4) None of the above. The biggest risk from a recession is the loss of a significant number of jobs. What is your plan if your job goes away, and there are 200 people lined up for every opening? What about if you keep your job, but your SO loses theirs -- can you make it indefinitely on one salary? What if both go away? Would you move for a new job, or would you hunker down until something came through -- and are your finances prepared for either option?
The best thing you can plan to do to weather a few down years is keep your expenses low, your EF solid, and your employable skills up to date and flexible. Do not lock yourself into a house -- what are you going to do if all of the local job opportunities go away and the mortgage is like an albatross around your neck? DO not tie up short-term money in the market -- what if you need that $10k because the jobs go away right when the market crashes?
OTOH, you also don't want to overreact and go to all-cash -- if you do that, what happens if the recession doesn't hit for another 5 years and you miss years of market gains? MMM is brilliant at what he does, but he still can't predict the future.
IOW, don't run around and drive yourself nuts trying to develop precisely the right approach for whatever you think is going to happen, because you never know what is going to hit or how bad it will be. Stay the course, keep funding your current investments, and if you have any extra, maybe increase your EF. Invest your time and effort into making yourself as employable and desirable as possible. And then if the recession hits and your company is in good shape and your job is solid, you can decide at that point whether you want to use some of that free cash to buy a house or buy more stocks.
