In equities, that suggests exposure to larger, more liquid stocks. Higher quality may also be desirable in the form of lower balance-sheet leverage, more visible earnings and higher free cash flow, as well as lower beta to the broad equity market.
In fixed income, quality and fundamental credit analysis is key—not only because balance sheets tend to deteriorate in the later stages of the cycle, but because the lack of liquidity increases the probability that investors will be forced to hold positions to maturity, or through the turn in the cycle.
This need not leave a portfolio entirely without liquidity. Cash flow can be optimized so that less-liquid or illiquid positions are constantly injecting large amounts of liquidity into a portfolio, by increasing the amount of principal being repaid alongside regular coupons. That can be done by favoring shorter-duration credit: because yield and credit curves are currently so flat, across many credit markets this can be done with little or no yield sacrifice. It can also be achieved by including an overweight to amortizing positions in commercial and residential mortgages, or to the debt or mezzanine tranches of collateralized loan obligations (CLOs).
Even in the most illiquid corners of a portfolio, in private markets, diversifying into short-duration, cash-generative private debt and taking full advantage of the secondaries market can help to maintain cash flow.