession recovery, investors beat themselves up: “I should have invested more at the bottom.” “I should have put my whole emergency fund in.” “I should have borrowed to invest.”

Stop. You survived the recession without selling. That alone puts you ahead of most investors. The goal was never to maximize returns during the crash – it was to not blow up your plan. If your plan is intact, you won.

Start Preparing for the Next One

There will be another recession. Start the cycle again: rebuild emergency fund if depleted, maintain automatic contributions, write down your plan, and wait.

The Recession Investor’s Cheat Sheet

Historical Perspective: What If You Invested at the Worst Possible Time?

Here’s a thought experiment that puts recession fear into perspective.

Imagine the worst possible luck: you invested a lump sum of $10,000 in a globally diversified equity portfolio at the absolute peak before every major crash.

Even with the worst timing imaginable, every single scenario produced positive returns over 10 years. Even if you bought at the absolute worst moment – the day before the biggest crash in a generation – you were still in the green a decade later.

Now imagine you were making regular contributions the entire time (as most XEQT investors do). Your returns would be significantly better, because you’d be buying throughout the decline at lower prices.

The math is unambiguous: time in the market beats timing the market. Always.

What Makes XEQT Particularly Resilient in Recessions

XEQT has structural features that make it more recession-resistant than many other investment approaches:

Extreme diversification. You own 9,000+ companies across 49 countries. Some will fail during a recession, but the vast majority will survive and eventually thrive. No single company, sector, or country can take down your portfolio.

Automatic rebalancing. During recessions, some regions and sectors fall more than others. XEQT’s underlying ETFs are automatically rebalanced by BlackRock, which means the fund systematically trims what’s done well and adds to what’s fallen – exactly the behavior that optimizes long-term returns.

No single-point-of-failure. Unlike individual stocks, dividend ETFs concentrated in banks, or sector bets on oil or tech, XEQT can’t be destroyed by a single industry downturn. When energy crashes, tech might hold up. When tech crashes, consumer staples might hold up. The diversification ensures that some part of your portfolio is always relatively stable.

Low costs during drawdowns. When your portfolio is down, the last thing you want is high fees eating into what’s left. XEQT’s 0.20% MER means the cost of holding through a recession is negligible. Compare this to a 2% mutual fund fee on a declining portfolio – that’s real money being extracted during the worst possible time.

Common Recession Mistakes XEQT Investors Make

Even disciplined investors make mistakes during recessions. Here are the most common ones:

1. Selling to “protect what’s left.” This crystallizes your losses and means you need the market to recover AND you need to time your re-entry perfectly. Most people who sell during a crash never buy back in at lower prices – they wait for “certainty,” which only arrives after the recovery is already well underway.

2. Switching to bonds or GICs mid-crash. By the time you’re scared enough to switch, the worst of the decline is usually already behind you. You lock in the loss and miss the recovery. If you needed bonds, you should have had them before the recession, not during it.

3. Pausing contributions “until things stabilize.” Things stabilize when the market recovers. But the recovery happens while things still look unstable. By the time it feels safe to contribute again, you’ve missed the best buying opportunity of the decade.

4. Listening to someone who “predicted” the crash. After every crash, someone claims they predicted it. They might have. But they probably also predicted the previous five crashes that didn’t happen. A broken clock is right twice a day.

5. Comparing your portfolio to cash. “If I’d just kept it in a savings account, I’d have more right now.” Yes, during the crash, that’s true. But over any period of 10+ years, equities have demolished cash returns. The comparison only works if you cherry-pick the worst possible window.

The Only Thing You Need to Remember

Recessions are normal, temporary, and – for long-term investors – ultimately beneficial.

They’re normal because the economy moves in cycles. Expansion, peak, contraction, trough, expansion. This has been happening for centuries and will continue happening.

They’re temporary because human beings innovate, build, and solve problems. Companies adapt. New industries emerge. The global economy has grown through two world wars, a dozen pandemics, countless financial crises, and every type of political upheaval imaginable.

They’re beneficial because they allow disciplined investors to buy assets at discounted prices. The same XEQT share that costs $30 today might cost $21 during a recession. If you’re still contributing, you’re accumulating more shares that will be worth significantly more when the economy recovers.

Your job during a recession is extraordinarily simple: don’t stop. Keep contributing. Keep holding. Keep living your life. The market will take care of the rest.