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Chart of the Week

Weekly chart using economic data to address timely market topics from the Wells Fargo Investment Institute Global Investment Strategy team.

June 28, 2022

A review of the past 11 bear markets

A review of the past 11 bear marketsSources: Bloomberg and Wells Fargo Investment Institute. Data as of May 31, 2022. *1961 recession ended in February, whereas the S&P 500 Index peaked in December 1961. Returns measured by the S&P 500 Index. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. This table was excerpted from Economic and Market Strategy Update (June 2022).

The 11 bear markets since World War II have averaged 16 months in duration

After peaking on January 3, 2022, the S&P 500 Index dropped to bear market levels on June 13 when it closed at 3,750, down 21.8% from its peak of 4,797. This marks the 12th bear market since World War II, and it means that we are already more than five months into the current bear market.

The average bear market has lasted 16 months, although bear markets accompanied by a recession have averaged closer to 20 months. While the average S&P 500 Index decline for a bear market has been 35.1%, the index has risen 43.4% on average in the 12 months following the end of a bear market. It has taken the S&P 500 Index an average of about 24 months to return to its prior peak.

What it may mean for investors

The S&P 500 Index remains in a downtrend, and we believe the technical damage in markets to date likely will take time to repair. 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. With the Federal Reserve just beginning the tightening cycle, we have shifted our investment preferences away from economically sensitive assets and toward more quality-oriented and defensive assets.

Risk Considerations

Each asset class has its own risk and return characteristics. The level of risk associated with a particular investment or asset class generally correlates with the level of return the investment or asset class might achieve. Stock markets, especially foreign markets, are volatile. Stock values may fluctuate in response to general economic and market conditions, the prospects of individual companies, and industry sectors.

General Disclosures

Global Investment Strategy (GIS) is a division of Wells Fargo Investment Institute, Inc. (WFII). WFII is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

The information in this report was prepared by Global Investment Strategy. Opinions represent GIS’ opinion as of the date of this report and are for general information purposes only and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally. GIS does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.

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