How long will stocks stay in a bear market? It likely hinges on if a recession hits, says Wells Fargo Institute

When the S&P 500 officially dropped into a bear market on June 13, closing down more than 20% from its last peak, it stirred debate about whether investors should hold tight or think about buying the dip.

To inform their view, the team studied spotted 11 past S&P 500 bear markets since World War II, finding that the downdrafts lasted an average of 16 month and produced a negative 35.1% bear-market return. However, the duration extended to about 20 months on average with a recession and a more severe -37.8% return.

“It may be tempting to try and take advantage of recent weakness, but while we expect additional entry points in coming months, for now we favor patience before committing new cash to equities,” the Wells team wrote.

Adding some private market context is also key, given how much money has poured into the sector over the last few years. Bear market might be worth quoting in the plural, depending on one's metric or purview.

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