Wells Fargo: How Bull Markets End

Wells Fargo Investment Institute report outlines risk factors and strategies for investors to prepare for a potential downturn

SAN FRANCISCO–(BUSINESS WIRE)–#markets–A new report from the Wells Fargo Investment Institute examines the signs investors should watch to understand whether a bear market is on the horizon. The report, titled “How Bull Markets End: Investment Strategies to Prepare for the Next Downturn,” explores the relationship between equity bear markets – when there’s a decline of at least 20% from the highest closing price to the lowest – and economic recessions. It also details predictive indicators worth watching, why this cycle is different from previous ones, and how investors could prepare their portfolios for a potential downturn.

According to the report, the U.S. economic expansion is 126 months old, making it the longest expansion in U.S. recorded history. Simultaneously the S&P 500 Index has sustained the longest bull market on record, gaining nearly 350% on a total return basis as of October 2019.

“The sheer length of our current expansion has investors worrying when the bull market will turn into a bear market. We are persistently watching for cautionary signals that can predict changes in the markets, and right now the indicators we’re studying don’t suggest it’s time to issue a storm watch,” said Darrell Cronk, president of the Wells Fargo Investment Institute and chief investment officer of Wealth and Investment Management at Wells Fargo. “Still, investors want to know when a storm is brewing in the economy and markets and how they should prepare for it.”

Exuberant investor sentiment, decelerating corporate earnings, changes in equity sector leadership, rising interest rates, and rapid growth in corporate mergers and acquisitions are but a handful of indicators outlined in the report that the Wells Fargo Investment Institute is keeping a pulse on.

Basing decisions on fear of the unknown can diminish longer-term potential returns and financial goals. “Market volatility typically picks up leading into a downturn, and that alone can naturally cause some anxiety for investors,” said Tracie McMillion, head of global asset allocation strategy for the Wells Fargo Investment Institute. “Our guidance is to stay invested through the cycles, resist the impulse to react emotionally, and proactively take control of the portfolio to manage risk.”

The report highlights four strategies for investors to adjust their portfolios differently ahead of the next downturn:

  • Diversify to help mitigate risks and broaden exposure to alternative investments.
  • Manage cash during periods of volatility and deploy it selectively.
  • Rebalance portfolios back to strategic targets.
  • Know what you own, as investor sentiment can outpace fundamental value late in a cycle.

For further portfolio positioning guidance, including strategies for investors nearing retirement and those who favor growth orientation, read “How Bull Markets End: Investment Strategies to Prepare for the Next Downturn.”

About the Wells Fargo Investment Institute

Wells Fargo Investment Institute is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company, providing investment research, strategy, manager research and thought leadership within the Wealth and Investment Management division, with the goal of supplying world-class advice to the company’s financial and wealth advisers.

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investment and mortgage products and services, as well as consumer and commercial finance, through 7,500 locations, more than 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 32 countries and territories to support customers who conduct business in the global economy. With approximately 261,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 29 on Fortune’s 2019 rankings of America’s largest corporations. News, insights and perspectives from Wells Fargo are also available at Wells Fargo Stories.


Diversification cannot eliminate the risk of fluctuating prices and uncertain returns.

Equity securities are subject to market risk which means their value may fluctuate in response to general economic and market conditions and the perception of individual issuers. Investments in equity securities are generally more volatile than other types of securities.

Alternative investments carry specific investor qualifications which can include high income and net-worth requirements as well as relatively high investment minimums. They are complex investment vehicles which generally have high costs and substantial risks. The high expenses often associated with these investments must be offset by trading profits and other income. They tend to be more volatile than other types of investments and present an increased risk of investment loss. There may also be a lack of transparency as to the underlying assets. Other risks may apply as well, depending on the specific investment product.


S&P 500 Index is a market capitalization-weighted index composed of 500 widely held common stocks that is generally considered representative of the US stock market.

An index is unmanaged and not available for direct investment.

General Disclosures

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

Opinions represent WFII’s opinion as of the date of this release 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. WFII does not undertake to advise you of any change in its opinions or the information contained in this release. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.

The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon.

Wells Fargo Wealth and Investment Management, a division within the Wells Fargo & Company enterprise, provides financial products and services through bank and brokerage affiliates of Wells Fargo & Company. Brokerage products and services offered through Wells Fargo Clearing Services, LLC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company. Bank products are offered through Wells Fargo Bank, N.A.


Kelly Reilly, 314-797-9701


Allison Chin-Leong, 212-214-6674


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