US corporate bankruptcies just soared past 2020 pandemic levels — a very bad sign for Trump’s economy. Time to sell stocks before things get ugly?

According to the latest S&P 500 Global numbers, July counted 71 U.S. bankruptcies among large public and private companies — up from 63 the month prior — with the report citing “elevated interest rates” and “uncertainty from US tariff policy” among the main culprits.

The pace of bankruptcies is set to surpass totals from the height of the pandemic in 2020, when 639 companies declared bankruptcy. Just seven months into 2025, 446 had already declared bankruptcy, according to the S&P.

Could these mounting bankruptcies portend an economic collapse on the horizon? And if so, should investors sell their stocks and cash out before the crash?

While that seems like the logical thing to do — and perhaps the most prudent option for those who are cash-strapped — experts agree that weathering the stock-market storm is often the best way forward.

History shows the storm will pass

Historical data indicates that the biggest stock-market gains can come during the worst economic downturns.

AP reporters Stan Choe and Cora Lewis reported that the S&P 500 has recovered from evey downturn — including the Great Depression, dot-com bust and pandemic — “to eventually make investors whole again.”

New York Times columnist Jeff Sommer observed that, “of the 10 best [one-day returns] in the last 50 years … five occurred during the great financial crisis of 2008 and 2009. Three of those five occurred while the stock market was mired in a recession.”

In fact, one of those days — delivering the third-best returns in half a century — occurred this year on April 9. The market rallied after President Donald Trump announced a 90-day pause on many tariffs. Then it fell the next day “when it became clear that many tariffs, especially those on China, would still be extremely high.”

Which illustrates his point that trying to predict the market “is a fool’s errand,” and that the best course of action is long-term investments.

What kind of return can you get with this kind of strategy? How does 467% sound?

That’s what the Motley Fool calculates you could have earned to date if you’d invested in an S&P 500 index fund in 2007 at the market’s peak — just before the 2008 crash — and held on through July 2025.

These experts advise investing in diversified portfolio of strong businesses that have the ability to stay the course during a recession, and avoid panic selling if stocks fall.

When to dump that losing stock

On the off chance you find yourself holding a sinking stock, Investors.com advises holding steady until that stock falls below 7 or 8% of its original value — what they call the “7%-8% sell rule,” based on their research of more than a 100 years of stock market activity.